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Putin woos Israel amid East Med gas clash

July 18, 2012 at 3:45 PM   |   Comments

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TEL AVIV, Israel, July 18 (UPI) -- Russian President Vladimir Putin's June visit to Israel is a measure of how the country's discovery of major gas fields under the eastern Mediterranean has intensified the volatile region's geopolitical dynamics.

Russian energy giant Gazprom is interested in cutting a deal with Israel, possibly injecting significant funds to bolster further exploration, in part to ensure its lucrative gas exports to Western Europe are not jeopardized.

Moscow is also wooing Cyprus, or to be more accurate, the Greek Cypriot majority who rules the southern part of the war-divided island that's 260 miles west of Israel and on the cusp of its own gas boom.

Cyprus has been divided since Turkey invaded in 1974 and seized the northern part of the island.

Putin has offered the Nicosia government a $3.5 billion loan to bolster its banking sector, which has suffered major losses because of the economic meltdown in Greece. Moscow gave Nicosia a three-year loan of $3.14 billion in 2010 at a below-market rate of 4.5 percent to help service its debt.

Russia has close ties with Cyprus, which sits on the periphery of the Middle East and has long been a hotbed of intrigue in the region's many conflicts.

Both countries follow the Orthodox faith and Russian companies have major interests in Cyprus.

The gas discoveries have transformed Cyprus from a Mediterranean backwater and energy importer to a potential regional energy power, like Israel. Analysts say Cyprus sits on enough natural gas to last it for two centuries at its current consumption rate.

Like Israel, Cyprus plans to become a gas exporter, primarily to Europe.

That's bad news for Russia, which doesn't want to see its stranglehold on gas supplies to Europe weakened.

Israel has identified gas reserves of 30 trillion cubic feet and some 4 billion barrels of oil.

Israel's maritime zone abuts that of Cyprus, and Israel's biggest field, Leviathan, with some 35 tcf of gas, apparently extends into Cyprus' southern waters.

Houston's Nobel Energy, which made the Israeli strikes, is also spearheading exploration off Cyprus and reported an initial strike of 7 tcf in the Aphrodite field 25 miles west of Leviathan.

Israel and Cyprus plan to pool their efforts to ship gas exports to Europe via Greece.

This is where the Middle East's conflict politics intersect with global energy strategies.

Israel would like the Russians to help it pressure Iran top halt its nuclear program and curb Moscow's arms sales to Tehran.

It also hopes Russia, which has been backing embattled Syrian President Bashar al-Assad, will move behind Western diplomatic efforts to find a settlement to end the 17-month uprising that threatens to destabilize the region to Israel's disadvantage.

Moscow, driving to restore its Cold War influence in the region, "wants a stake in the development of ... gas reserves in the Mediterranean Sea," observed analyst Simon Henderson of the Washington Institute for Near East Policy.

"Russia has the largest gas reserves in the world and is Europe's main supplier.

"Yet Israel's relatively small production levels will be boosted next year when a new field comes onstream and again in 2017 when gas begins to flow from another field partially designated for export."

Israel doesn't want its export opportunities limited by Russia, even in return for a capital infusion from Gazprom, which is determined to hold onto its market share despite Europe's efforts to break loose.

"The energy dimension of Putin's visit should not be understated: Russia's economy is heavily dependent on oil and gas exports and has been hit hard by recent price drops," Henderson noted.

The fate of Syria's another key issue. Israel argues that Moscow's support for the embattled Syrian regime "only increases the chances of a bad outcome following the inevitable transition of power from Bashar al-Assad," Henderson noted.

"Israel has some leverage in this regard: it will reject an expected Russian request for new drone aircraft."

Turkey, Israel's strategic ally until mid-2010, doesn't want to see the Jewish state or Cyprus become energy powers.

Turkey's threatened to use military force to stop the drilling off southern Cyprus and also wants to curb Russia's energy exports so it can become the main energy hub between east and west.

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