The old saw has it that “money makes the world go ‘round”. But in the post- industrial world it must be said to be energy. It could be argued that the two are synonymous. But that, too, isn’t true.
Take the recent arrival in Israel of a Dutch-Swiss trading company’s sweet oil cargo from the U.S. The shipment not only marked the first overseas shipment since the U.S. lifted its embargo on oil exports, but had enormous geopolitical implications. With the U.S. Shale Revolution smashing gas and petroleum prices generally around the world, the fallout has been vast and much of it still unpredictable.
There is, of course, the possibility that the U.S. will again resume its position as one of the world market’s major source of oil exports after a half century dominated by the Persian Gulf producers and their incredibly low crude costs. That would satisfy that old political battle cry for U.S. energy “independence”. The boom in the Mideast has led to the pile-up of petrodollars in the region beyond its technical and intellectual capacity to invest wisely, not the tax on world economies which former Secretary of Treasury William Simon once rationalized and dismissed as Persian Gulf producers came to dominate the market.
At the moment, the Saudis – despite an attempt to get major producers to limit production – is pumping madly in an attempt to cripple the higher cost American shale producers and to retain market share. So far that’s been met largely by additional technological innovation by the shale producers. More and more oil is coming on market, even some of it from noncompetitive smaller producers induced by political considerations. And with the lifting of sanctions, the mullahs in Tehran are hoping to get back into the fray as a once major exporter.
The arrival of American oil gives the Israelis one more element in what was once considered their most dangerous vulnerability, the lack of energy. It also adds one more link to the U.S.-Israeli alliance. It will enhance Prime Minister Benjamin Netanyahu’s battle against the state capitalists on both the Israeli left and right who want to forbid exports of their newfound huge gas deposits in the Eastern Mediterranean. Netanyahu needs those exports for political reasons, not the least to bolster the wavering relationship with Turkey. The Turks, once Israel’s only economic and military ally in the region, have drifted off under Pres. Recep Tayipp Erdogan flirtation with the Islamicists. But Israeli gas shipments through energy-deficit Turkey, along with transshipment of Central Asian oil and gas, to Europe is one of Ankara’s principal and critical politico-economic goals.
The American tie-up will also strengthen Israel’s hand in its efforts to coordinate recent massive discoveries of gas off Egypt by the Italian government company and Cyprus offshore gas. Even before these latest finds, a 2010 US Geological Survey report estimated that there were 122 trillion cubic feet of gas and 1.7bn barrels of oil off the coasts of Israel and the Gaza Strip, Cyprus, Syria and Lebanon. [The U.S. consumes about 25 million cubic feet of gas annually.] The most recent additions to these massive reserves offer the Europeans an alternative to the high-cost Russian gas imports which have been the heart Moscow’s economy, now jeopardized sanctions imposed as a result of Vladimir Putin’s aggression in Ukraine and Syria and threats to the Baltic states.
With domestic gas, access to neighbor’s reserves, and now the new American tie, Israel’s economy and its worldwide stature is rising rapidly despite the insoluble Palestinian problem and the current wave of individual knifing violence. The Israeli arms industry and its exports, for example, are taking on great significance. [Israel and India have just initialed a new $2 billion New Delhi purchase.]
The irony, of course, in this is taking place despite the Obama Administration, for the most part covertly, to loosen Washington ties to the Israelis, America’s most dependable ally in the Middle East. That, too, may change in January 2017.