More pipes, less Putin

SAN DIEGO: Greeks, Egyptians, Palestinians, and Israelis rarely agree on anything, except perhaps hummus. When they do concur on other issues, we should take their views seriously. In 2020, their leaders put aside ancient barbs and modern grudges to agree on a new pipeline that would send natural gas from newly discovered fields in the Mediterranean to Europe.

Those Greeks, Egyptians, Palestinians, and Israelis were prescient. They did not know that prices would quadruple, or that Vladimir Putin would turn Russian gas into a weapon of war and commerce. Unfortunately, as soon as US President Joe Biden entered the White House in 2021, he sent out emissaries to quash the plans in a haze of fuzzy talk about the environment.

I describe the Biden administration’s directive this way because US State Department officials leaked it in a background briefing, or 'non-paper'. No surprise, Biden’s fingerprints were not on the non-paper: In 2014, then Vice-President Biden lauded the plans as a potential “win-win”. Putin’s savage attack on Ukraine, literally fuelled by Russia’s own natural-gas reserves, makes it clear that the Biden team should immediately pivot and support the EastMed pipeline.

The administration’s crusade against pipelines is perilous and indiscriminate. Beyond the Mediterranean, the Biden administration has cut off the Keystone XL pipeline from Canada to Texas and a proposed pipeline from Pennsylvania to New England. Meanwhile, residents from New Hampshire to Hampshire, England, are warned to expect brownouts during the brutal summer heat and advised to buy heavier blankets for the winters to come.

Instead of pipes, the Biden administration lauds windmills and solar farms, which have become more economically competitive and may be much better for the environment. This depends, of course, on where rare earths like neodymium and dysprosium, needed for magnets, are mined (most likely China), and where utilities choose to mar the landscape with 400-foot (120-metre) towers, whirring noises, and blinding mirrors.

European leaders, who often sound 'greener' on energy than US politicians, have been puzzled and troubled by the US opposition to Mediterranean energy. They now understand that modern economies need natural gas, at least until green energy can ramp up without regular brownouts. Europe funded the feasibility study that undergirds the EastMed pipeline, which could supply 10 per cent of Europe’s needs at an estimated cost of about $7 billion.

With its citizens protesting high energy prices, Europe literally can’t wait for the pipeline to be built in the Levant. That is why on June 15, European Commission President Ursula von der Leyen signed a historic memorandum with the Egyptian and Israeli energy ministers to ship gas from Israel to Egypt, where it will be turned into liquefied natural gas (LNG) before travelling onwards to Europe.

Biden’s team seems troubled by Turkey’s on-and-off participation in such projects and wants the country to be more involved. Turkey certainly has incentive to cooperate, as it imports 45 per cent of its gas from Russia. Other participants are troubled by President Recep Tayyip Erdoğan’s mercurial policies and scabrous rhetoric. In the last few months, however, Erdoğan has warmed up to his neighbours, hosting Israeli President Isaac Herzog in Ankara and sending a congratulatory note on Israeli Independence Day. Since the Palestinian Authority, alongside Israel, is a founding member of the East Mediterranean Gas Forum, it would be odd for Erdoğan to boycott, mine, or otherwise disrupt a new pipeline in the name of Islam or anti-Zionism.

For most of the 20th century, Middle East energy meant oil from the Arabian peninsula. But recent natural gas discoveries have changed the map. In 2018, Egypt swung from being an LNG importer to being a net exporter after the Italian company Eni plumbed almost a mile (1.6 kilometres) deep and found the massive Zohr field. The Arabic word 'zohr' means 'midday', and the discovery signals a new height for Egypt’s economic potential. On the other side of the Sinai, historians used to joke that while Israel might be home to God’s chosen people, He apparently chose not to give them an ounce of fuel. That, too, has changed, as Israel suddenly has enough to satisfy its residents, while exporting to Jordan and beyond.

If all of these positive developments are taking place without the United States, who cares if Biden’s team scoffs? We all should, because by signalling its opposition, the administration discourages banks and private equity funds from lending, while also dampening the odds of support from the World Bank and the International Monetary Fund. Yes, the pipeline can still be built, but financing terms will be steeper and the pay-off less certain for investors.

Biden is not the only one rooting against Mediterranean gas. So is Putin. It’s time for Biden to get on the home side of the bleachers.

Todd G. Buchholz, a former White House director of economic policy under President George H.W. Bush and managing director of the Tiger Management hedge fund, is the author of New Ideas from Dead Economists (Plume, 2021) and The Price of Prosperity (Harper, 2016).

Copyright: Project Syndicate, 2022.

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