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Making a Right Turn -- Natural Gas in Israel

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With a sense of humor Israelis bemoaned that when Moses led his people out of Israel he took a wrong turn on his way to the Promised Land. Israel's former Prime Minister Golda Meir famously quipped that Moses took the Israelites 40 years through the desert in order to bring them to the one spot in the Middle East that has no oil. So was this Promised Land, which Moses never was able to enter, a Land without Promise, at least in terms of natural resources? After Israel announced the discovery of a first major natural gas field off its coast at the beginning of 2009 it seems that he had a better instinct with regard to energy resources than previously thought. The field, located 55 miles off Israel's northern coast, was the first large one discovered in the eastern Mediterranean and is significant even by global standards. More finds followed in 2010. The implications will be significant as well.

In the 62 years of her existence, Israel, a tiny democratic haven in a still hostile neighborhood, relied on the brainpower, creativity, ingenuity, and an unbroken innovative spirit of her people for the country's development. The country's economy has weathered many crises but today stands stronger than ever before. Israelis worked hard and turned the misfortune of a lack of mineral wealth into a motivator. The hi-tech industries are the envy of the world and the country is an international player in not only science and technology, in medical research, bio-tech, but also agriculture and other areas. It is curious but nonetheless true that the country's strategic position, facing a constant existential threat from her neighbors and a lack of resources, would actually focus her people and drive them to excel.

Now, the recent discoveries of gas will change Israel's geo-strategic position. The country will move from importing energy to exporting it. Egyptian-Israeli energy ties go back to the Camp David Accords of 1978 and in 2005 both countries signed a deal to supply natural gas to Israel. Recently, there have been considerable tensions in Egypt not only because of the fact that these deliveries are made at prices agreed to in 2005, substantially below the current going rate but also because the idea of helping Israel is not popular. In an ironic twist Egypt is now apparently seeking to buy back gas from Israel because of domestic shortages. Egyptians hopefully will be more amenable to Israel helping their country.

Looking north there will be implications in the wake of the gas discovery. Considering Israel's ongoing bilateral tensions with Ankara it does not come as a surprise that there is talk about Israel building an undersea gas pipeline to Greece, a member of the European Union, rather than Turkey. The political and economic ramifications of such a move are not clear at this point.

What is clear, however, is that the new gas wealth -- even if not immediately rather than over a period of time -- will undermine the energy side of the ongoing but only sporadically enforced boycott of the Arab League that targets those that, in short, do business with Israel. Most countries in the region continue to wish for Israel's isolation and the contrary will happen in the wake of the gas discoveries. Israel's government would be smart to elevate its gas discoveries not just for its own development, but also for the entire region. There's enough gas for it.

But, Israel's energy find has increased tensions with her neighbor to the north. Lebanese politicians and media claimed that the discovered gas fields belonged to Lebanon. It is no surprise that Hezbollah weighed in as well. Thankfully, however, Israel has a watertight case in her Mediterranean waters, so to speak. This does not rule out, however, that Lebanon, particularly Hezbollah, will use this dispute to further increase already high tensions with Israel.

And as if Israel's gas discovery had not enough ramifications, another one needs to be added. There will be negative effects on Iran's gas exports as well. Tehran, under sanctions by the United Nations Security Council as well as United States and the European Union, will not like it. It is regrettable though that these effects will kick in too late to add to the pressure aimed at stopping Iran's drive to nuclear weapons capability. Tehran, however, does not sit idly by and watch Israel become a player and a competitor in the regional energy market. In a recent agreement with Lebanon, which is already disputing the lawfulness of Israel's gas claims, Iran, of all countries, will help with oil and gas exploration off the Lebanese coast. In addition to Hezbollah already being Iran's terrorist puppet, Tehran now will get an even larger foothold in Lebanon and increase its influence with Israel's northern neighbor. This is a worrying prospect that is destined to heighten regional tensions. As if there weren't already enough explosive problems in the Middle East. Now Israel's gas windfall, for all its benefits, is another one.

What should be done? It is important that the Israeli Government, consider the additional funds as a gift. Domestically, caution must prevail, however. Stanley Fischer, Governor of Israel's Central Bank sounded a warning to Israel's leadership and laid out a sensible scenario. He suggested avoiding unwanted effects on the national economy by enabling the government to use only small doses of the gas royalties at any given time. These funds would be introduced into the economy much like water for plants through Israel's famed drip-irrigation.

The additional funds must be invested in what made Israel successful throughout her existence: her people. Israeli leadership should improve the education system, strengthen universities and research centers, and provide increased social and economic opportunities as incentives to use brainpower, creativity, ingenuity, and an unbroken innovative spirit. Israel must remain a world leader in many fields. Funds should also be used to help bridge the large gap between the poor and the rich.

Regionally, Israel's leadership should recognize that the new-found wealth, once unearthed, should be used prudently and to the benefit not only of Israelis but of the surrounding countries as well. While it is true that Israel lives in a challenging neighborhood and that there was no lack of goodwill gestures in the face of rejection, it is important to continue efforts that will lead to Israel's acceptance. In an important signal the Israeli Government should not only share more of Israel's technologies and increase trade but incorporate the gas discoveries into the peace talks as an element similar to the question of water, which is an important issue of regional cooperation. It would be farsighted if Israel could, to whichever degree is possible, use parts of the gas bonanza to help the development of her neighbors.

All this combined would result, domestically, in economic and educational improvement, continued robust security, and, regionally, in a hopefully appreciated outreach to the countries bordering Israel in a search for desired peace. So Moses might not have been taking a wrong turn on his way to a Promised Land void of energy resources in the end. The Promised Land turned out to bring out the best in its innovative and hard working people. The energy wealth is a late gift that, if used responsibly, can help to make Israel and the entire region a better place.