Mutual Economic Interest Draws Israel and Arab Neighbors Closer

Israeli desalination plant (Mark Neyman via Wikimedia Commons)

by Yigal Chazan

With Donald Trump’s “deal of the century” seemingly doomed and the Israeli-Palestinian peace process as deadlocked as ever, Israel and its Arab neighbors are quietly moving ahead with major natural resource-based economic projects that could boost regional stability.

Self-interest is driving significant levels of cooperation in the energy and water sector that, notwithstanding its vulnerability to political and security tensions, will likely lead to greater interdependence between Israel and its neighbors, lessening the prospect of renewed conflict along their borders.

The eastern Mediterranean’s massive natural gas reserves are a boon for the economies of the littoral states. Egypt and Israel are notably working in tandem to maximize mutual benefit. With its Liquefied Natural Gas terminals, the Egyptians have their eye on becoming an export hub, as a planned pipeline connecting regional producers with European markets is barely off the drawing board and remains burdened by cost and engineering concerns.

Israel, which would benefit greatly from Egypt’s LNG distribution outlet, went some way to helping its southern neighbor achieve its ambition, striking a $15 billion deal to supply gas in February 2018. At the time, Egypt’s president Abdel Fatah al-Sisi said that the agreement would help him realize his dream of turning the country into a regional energy hub. The first of the Israeli deliveries, initially destined mainly for the Egyptian domestic market, is expected to be pumped through a Sinai pipeline this year.

Another Israeli supply contact, a $10 billion deal with Jordan, is also anticipated to come on stream soon, although there has been resistance to the move in the Jordanian parliament. MPs are concerned that it would undermine the country’s energy security and support Israel’s control of the West Bank. There had been suggestions that Egypt’s resumption of supplies to Jordan might also lessen the need for Israeli gas. Yet at the end of April, one of the partners in the project said that it was on schedule to deliver gas by the end of year.

Although Israel’s peace treaties with Jordan and Egypt made the respective deals possible, it remains technically at war with Lebanon to the north, which makes a U.S.-mediated Israeli- Lebanese effort to resolve a maritime border dispute all the more significant. The dispute concerns ownership of a gas field straddling their respective territorial waters. It was triggered by Beirut’s issuing of an exploration tender last year. The episode provoked a war of words, with Lebanon’s Iranian-backed Shia political and military movement, Hezbollah, vowing to defend the country’s “oil and gas rights.”

The Lebanese want a quick resolution because they are keen to start extracting gas to bolster their cash-strapped, debt-laden economy. Hezbollah, under sanctions and seeing less and less funds from embargoed Iran, would likely also benefit from the revenue stream. That may explain why Israel’s implacable enemy, which exerts huge influence in Lebanese politics, has not sought to obstruct the process.

Running parallel to the energy developments are moves to exploit Israel’s desalination potential to make good Jordan’s acute water shortages, which threatens its capacity to accommodate over a million Syrian refugees. Israel supplies Jordan with water as part of its 1994 peace treaty, but the 55 million cubic meters pumped from the Sea of Galilee annually could soon increase, thanks to the Israel’s expansion of its desalination capacity—the process already supplies 70 per cent of its drinking water.

In a bid to address the Sea of Galilee’s falling water level, caused by drought and decades of overuse, Israel is planning to restore it to health by drawing on desalinated water from new and existing plants. Late last year it was reported that work had begun on a pipeline and pumping facilities that would funnel desalinated water to Israel’s largest reservoir in about two years’ time. The project, estimated to cost around $280 million, will not only aim to replenish the historic lake but also bolster Jordan’s water supplies and revive the much-diminished River Jordan for which the Sea of Galilee is the primary source.

Another plan in the making is a World Bank-backed Israel-Jordan scheme to build a desalination plant in Aqaba, Jordan’s Red Sea port, which would supply both sides with drinking water and pipe the brine byproduct into the shrinking Dead Sea 200 kilometers to the north. Both countries border the hyper-saline lake, accruing economic value from its exploitation, through tourism and the mining of salts.

Israel is reportedly ready to press ahead with the long-delayed $10 billion Red Sea-Dead Sea canal project in order to improve bilateral relations. Signed off in 2015, the enterprise had been held up by diplomatic rows, concerns over costs, and possible environmental damage. Some scientists have warned that mixing the desalination plant-generated brine with Dead Sea waters could threaten its delicate ecosystem. Earthquake tremors might also cause the brine pipeline to leak, spoiling local agriculture.

Although the energy and water projects are largely economic and practical, security and political tensions could yet postpone or even scupper them. Notwithstanding the risks, these projects demonstrate a willingness on the part of Israel and its Arab neighbors to move forward, even as the Palestinian issue remains unresolved. That doesn’t necessarily reflect a grudging acceptance of Israel. Rather, it’s a recognition that their economies can no longer be held back by a disdain for or hostility towards the Jewish state.

For their part, the Palestinians are also keen on commercial opportunities but not as a substitute for a political solution to their current circumstances, hence their rejection of the Trump deal. Building up trust through economic incentives may create an environment more conducive to a final settlement of the decades-old conflict, but it is a mistake to view the former as ends in themselves.

Yigal Chazan is the head of content at Alaco, a London-based business intelligence consultancy.

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  1. Interesting….economic realities, and opportunities shake policies once again. US. foreign policies, by the chance expansion of oil and gas technology, has more to do with the diminution of Iran/Russian geopolitical threat, than the force of arms. Egyptian/Israeli advances in gas/oil economics is virtually forcing collaboration, more than years of peace negotiation. Iran has more to fear from oil/gas competition. Even Russia is caught between a rock and a hard place. They too are losing leverage internationally through market oil and gas competition. And when more oil/gas resources come on line from Canada, and even California, watch the impact that will have on Japan and China….and if discoveries are made in the South China Seas, the World will float economically in rising economic growth from cheap, and much less polluting energy, afforded by….oil and gas. Life can be beautiful, if only political leadership get off their hobby horses living off the dominant military/industrial rational for government expenditures.

  2. JMANZANO1930J

    More of economic determinism; as though humans are economic animals.

    There was more of economic integration between Urals to the Atlantic Ocean before August of 1914 that is present today. It did not prevent the war.

    Iraq could have been the breadbasket of the Arab world – since one can harvest 2 crops a year – and its oil wealth could have been used to upgrade the Arab civilization and culture – alas, was not to be, they used their wealth to build an army to attack Iran.

    There are Israeli Jews with property in Lebanon – which they cannot til or sell or do anything with.

    Last week, the effort to demarcate the maritime border between Lebanon and Israel failed.

    And Americans, sold their jobs to Chinese so that they could build a military to threaten everyone in the world – while their own population sank in standards of living and education. Some rationality! And now they have picked a fight with a religion too.

  3. The real key to Israeli – Arab reconciliation is Saudi Arabia. While the mutual anti-Iran front is most obvious there are many economic interests common to both as well. Israeli advances in the fields of medicine, computer technology and water conservation married to Saudi finances is but one example.


    For that, Israelis must leave East Jerusalem – including the Armenian Quarter as well as Muslim and Christian cemeteries.

    They will not.

    The war will go on.

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