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Middle East: A 'Pipeline Of Peace' Sparks New Rivalries

A "pipeline of peace" could someday connect Egypt, Israel, Syria, Lebanon, and Turkey, officials say. It could also mean changes for all the countries that seek to supply Turkey with natural gas.

Boston, 21 January 2000 (RFE/RL/) -- Egypt, Israel, and Turkey could soon share an enormous peace dividend, but the prospect could further complicate the regional race to build gas pipelines.

Israeli Prime Minister Ehud Barak sparked the latest round of strategic calculations last month by announcing that Egypt had agreed to export gas to Israel and the Palestinian Authority with a new pipeline that could be extended to Turkey, if a peace deal with Syria is signed.

The chance of a "pipeline of peace" running along the Mediterranean shore and serving Israel, Syria, Lebanon and Turkey, as well as the Palestinians, raised hopes in some countries but sparked anger in Iran.

The Iranian official news agency IRNA was quick to relay a reported denial by Egyptian Oil Minister Amin Sameh Fahmy that any agreement had been reached on selling gas to Israel. Barak's office had cited Egypt's ambassador to Israel, Mohammed Bassiouny, in making the announcement of a decision to approve the exports. Fahmy would not confirm the deal.

Iran may see both diplomatic and economic disadvantages if it goes through. If an Egyptian pipeline eventually reaches Turkey, it could be yet another competitor to Iran's plan to pipe gas to the Turkish market under a 23-year contract. Industry sources say Israel's initial gas demand may be relatively small at only 2.5 billion cubic meters per year. But the amount could multiply as power plants and industries convert from burning oil and coal.

Turkey's market could be a greater prize for Egypt. The Turkish pipeline company Botas has forecast that the country's gas consumption will rise by more than four times to 55 billion cubic meters in 2010.

While some analysts doubt the forecasts, Turkey has signed supply pacts with countries including Russia, Iran, and Turkmenistan. In 1998, Botas concluded a memorandum of understanding with Egypt to import 10 billion cubic meters of gas. Last year, it signed a protocol for transportation by pipeline.

Egypt is also increasing its potential as a gas supplier. Oil Minister Fahmy estimated this week that the country has 3.4 trillion cubic meters in gas reserves, of which 1.2 trillion are proven. Cairo is seeking to increase its annual revenues from gas exports to 3 billion. The reserves are enough to cover Egypt's domestic and export needs for 100 years, Fahmy said.

Iran should have relatively little concern about the threat of new competition from Egypt. In 1996, Iran concluded a take-or-pay contract with Turkey, which gives it a strong claim to be paid, in any case. Iran has also recently completed a pipeline to the Turkish border. But its main problem appears to be diplomatic. After working to build better relations with Egypt for the past year, Iran is likely to treat the Israeli deal as a setback.

A pipeline that joins Israel with Syria and Lebanon would also increase Iran's fear of isolation in the region at a time when it is dealing with its own internal pressures over foreign investment. The government has recently come under fire from some conservative newspapers for negotiating with foreign oil companies that may have "Zionist roots."

The allegations against companies including Royal/Dutch Shell, British Petroleum and Totalfina appear to be aimed at reawakening fears of colonialism from Iran's past. But officials have been forced to defend their negotiations by claiming that profit margins for the foreign companies have decreased with each new deal that has been signed. That bargaining stance is hardly likely to make investment easy, while opportunities elsewhere in the region abound.

But the "pipeline of peace" could also be complicating for investors. The Israeli company Merhav will reportedly be involved in building the new gas line from Al'Arish in Egypt and possibly the extension to Turkey, for example. Merhav has deep interests in Turkmenistan, which is competing for the Turkish market with its planned trans-Caspian pipeline. Similarly, ENI of Italy has been building the line from Egypt's delta region to Al'Arish. ENI is also a partner in the competing Blue Stream project with Russia's Gazprom to pipe gas across the Black Sea to Turkey.

It is unclear how the competing interests will play out, particularly if Turkey's gas demand proves to be less than forecast. But as peace advances in the Middle East, it may be increasingly possible to supply energy from a variety of sources and through routes that would have previously been unthinkable. The competition may simply have to adjust to reflect the new political realities.