The Nord Stream 2 gas pipeline has been a subject of heated debates all along the construction cycle. The pros and cons are abundantly exposed in the public domain and have been at the centre of technical and political discussions for several years. The project comes amid a wide range of comments and statements on the high political level, involving leaders of Germany, Russia, the United States and the European Union. The polemic around the Nord Stream 2 takes place in a particular context marked by the growing tensions between Russia and the West and recurrent security incidents in the East of Ukraine and the Crimea area. Those factors add further to a tendency to overemphasize political and security dimensions of the Nord Stream 2. Consequently, the project has been associated with far-reaching strategic implications. Referring to the opinions expressed by politicians and experts on both sides of the Atlantic, Western media have represented the pipeline construction as infringing on the NATO interests in the region and frustrating the unity of the European nations. The pipeline has also been presented as laying the ground for Russian military offensive into its European neighbourhood. This has created quite an exceptional environment for a project which was designed merely as an extension of the already existing pipeline route (Nord Stream 1). Indeed, the project could hardly be viewed in ‘normal circumstances’ as a very new element in, or a substantial change, to the European energy and security landscape.
Making an extra argument in favour or against the project will not be the objective of this article. What it will, however, try to explore is to what extent the contention around the Nord Stream 2 may interfere with existing security balances in Europe and how far it can impact strategic security relations in a triangle formed by Russia, the EU and the USA.
On the one hand, the developments around the Nord Stream 2 are quite similar to those which accompanied earlier projects of hydrocarbon transit from Russia to Europe, starting from the Nord Stream 1 and back to the Cold War times. This can be noticed by looking at the international reaction to the project. Indeed, many arguments currently advanced against the Nord Stream 2 have already emerged at the order of the day on several occasions. The narrative is commonly constructed along the lines of Europe’s energy vulnerability and its dependence on external energy supplies, from the Cold War era “red oil” threat to later Soviet and now Russian gas dependency. Ten years ago, the opponents of the first Nord Stream pipeline put on the table almost the same points of criticism. They considered the project as an attempt to bypass traditional transit countries, exert political and military influence on them, gain strategic dominance over Europe.
The diplomatic and political manoeuvres around the Nord Stream 2 are also not entirely new. Back in 1962 (a time when oil and not gas was the main product in energy trade relations between the USSR and Europe) NATO countries introduced a US-proposed embargo on oil pipes and connected technology for the Soviet Union. This strategy was enacted as an attempt to delay the construction of the pipeline named Druzhba (the Russian for ʻfriendshipʼ) intended to bring the country’s oil to Europe. Further embargo on pipeline technologies was implemented in the early 1980s by Ronald Reaganʼs government. The measure was supposed to prevent the construction of the Soviet export gas pipeline Urengoy-Pomary-Uzhhorod, in which several European companies and banks had a stake. For these past events, various features of the European and transatlantic policy were quite similar to the present times. The division of Europe into supporters and detractors of the pipelines from Russia, US and NATO attempts to block Russian energy deals with the European companies, and the national governments’ subjection in international affairs to the energy majors’ strategies, do not sound like anything new. Thus the actual contention over the Nord Stream 2 is inscribed into the longer-term turbulent history of the Russian hydrocarbon transit projects in Europe.
On the other hand, today’s context is different, and there are mainly two new elements which account for the change. First is that the world has entered a new historical period, security-wise far less structured, predictable and manageable than the Cold War times and even the post-Cold War era. Dramatically reduced level of trust between the USA and Russia, coupled with the harsh rhetoric of their leaders and continuous mutual accusations raise the conflictual potential in the bilateral relations. US-China competition over trade and economic leadership adds to further international complexity. The growing number of actual and potential military conflicts, including hybrid ones, brings about a higher risk of escalation with unpredictable consequences. Serious concerns hover over disarmament and non-proliferation regime, with its significant components fallen apart or remaining in limbo. While the demise of the time-proved mechanisms aimed at conflict prevention may be traced back to 2002, when Washington’s withdrew from the Anti-Ballistic Missile treaty (ABN Treaty), the recent developments, mainly the US decision to pull out from the 1987 Intermediate-Range Nuclear Forces (INF) Treaty and Russia’s suspension shortly after of its own compliance with the pact, have put the finishing touch to the arms control and disarmament agenda of the whole post-Cold War era.
In such a context, armed conflicts are likely to break out or grow in intensity along one of many existing fault lines. The cross-border energy projects also turn into dividing factors within the current confrontational conjuncture. Consequently, North Stream 2 has got the potential to impact the European geopolitical scene profoundly.
The second new element pertains to the US domestic hydrocarbons production and the way it strains the competition for the European gas market sharply. Only about a decade ago, the United States was supposed to become the largest importer of liquefied gas. However, the shale revolution brought about a sharp increase in domestic gas production. Paradoxically, the infrastructure previously designed to import LNG to the USA was used later on to export gas. That contributed to a significant reduction in the cost of American LNG projects compared to similar endeavours in other countries (Qatar, Australia and Russia). By 2020, the production capacity of the six existing US LNG plants reached about 78 million tons, and the United States is now quite able to outrun Qatar in production volumes (this is apart from being currently the world’s leading exporter of refined oil products).
Meanwhile, domestic gas production in the European countries accounts today for less than 50 per cent of domestic consumption. The demand for imported gas is growing. Over the past six years, gas supplies from external sources have increased by an average of almost 4 per cent annually. In 2018, European countries imported 326 Bcm of gas, 4.8 per cent more than in 2017. In the first half of 2019, the total net gas imports in the EU amounted to 210 Bcm, which was 19 per cent more than in the first half of 2018, amid increasing consumption (+4.5 per cent) and decreasing domestic production (-7.6 per cent), pointing to further increase of gas import dependency in the EU. Russia remained the top pipeline gas supplier of the EU, covering the major part (almost 45 per cent) of total extra-EU gas imports.
The approximate market share volume in Europe for the US gas producers may potentially elevate up to 60 – 80 billion cubic meters, but only if supplies from Russia are effectively restricted. Because of the hurdles which the US LNG may face on the European market due to the growing competition with the cheaper pipeline gas from Russia, its export may find itself limited only to the markets of the Asia-Pacific Region and Latin America with only a marginal proportion going to Europe. That explains the rationale behind some non-market restrictive measures, or sanctions, which serve as an instrument to sideline the competitor and politically facilitate American LNG flows toward Europe. President Trump and high officials of his administration expressed on various occasions their opinions on the North Stream 2 project, which oscillated from lukewarm to overtly adverse. The US ambassadors in Berlin and the Hague overtly pressured local governments and private companies to reconsider their support for or involvement with the pipeline. In June 2019, the US House of Representatives’ Foreign Affairs Committee approved the Protecting European Energy Security Act, a bill which would impose sanctions on anyone who sells, leases, or provides pipe-laying vessels used in the construction of a Russian-origin energy pipeline that makes landfall in Germany or Turkey. A month later, the US Senate Foreign Relations Committee advanced the bill that would impose sanctions on the Nord Stream 2 as an effort to “protect European energy security and Ukraine’s stability”.
Finally, on December 20, 2019, the US President signed a sanctions package on the Nord Stream 2 and another offshore pipeline designed by Moscow, Turkish Stream (also called TurkStream). As an immediate effect, the Swiss-Dutch company AllSeas in charge of laying the pipes in both projects announced its withdrawal from the Nord Stream 2, causing presumably a one-year delay to its completion.
The surplus shale oil and gas production in the US has impacted the governmental approach toward diplomacy. Ever since the 1970s, Washington had criticized the use of energy as a political instrument; however, once the self-sufficiency was achieved, energy sanctions have become the tool of choice for American foreign policy. This new role of the US — that of the ‘energy hegemon’ — will likely have several effects on the transatlantic relations and international security.
First of all, overusing sanctions in the energy domain would affect the supply security of the EU countries and necessitate some innovative safeguards against further deterioration. A situation when almost all non-US sponsored energy supply projects in Europe may face fierce American opposition on political grounds is constraining for actual and potential investors into hydrocarbon transit business. As long as the US economic interests find their way in Europe under the guise of political considerations, the stakes of the European companies involved in the Nord Stream 2 (or other energy projects with Russia or Iran) will remain at risk. That kind of setting may result in a broader awareness within the EU about the diverging political priorities of Washington. It is also possible to expect the elaboration of some specific measures aiming to mitigate the effects of the US sanctions on what Europeans see as their legitimate business and security interests. It should be noted, that the big question is whether the EU will have enough of united political will and capacity to take a course of action that goes against the attitude of its central political and commercial partner, the US. However, the ongoing discussions in Europe about the de-dollarisation of the energy products trading, as well as some attempts made by France, Germany and the United Kingdom to set up a special purpose financial vehicle (INSTEX) to facilitate trade with Iran, are some early examples of a search for greater autonomy.
Secondly, fierce US lobbying against the Nord Stream 2 stokes tension to an already complex and sometimes explosive European security landscape. The US and some Eastern European countries used to strengthen the arguments against the project by stressing its linkage with the ongoing conflict in Ukraine. It purportedly followed therefrom that the raison d’être of the North Stream 2 was to slowly strangle Russian neighbour’s economic and political capabilities, particularly by causing Ukraine to lose around 2 billion euro annually in gas transit fees when the new pipeline becomes operational.
However, by the end of 2019 Moscow and Kyiv reached a new five-year agreement on Russian gas transit through Ukrainian territory. Ukraine got the supply volumes it wanted: 65 billion cubic meters in the first year, and 40 billion the next year. In the absence of the Nord Stream 2, delayed by the US sanctions, Gazprom might have to supply some 75 Bcm through Ukraine in 2020.
Nevertheless, the critics of the project are already extending the strategic implications of the pipeline to the Baltic area. The standard argument here is that the pipe would give Russians a pretext to patrol the entire Baltic sea, as well as provide infrastructure for information transmission and for tracking the movement of naval vessels. From that reasoning follows that adequate countermeasures need to be designed and implemented by NATO in order to prevent a “blow” against security in Eastern Europe. As a consequence, the whole area is getting locked in a highly conflictual conjuncture aggravated by already existing regional security challenges, such as the demise of the Intermediate-Range Nuclear Forces Treaty and the ongoing military buildup on the NATO’s Eastern flank.
Thirdly, the recurrent difficulties in involving Europeans into sustainable and smooth economic partnership in the gas sector, as well as the American sanctions which could eventually apply to any additional lines to the Russia-sponsored pipelines in Europe, incentivize Russia to reconsider the geometry of its energy export routes. The deliveries of Siberian gas to China in the amount exceeding 1 trillion cubic meters in 30 years began via a new trunkline — ‘the Power of Siberia’, with the annual capacity of 38 Bcm . The reorientation of substantial gas volumes toward the East is a sign that the former Cold War allies seem to be on the way of upgrading their relationships while trying to fend off escalating pressure from the West. Washington clearly designates Russia and China as US strategic rivals, and this precipitates both countries to cooperate on a broader range of issues, like energy and related infrastructure, international security and domestic governance. With all the limitations which an alliance between Moscow and Beijing may face, this it is likely to become a consequential factor of the strategic landscape in Eurasia and beyond.
Fourthly, the growing US pressure both on Russia and on Europe to stanch the Nord Stream 2 construction causes discords within the EU and is likely to rebound badly for the European political unity already put to the test by many economic and security issues. The controversial reputation of Donald Trump’s international policymaking could pose a problem to those EU member states that follow American president in warning against the project. On the contrary, those who support the Nord Stream 2 or stay neutrally favourable toward it, are likely to be in a more advantageous position by representing their attitude as resistance to external pressure and uncompromising defence of national and European interests. The German’s pattern of political conduct fits well into this framework. Berlin supports the pipeline construction (regarded primarily as a business project) and defends it as a contribution to national economic development and secure energy supply for Europe. In a way, Germany has revealed the limits of pressure that President Trump is prone to exercise on the US allies and adversaries alike. What is happening proves that applying coercion, or just evoking it publicly, can bring about the opposite effect. That holds true for the Nord Stream 2 which has got broad public support within German society, and is now championed both by major ruling political parties in the current CDU/SPD coalition as well as three parties of the opposition: the far right AfD, the liberal FDP, and the extreme left, die Linke. The same holds in other cases as well. For instance, another President Trump’s favourite subject of anger concerning Germany is its defence spending. However, pushing Berlin into increasing it up to 2 per cent of its GDP makes it extremely difficult to do so. On the one hand, existing polling data proves that Germans oppose defence spending above the 1.5 per cent of GDP, already promised by Angela Merkel by 2024. On the other hand, hardly any politician in Germany wants to be seen succumbing to Trump’s overt forcing. Although there is no direct link between the German involvement with the Nord Stream 2 construction and its vision of the defense spending obligations, the underlying factor on both accounts is compelling American demand for clear-cut solutions to the issues, which turn out to be much more nuanced from the German standpoint.
The overemphasized political and military dimensions of the Nord Stream 2 increase pressure on the strategic relationship between Russia and the West. The anti-Russian rhetoric fans the continuous contention around the project in the American and European mass media. The moment when it happens is all the more inopportune, taking into account the deteriorated security environment in Europe which moves closer to the untrammeled arms race with the demise of the INF Treaty and the uncertainty about the future of the New START — one of the last pillars of the arms control regime. International energy supply projects have become — nolens volens — closely intertwined with political and security developments, be it escalation between the US and Iran at the Strait of Hormuz — a vital shipping route linking Middle East oil producers to global markets — or the simmering conflict in the East of Ukraine, in the vicinity of a transit corridor for Russian gas exported to Europe. Being a constant element of the strategic picture, energy is more and more regarded as a dividing factor which serves the interests of one party to the detriment of the other. The application of this conflictual paradigm to the Nord Stream 2 gives rise to yet another fault line amidst already strained European political and security environment.
Paradoxically, with the Nord Stream 2 contention, the very concept of energy resources supply and sharing acquires a confrontational connotation in Europe. Whereas, the same idea was underlying regional integration back in the mid-20th century. The European Coal and Steel Community (ECSC) established by the Paris agreement in 1951 was intended to neutralize competition between European nations over natural resources and prevent further war with Germany. The visionary idea behind the transnational community implied that amidst dramatic lack of trust toward a particular country the best way to avoid conflict and to restore confidence was to involve the distrusted state into a large-scale energy project. Unfortunately, subsequent historical developments on the European continent resulted in a situation where the idea of promoting extended energy partnership as a pledge of lasting peace seems no longer attractive. The Nord Stream 2 case demonstrates quite clearly the lack of collective will on behalf of the European Union to engage on a long-term basis with its Eastern neighbour in the gas sector. Keeping in mind the limitations of any historical analogies, back than the ECSC represented a political option in dealing with a nation which was suspected of seeking regional domination. In the modern days, rather than making out of the Nord Stream 2 another squandered opportunity for building a more sustainable relationship with Russia, the West, and primarily the EU as a close neighbour, could have looked at the pipeline beyond its primary function of one-way gas supply. The connecting gas artery might also serve to send something back from Europe toward Russia, albeit in a virtual sense, like a better understanding of European priorities and concerns, trust, and a vision of a shared future. The project could have also been viewed as a safeguard against presupposed Russian military invasion into the countries of the EU Eastern periphery. The possible damage to the pipeline which would provide significant and much-needed export revenues for the national economy is a convincing disincentive for Moscow to mount some dubious warfare operation in its neighbourhood. However, this perspective was not able to make its way through alarmist rhetoric which depicted the Nord Stream 2 as a part of Russia’s sinister designs. The same reasoning certainly reinforces the aggressive image of Russia and gives additional sense to NATO’s raison d’être. At the same time, it leaves Moscow disenchanted with the European partners, locks the country out in a reactive posture and makes look for strategic alliances elsewhere.
Finally, the US-Russia contention over the Nord Stream 2 is likely to take a toll on the transatlantic solidarity. The trends going in that direction are gaining strength driven by the specifics of the current American foreign policy. It would be premature to argue that the European elites are ready to break ranks with Washington. However, on several issues, such as the nuclear deal with Iran (JCPOA), Middle East policy, the role of NATO or relations with China they show increased independence and greater consideration of their national interests. The way things will develop for the Nord Stream 2 will be partly determined by the unfoldment of the debates over the greater European strategic autonomy from the US. However, even if the outcome of these debates tilts the balance in favour of the Nord Stream 2, it is difficult to predict for how long that could last. The European position regarding the project has indeed proved to be a complicated, precarious symbiosis between internal strategic concerns, imposed security frameworks and economic motivations.
From our partner RIAC
 As Roberto Cantoni notes, those were not the only USA-proposed blockades aimed at hindering Soviet industrial projects: “…In 1946, a penicillin plant program launched by the United Nations Relief and Rehabilitation Administration to build up the capacity of the pharmaceutical industry in Eastern and Southern Europe was significantly delayed by an American embargo on extractor technologies. The State Department refused to grant export licenses for the necessary equipment to pass the Iron Curtain. Other products including radioisotopes and computer equipment were also embargoed to stifle Soviet technological progress”.
 Among the primary factors driving gas demand growth in Europe are the decline in domestic production, reduction in nuclear generation, and the decreased role of coal in the energy sector. Within the EU, the gradual capping on the extraction from the major Dutch Groningen gas field resulted in the production downturn of a magnitude similar to the increase of Russian gas imports (both roughly 40 Bcm).
The hydrogen revolution: A new development model that starts with the sea, the sun and the wind
“Once again in history, energy is becoming the protagonist of a breaking phase in capitalism: a great transformation is taking place, matched by the digital technological revolution”.
The subtitle of the interesting book (“Energia. La grande trasformazione“, Laterza) by Valeria Termini, an economist at the Rome University “Roma Tre”,summarises – in a simple and brilliant way – the phase that will accompany the development of our planet for at least the next three decades,A phase starting from the awareness that technological progress and economic growth can no longer neglect environmental protection.
This awareness is now no longer confined to the ideological debates on the defence of the ecosystem based exclusively on limits, bans and prohibitions, on purely cosmetic measures such as the useless ‘Sundays on which vehicles with emissions that cause pollution are banned’, and on initiatives aimed at curbing development – considered harmful to mankind – under the banner of slogans that are as simple as they are full of damaging economic implications, such as the quest for ‘happy degrowth’.
With “degrowth” there is no happiness nor wellbeing, let alone social justice.
China has understood this and, with a view to remedying the environmental damage caused by three decades of relentless economic growth, it has not decided to take steps backwards in industrial production, by going back to the wooden plough typical of the period before the unfortunate “Great Leap Forward” of 1958, but – in its 14thFive-Year Plan (2020- 2025)-it has outlined a strategic project under the banner of “sustainable growth”, thus committing itself to continuing to build a dynamic development model in harmony with the needs of environmental protection, following the direction already taken with its 13th Five-Year Plan, which has enabled the Asian giant to reduce carbon dioxide emissions by 12% over the last five years. This achievement could make China the first country in the world to reach the targets set in the 2012 Paris Climate Agreement, which envisage achieving ‘zero CO2 emissions’ by the end of 2030.
Also as a result of the economic shock caused by the Covid-19 pandemic, Europe and the United States have decided to follow the path marked out by China which, although perceived and described as a “strategic adversary” of the West, can be considered a fellow traveller in the strategy defined by the economy of the third millennium for “turning green”.
The European Union’s ‘Green Deal’ has become an integral part of the ‘Recovery Plan’ designed to help EU Member States to emerge from the production crisis caused by the pandemic.
A substantial share of resources (47 billion euros in the case of Italy) is in fact allocated destined for the “great transformation” of the new development models, under the banner of research and exploitation of energy resources which, unlike traditional “non-renewable sources”, promote economic and industrial growth with the use of new tools capable of operating in conditions of balance with the ecosystem.
The most important of these tools is undoubtedly Hydrogen.
Hydrogen, as an energy source, has been the dream of generations of scientists because, besides being the originator of the ‘table of elements’, it is the most abundant substance on the planet, if not in the entire universe.
Its great limitation is that in order to be ‘separated’ from the oxygen with which it forms water, procedures requiring high electricity consumption are needed. The said energy has traditionally been supplied by fossil – and hence polluting- fuels.
In fact, in order to produce ‘clean’ hydrogen from water, it must be separated from oxygen by electrolysis, a mechanism that requires a large amount of energy.
The fact of using large quantities of electricity produced with traditional -and hence polluting – systems leads to the paradox that, in order to produce ‘clean’ energy from hydrogen, we keep on polluting the environment with ‘dirty’ emissions from non-renewable sources.
This paradox can be overcome with a small new industrial revolution, i.d. producing energy from the sea, the sun and the wind to power the electrolysis process that produces hydrogen.
The revolutionary strategy based on the use of ‘green’ energy to produce adequate quantities of hydrogen at an acceptable cost can be considered the key to a paradigm shift in production that can bring the world out of the pandemic crisis with positive impacts on the environment and on climate.
In the summer of last year, the European Union had already outlined an investment project worth 470 billion euros, called the “Hydrogen Energy Strategy”, aimed at equipping the EU Member States with devices for hydrogen electrolysis from renewable and clean sources, capable of ensuring the production of one million tonnes of “green” hydrogen (i.e. clean because extracted from water) by the end of 2024.
This is an absolutely sustainable target, considering that the International Energy Agency (IEA) estimates that the “total installed wind, marine and solar capacity is set to overtake natural gas by the end 2023 and coal by the end of 2024”.
A study dated February 17, 2021, carried out by the Hydrogen Council and McKinsey & Company, entitled ‘Hydrogen Insights’, shows that many new hydrogen projects are appearing on the market all over the world, at such a pace that ‘the industry cannot keep up with it’.
According to the study, 345 billion dollars will be invested globally in hydrogen research and production by the end of 2030, to which the billion euros allocated by the European Union in the ‘Hydrogen Strategy’ shall be added.
To understand how the momentum and drive for hydrogen seems to be unstoppable, we can note that the Hydrogen Council, which only four years ago had 18 members, has now grown to 109 members, research centres and companies backed by70 billion dollar of public funding provided by enthusiastic governments.
According to the Executive Director of the Hydrogen Council, Daryl Wilson, “hydrogen energy research already accounts for 20% of the success in our pathway to decarbonisation”.
According to the study mentioned above, all European countries are “betting on hydrogen and are planning to allocate billions of euros under the Next Generation EU Recovery Plan for investment in this sector”:
Spain has already earmarked 1.5 billion euros for national hydrogen production over the next two years, while Portugal plans to invest 186 billion euros of the Recovery Plan in projects related to hydrogen energy production.
Italy will have 47 billion euros available for “ecological transition”, an ambitious goal of which the government has understood the importance by deciding to set up a department with a dedicated portfolio.
Italy is well prepared and equipped on a scientific and productive level to face the challenge of ‘producing clean energy using clean energy’.
Not only are we at the forefront in the production of devices for extracting energy from sea waves – such as the Inertial Sea Waves Energy Converter (ISWEC), created thanks to research by the Turin Polytechnic, which occupies only 150 square metres of sea water and produces large quantities of clean energy, and alone reduces CO2 emissions by 68 tonnes a year, or the so-called Pinguino (Penguin), a device placed at a depth of 50 metres which produces energy without damaging the marine ecosystem – but we also have the inventiveness, culture and courage to accompany the strategy for “turning green”.
The International World Group of Rome and Eldor Corporation Spa, located in the Latium Region, have recently signed an agreement to promote projects for energy generation and the production of hydrogen from sea waves and other renewable energy sources, as part of cooperation between Europe and China under the Road and Belt Initiative.
The project will see Italian companies, starting with Eldor, working in close collaboration with the Chinese “National Ocean Technology Centre”, based in Shenzhen, to set up an international research and development centre in the field of ‘green’ hydrogen production using clean energy.
A process that is part of a global strategy which, with the contribution of Italy, its productive forces and its institutions, can help our country, Europe and the rest of the world to recover from a pandemic crisis that, once resolved, together with digital revolution, can trigger a new industrial revolution based no longer on coal or oil, but on hydrogen, which can be turned from the most widespread element in the universe into the growth engine of a new civilisation.
Jordan, Israel, and Palestine in Quest of Solving the Energy Conundrum
Gas discoveries in the Eastern Mediterranean can help deliver dividends of peace to Jordan, Israel, and Egypt. New energy supply options can strengthen Jordan’s energy security and emergence as a leading transit hub of natural gas from the Eastern Mediterranean. In fact, the transformation of the port of Aqaba into a second regional energy hub would enable Jordan to re-export Israeli and Egyptian gas to Arab and Asian markets.
The possibility of the kingdom to turn into a regional energy distribution centre can bevalid through the direction of Israeli and Egyptian natural gas to Egyptian liquefaction plants and onwards to Jordan, where it could be piped via the Arab Gas Pipeline to Syria, Lebanon, and countries to the East. The creation of an energy hub in Jordan will not only help diversify the region’s energy suppliers and routes. Equal important, it is conducive to Jordan’s energy diversification efforts whose main pillars lie in the import of gas from Israel and Egypt; construction of a dual oil and gas pipeline from Iraq; and a shift towards renewables. In a systematic effort to reduce dependence on oil imports, the kingdom swiftly proceeds with exploration of its domestic fields like the Risha gas field that makes up almost 5% of the national gas consumption. Notably, the state-owned National Petroleum Company discovered in late 2020 promising new quantities in the Risha gas field that lies along Jordan’s eastern border with Iraq.
In addition, gas discoveries in the Eastern Mediterranean can be leveraged to create interdependencies between Israel, Jordan, and Palestine with the use of gas and solar for the generation of energy, which, in turn, can power desalination plants to generate shared drinking water. Eco-Peace Middle East, an organization that brings together environmentalists from Jordan, Israel and Palestine pursues the Water-Energy Nexus Project that examines the technical and economic feasibility of turning Israeli, Palestinian, and potentially Lebanese gas in the short-term, and Jordan’s solar energy in the long-term into desalinated water providing viable solutions to water scarcity in the region. Concurrently, Jordan supplies electricity to the Palestinians as means to enhancing grid connectivity with neighbours and promoting regional stability.
In neighbouring Israel, gas largely replaced diesel and coal-fired electricity generation feeding about 85% of Israeli domestic energy demand. It is estimated that by 2025 all new power plants in Israel will use renewable energy resources for electricity generation. Still, gas will be used to produce methane, ethanol and hydrogen, the fuel of the future that supports transition to clean energy. The coronavirus pandemic inflicted challenges and opportunities upon the gas market in Israel. A prime opportunity is the entry of American energy major Chevron into the Israeli gas sector with the acquisition of American Noble Energy with a deal valued $13 billion that includes Noble’s$8 billion in debt.
The participation of Chevron in Israeli gas fields strengthens its investment portfolio in the Eastern Mediterranean and fortifies the position of Israel as a reliable gas producer in the Arab world. This is reinforced by the fact that the American energy major participates in the exploration of energy assets in Iraqi Kurdistan, the UAE, and the neutral zone between Saudi Arabia and Kuwait. Israel’s normalization agreement with the UAE makes Chevron’s acquisition of Noble Energy less controversial and advances Israel’s geostrategic interests and energy export outreach to markets in Asia via Gulf countries.
The reduction by 50% in Egyptian purchase of gas from Israel is a major challenge caused by the pandemic. Notably, a clause in the Israel-Egypt gas contract allows up to 50% decrease of Egyptian purchase of gas from Israel if Brent Crude prices fall below $50 per barrel. At another level, it seems that Israel should make use of Egypt’s excess liquefaction capacity in the Damietta and Idku plants rather than build an Israeli liquefaction plant at Eilat so that liquefied Israeli gas is shipped through the Arab Gas Pipeline to third markets.
When it comes to the West Bank and Gaza, energy challenges remain high. Palestine has the lowest GDP in the region, but it experiences rapid economic growth, leading to an annual average 3% increase of electricity demand. Around 90% of the total electricity consumption in the Palestinian territories is provided by Israel and the remaining 10% is provided by Jordan and Egypt as well as rooftop solar panels primarily in the West Bank. Palestinian cities can be described as energy islands with limited integration into the national grid due to lack of high-voltage transmission lines that would connect north and south West Bank. Because of this reality, the Palestinian Authority should engage the private sector in energy infrastructure projects like construction of high-voltage transmission and distribution lines that will connect north and south of the West Bank. The private sector can partly finance infrastructure costs in a Public Private Partnership scheme and guarantee smooth project execution.
Fiscal challenges however outweigh infrastructure challenges with most representative the inability of the Palestinian Authority to collect electricity bill payments from customers. The situation forced the Palestinian Authority to introduce subsidies and outstanding payments are owed by Palestinian distribution companies to the Israeli Electricity Corporation which is the largest supplier of electricity. As consequence 6% of the Palestinian budget is dedicated to paying electricity debts and when this does not happen, the amount is deducted from the taxes Israel collects for the Palestinian Authority.
The best option for Palestine to meet electricity demand is the construction of a solar power plant with 300 MW capacity in Area C of the West Bank and another solar power plant with 200 MW capacity across the Gaza-Israel border. In addition, the development of the Gaza marine gas field would funnel gas in the West Bank and Gaza and convert the Gaza power plant to burn gas instead of heavy fuel. The recent signing of a Memorandum of Understanding between the Palestinian Investment Fund, the Egyptian Natural Gas Holding Company (EGAS) and Consolidated Contractors Company (CCC) for the development of the Gaza marine field, the construction of all necessary infrastructure, and the transportation of Palestinian gas to Egypt is a major development. Coordination with Israel can unlock the development of the Palestinian field and pave the way for the resolution of the energy crisis in Gaza and also supply gas to a new power plant in Jenin.
Overall, the creation of an integrating energy economy between Israel, Jordan, Egypt, and Palestine can anchor lasting and mutually beneficial economic interdependencies and deliver dividends of peace. All it takes is efficient leadership that recognizes the high potentials.
The EV Effect: Markets are Betting on the Energy Transition
The International Renewable Energy Agency (IRENA) has calculated that USD 2 trillion in annual investment will be required to achieve the goals of the Paris Agreement in the coming three years.
Electromobility has a major role to play in this regard – IRENA’s transformation pathway estimates that 350 million electric vehicles (EVs) will be needed by 2030, kickstarting developments in the industry and influencing share values as manufacturers, suppliers and investors move to capitalise on the energy transition.
Today, around eight million EVs account for a mere 1% of all vehicles on the world’s roads, but 3.1 million were sold in 2020, representing a 4% market share. While the penetration of EVs in the heavy duty (3.5+ tons) vehicles category is much lower, electric trucks are expected to become more mainstream as manufacturers begin to offer new models to meet increasing demand.
The pace of development in the industry has increased the value of stocks in companies such as Tesla, Nio and BYD, who were among the highest performers in the sector in 2020. Tesla produced half a million cars last year, was valued at USD 670 billion, and produced a price-to-earnings ratio that vastly outstripped the industry average, despite Volkswagen and Renault both selling significantly more electric vehicles (EV) than Tesla in Europe in the last months of 2020.
Nevertheless, it is unlikely this gap will remain as volumes continue to grow, and with EV growth will come increased demand for batteries. The recent success of EV sales has largely been driven by the falling cost of battery packs – which reached 137 USD/kWh in 2020. The sale of more than 35 million vehicles per year will require a ten-fold increase in battery manufacturing capacity from today’s levels, leading to increased shares in battery manufacturers like Samsung SDI and CATL in the past year.
This rising demand has also boosted mining stocks, as about 80 kg of copper is required for a single EV battery. As the energy transition gathers pace, the need for copper will extend beyond electric cars to encompass electric grids and other motors. Copper prices have therefore risen by 30% in recent months to USD 7 800 per tonne, pushing up the share prices of miners such as Freeport-McRoran significantly.
Finally, around 35 million public charging stations will be needed by 2030, as well as ten times more private charging stations, which require an investment in the range of USD 1.2 – 2.4 trillion. This has increased the value of charging companies such as Fastnet and Switchback significantly in recent months.
Skyrocketing stock prices – ahead of actual deployment – testify to market confidence in the energy transition; however, investment opportunities remain scarce. Market expectations are that financing will follow as soon as skills and investment barriers fall. Nevertheless, these must be addressed without delay to attract and accelerate the investment required to deliver on the significant promise of the energy transition.
Beyond the friendship diplomacy between Morocco and Mauritania
Over the past decade or so, many politicians and diplomats have held that the most significant bilateral relationship has been...
The Present Battle over Greece’s Past is Seeding New Battles in its Future
The streets of Greece have been raging with marches, violent clashes between police and protesters, and clandestine violence since the...
The phenomenon of land grabbing by multinationals
Since 2012 the United Nations has adopted voluntary guidelines for land and forest management to combat land grabbing. But only...
The Only Wealth, There’s in Man
The famous quote of Jean Bodinprovide us with an important visualization about the human capital in developing countries, in order...
Hybrid Warfare Against Pakistan: Challenges and Response
The term ‘hybrid warfare’ entered the strategic lexicon in the early 21st century despite having been practiced in various forms...
Twentieth century was a century of great events and developments in every part of human life. The century is marked...
UNEA-5 ends with clear message: act now to tackle planetary crises
The virtual Fifth Session of the UN Environment Assembly ended on Tuesday with a clear message: our fragile planet needs more...
Americas3 days ago
U.S. Climate Policy Could Break the Ice with Russia
South Asia3 days ago
Ancestral Lineage of Hazaras: from Afghanistan to Pakistan
Eastern Europe2 days ago
Caspian: Status, Challenges, Prospects
Americas2 days ago
Rejoining the UNHRC will be the State Department’s first diplomatic mistake
Green Planet3 days ago
Climate politics and the future of carbon emissions
Middle East2 days ago
Back to Strategic Hedging and Mediation in Qatar Foreign Policy after the Gulf Reconciliation
Europe2 days ago
Dara of Jasenovac
Middle East3 days ago
A little acknowledged clause may be main obstacle to revival of Iran nuclear accord