An historic agreement has finally reached maturity, in a climate of general inattention, for the East Med gas pipeline which will be able to connect the Eastern Mediterranean to Europe. It will draw on the enormous offshore gas resources of the Leviathan, north of Israel (about 530 bcm), and transport part of it to the European Union via Cyprus, Greece and Italy
At the beginning of April, the agreement was signed by the European energy commissioner Miguel Canete, by minister Carlo Calenda and by the corresponding ministers of the other countries, in the distraction caused by the disappointing outcome of the G7 Energy.
The path comes from afar. East Med was already included in 2015 among the Projects of Common Interest (PCI) of the European Commission; it was included in the ten-year investment plan to strengthen the single energy market; benefited from the Connecting Europe Facility (CEF) fund, with two million euros which co-financed the feasibility study of IGI-Poseidon (a company currently 50% Edison and 50% Depa).
The positive result therefore opened the way for the design of a gas pipeline of about 1.300 km off-shore for the connection between Israel, Cyprus, Crete and the Peloponnese and about 600 km on the surface to cross Greece, and then Italy, after the 'April Agreement. A transport capacity of 10 billion cubic meters of gas, which can be extended to 20, with an estimated cost of six billion euros.
An agreement of extraordinary importance
It is an agreement of extraordinary importance, since it puts the resources of the eastern Mediterranean once again at the center of the economic and political interests of the EU, in a very delicate moment for that region in which Europe is struggling to show the protagonism it deserves in the area. It presents itself as a complementary route to existing and planned supplies of Russian gas: it is therefore not a direct action against Russia, which Italy could not have subscribed to.
For years, those who care about Italy's role in Europe and in the Mediterranean, and deal with energy, have hoped and worked towards the conclusion of an agreement of this nature: a concrete element for the construction of a Mediterranean gas hub in which Italy could regain the weight built in the times of Enrico Mattei, to which it has once again prepared itself in recent years by strengthening the infrastructures and arranging necessary and clear rules to give certainty to investments.
The benefits of a long-term strategy
The value of the project lies in the many elements that contribute to a long-term energy-based economic and geopolitical strategy that transcends the borders of the EU and the Eastern Mediterranean countries. With the necessary precautions for future uncertainty, Italy too could reap important benefits. I can only recall the main benefits here.
1. For the EU, the pipeline represents a clear step forward in the strategy of the Energy Union (2016), aimed at diversifying the sources of gas and oil imports. As we know, the EU imports 70% of the gas it consumes, 40% of which from Russia. The new pipeline sees the Mediterranean return to the center of energy security.
In terms of domestic politics, the transit of gas from the Mediterranean to the North rebalances European geography and strengthens the position of the countries in the southern fault line, too often referred to only as an element of weakness in the Union's accounts. It also adds an element of security for the Union by consolidating supply capacity through southern corridors which are not directly dependent on transit through Turkey.
2. For Italy, the transit of gas integrates and strengthens the country's position in Europe, offering a positive contribution on the very delicate area of energy security. In economic terms, the induced activities of the new infrastructures will create income and employment, as well as enhancing the investments of Snam Rete Gas, already implemented in compliance with the European regulation to allow the bidirectional flow of gas.
In the same vein, the new Agreement is placed in the perspective of Italy's commitment in the Mediterranean, which sees Eni as the protagonist of the great gas discoveries in Egypt (the Zohr reserve). Italy is historically a major importer of Russian gas and will continue to be so in the energy transition; the Mediterranean gas pipeline is therefore complementary to the Russian source.
3. Finally, for the two shores of the Mediterranean, the East Med takes the form of a strategy of mutual economic and political interest. From a geopolitical point of view, the construction of common interests can only be successful in the dramatic scenario of the eastern Mediterranean. After the "peace of water", signed between Rabin, Peres and King Hussein of Jordan in 1994 on which a lasting path of cooperation and not belligerence was built, energy constitutes a second step in the same direction of regional agreements.
It is not yet clear how Donald Trump will ultimately shape the unconventional gas export policy; for the EU and for Italy, the steps to concretely launch a gas hub in the Mediterranean with the Agreement signed in April constitute an element of security and growth.
Contrasts and obstacles for sellers and buyers
The conflicts to keep under control have seemed insurmountable from time to time for various reasons. In 2015, the producer, Israel, overcame the obstacle of Parliament's consent to the export of gas with difficulty, without prejudice to its use for future domestic consumption; it then kept the option of the route to the Pacific open for a long time, to be preferred since the significant price differential with Europe (7 $/mmBtu in Europe compared to 11 $/mmBtu in Japan, 2015 source BP) made the sale of gas to this region is more convenient.
Finally, the strategy of directing gas also in Europe prevailed, given the amount of available reserves and the long-term time frame involved. But Turkey first, then the Balkans, then seemed to be the favorite candidates for transit to Europe, while the path for LNG to be transported to Europe remained open, possibly through Spanish regasification terminals. All projects that would have excluded the passage from Italy.
Even on the part of the buyers, the obstacles were complex to resolve. In fact, the EU expresses a historic distrust towards Israel, aggravated by the recent policies of Benjamin Nethanyau towards the Palestinians. And at the same time the European strategy of the Energy Union (2016) aimed at diversifying gas supply sources, countries and routes, has not produced consequent policies, in particular for the enhancement of reserves in the Eastern Mediterranean.
The causes are complex: the southern routes have in fact been frozen by the dialectic between Putin's programs on new gas pipelines and the Union rules aimed at containing the market power and the political instrumentality of Russian gas; an aspect in which at times the hidden voice of the United States has intruded, in addition to the political uncertainty caused by the events in Turkey.
In 2016, the bilateral project between Germany and Russia was added for the construction of the North Stream 2 gas pipeline which would double the transport capacity of Russian gas to the EU, making Germany the central hub for gas imports to Europe and effectively making infrastructure investments redundant in the southern corridor; the Russian-German project is still stalled, blocked by the verification of respect for competition and by the rules set up by the EU to safeguard common European commitments, but the outcome of the political negotiation is not at all obvious.
The distraction of the G7 created the extraordinary conditions to seize the moment and sign the Accord: an unexpected benefit of the Trump era!
In a nutshell, the agreement between the four Mediterranean countries and Europe clearly demonstrates the long-term strategic value, in which the convergence of economic interests between the EU and the eastern shore of the Mediterranean can and must play a politically strategic. The rapid construction of the East Med gas pipeline could also mark a decisive turning point for Italy's role in the European energy strategy. The conditional is a must, since it is an important step in the context of a long troubled journey, where every obstacle risks blocking the long-term trajectory.
