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14 February 2015

Is Israel Next in Line for an Energy Revolution?

By David A. Merkel
February 12, 2015

The fall in oil prices over the last several months carries significance far beyond the low prices American commuters are paying at the pump. Low oil prices serve Western strategic interests by starving some of the most troublesome actors in the world of their major source of revenue - countries such as Iran, the leading state sponsor of terrorism, and Russia, which attacks its neighbors and uses its energy might to blackmail Europe.

One cause of the drop in oil prices is the technological advances that have enabled Western countries such as the United States and Canada to dramatically increase their domestic oil production. Now the global oil supply appears set to get a boost from a new and improbable player in the oil business: Israel.

Former Israeli Prime Minister Golda Meir famously lamented that Moses wandered the desert for 40 years before coming to the only place in the Middle East that doesn't have oil. Today, Israel imports 99 percent of the oil needed to satisfy domestic demand. But depending on the results of drilling tests now underway on the Golan Heights, this situation - which leaves Israel vulnerable to supply interruption - may soon change, and perhaps dramatically.

U.S. company Genie Energy has received permits to drill 10 test wells in the Golan Heights. The company's surveys suggest that some parts of Golan may contain enough oil to fill billions of barrels - enough to satisfy Israel's domestic oil needs and even become an oil exporter.

Oil discoveries would complement Israel's already-discovered natural gas fields to make Israel truly energy-independent. But an oil discovery would also strengthen the U.S.-brokered peace treaties between Israel and neighbors Jordan and Egypt, which, like Israel in the past, are poor in natural resources. Amman and Cairo maintain their peace treaties with Israel despite enormous domestic opposition. Energy partnerships are perhaps the single best way to foster closer relations - promoting regional stability and furthering U.S. interests in the region.

Last year, Israel signed a memorandum of understanding with Jordan under which it will supply $15 billion in natural gas over 15 years - making it Jordan's largest energy supplier. Similar arrangements could be made for Israeli oil. In addition to being a peace partner, the pro-West kingdom is Washington's closest Arab ally, receiving nearly $1 billion in U.S. assistance in 2013. In recent years, however, pressure from Syrian refugees and from spikes in energy costs - largely due to repeated attacks on the Egyptian natural gas pipeline - have fueled unsustainable budget deficits, threatening the stability of the kingdom. An Israel-Jordan oil deal would ease the pressure and promote a major U.S. interest in the Middle East: keeping Jordan in the U.S. orbit.

Some may complain that Israel should not extract natural resources from a territory whose legal standing is contested - the Syrian regime, the United Nations, and many European countries stress their view that the Golan Heights is occupied territory.

But given the reality of Syria today - several years into a brutal war that has left major cities destroyed, 200,000 people dead, the country's territory controlled by different militias, and the Assad regime more dependent than ever on Iran and Hezbollah - the prospect of peace with Israel is so distant that abstaining from oil extraction seems to serve little purpose. This is especially clear when considering the benefits of extraction to countries that are not aligned with Iran and are not slaughtering their own citizens. The wisdom of keeping out of Golan also rests on the assumption that Syria will emerge from years of devastating fighting with the same borders and national character that it had before - a dubious proposition.

More important, if history is any guide, Israeli energy extraction from Golan will not obstruct peace. After the 1967 Six Day War, in which Israel captured Sinai from Egypt, Israel used Sinai's oil fields to supply, at their height, around half of the country's oil needs, and it also developed new oil wells.

Far from being an obstruction to peace, Israel's oil extraction in Sinai encouraged peace by creating an incentive for Egypt to pursue a treaty that would enable it to regain the territory. The prominence of the oil issue in the Israel-Egypt talks was such that the very first diplomatic understanding between the two countries - reached in 1975, four years before the final peace treaty was signed - pertained to the Sinai oil fields. As part of the 1979 peace treaty, Egypt agreed to supply Israel with oil from the Sinai fields, an arrangement that formed the foundation for future economic relations between the two countries.

The same dynamics are likely to prevail for Syria and Israel should the day arrive that Syria is stable enough, and politically willing, to make peace. If development of Golan's natural resources has any influence over the prospects for Syria-Israel peace, it would likely be to encourage Syria toward peace, not the opposite. In the meantime, the United States, Israel, and our regional allies should hope that the oil exploration now underway in the Golan Heights ends up proving Golda Meir wrong.

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