Israel’s Natural Gas Fields are Giving Putin Heartache


Israel’s gas find offers an opportunity for US interests by helping to secure Middle East peace & undercutting Putin’s pretensions in Europe & the East Mediterranean.

By Arthur Herman


If you think Vladimir Putin has enough worries on his plate dealing with the Sochi Olympics debacle, the turmoil in Ukraine and Russia’s sputtering economy, think again. A new potential source of trouble is brewing out in the eastern Mediterranean — one that could not only undermine Putin’s efforts to rebuild Russia’s influence in the Middle East, but his current strong hand in Europe.

Russian President Vladimir Putin - Photo: AP

Russian President Vladimir Putin – Photo: AP

The threat: Israel’s recently discovered offshore gas deposits — one of the biggest global finds of the past decade.

Those fields, dubbed Tamar and Leviathan, promise Israel an unprecedented degree of energy independence and a lucrative export market to its Arab neighbors, including Egypt and Jordan. And they threaten to challenge Russian energy giant Gazprom’s dominance of the European gas market.

That dominance has been one of the lynchpins of Putin’s power. Gazprom provided Europe almost one-quarter of its total natural gas needs last year, and that need is inevitably going to grow.

Europeans know they pay Gazprom a significant premium for natural gas (more than 2¹/₂ times what Americans pay for gas), even as Gazprom produces cheaply in Russia’s Soviet-era fields. They also know Russia’s not afraid to use its gas exports as blackmail, as when Putin severed the supply lines to Ukraine in 2009.

Greens won’t let Europeans extract their own natural-gas reserves through fracking, so countries of the European Union have been resigned to letting Putin hold a whiphand over their energy needs, and their economies.

Here’s where Israel enters the picture. Its spectacular offshore gas finds at Tamar (which opened last March) and the much larger Leviathan field now threaten to spoil the caviar. Although the reserves (around 1 trillion cubic meters) are nowhere near as big as Russia’s, the demands of 8 million Israelis are tiny. So the bulk of future Leviathan development is free to go abroad, most likely in the form of liquified natural gas or LNG — which can be shipped anywhere in any quantity without the risk of terrorists cutting a pipeline.

This could be manna from heaven for the gas-starved EU. It certainly promises a political bonus for Israel, by turning the Jewish state from a European pariah into a would-be savior.

That has Gazprom, which gets 40 percent of its revenues from Europe, worried — and Putin, too.

The Russian company has made offers to “help” Israel develop the Leviathan field (the Israelis chief partner now is Houston-based Noble Energy). Early last year Gazprom negotiated a contract to liquify some of the gas coming from the Tamar field.

But many experts wonder how much the Russians really want to help Israel’s emergence as an energy competitor. Insiders agree the Tamar export deal is now all but dead, and an Australian challenger with major LNG expertise, Woodside Petroleum, has just agreed to take a 25 percent stake in Leviathan development.

The Israeli government is still working out how much gas it wants to export, and what to reserve for home consumption. But for Gazprom the rebuff when the Israelis opted for Woodside is a harbinger of what’s to come: not just a lost contract on Leviathan, or even a challenge to its European market — but also a loss of influence in the Middle East.

Exporting gas to Egypt, Jordan, and even the Palestinian Authority (Noble already has a contract with the Palestine Generating Power Co. to start in by 2017) will help smooth Israel’s relations with its neighbors — more bad news for a Russia that always prefers to fish in waters roiled by Middle East chaos, as the Russian warships now stationed off Syria should remind us.

Israel’s new gas bonanza offers a huge opportunity for US interests, by helping to secure peace in the Middle East and undercutting Putin’s imperial pretensions in Europe and the East Mediterranean.

So let the Russian “czar” enjoy his Olympics. He’ll soon be experiencing gas troubles that will have him reaching for the Gaviscom — as well as the phone to Tel Aviv.


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About the Author:

Arthur Herman is the author of “Freedom’s Forge: How American Business Produced Victory in World War Two.”