At a time when media and financial analysts are fully focused on oil futures, natural gas markets are moving again. East Mediterranean gas futures, in particular, seem to be looking up due to some ongoing regional developments. The unexpected but very successful visit of Abu Dhabi’s Crown Prince Mohammed bin Zayed to Turkey and Egypt may well have long-lasting consequences in the region. The multibillion agreements signed between Turkey and the UAE, especially the long-term investment agreements between the Turkish sovereign wealth fund and UAE corporations, such as Abu Dhabi Ports, seem to be an opening to a new era of cooperation in the region.
The overall optimism shown in Turkish and Abu Dhabi-based media sources, however, should be taken with a grain of salt as financial deals may not counter the ongoing power struggle between Turkey’s president Erdogan and Abu Dhabi’s Crown Prince Mohammed bin Zayed. Both nations are supporting political, military, and economic power projects in the East Mediterranean and MENA regions designed to increase their influence. Turkey’s president Erdogan will see the first visit of MBZ in 12 years as a major triumph. His regional power plays are still a bone of contention in Abu Dhabi, Cairo, and Athens. While Turkish media sources are very optimistic about the perceived thaw in relations, other regional players have been watching with anticipation to understand the real outcome of the meetings.
The move by MBZ is not linked to a major change in regional geopolitics but is based on geo-economics. When looking at the dire state of the Turkish economy, high inflation rates, and the ongoing plunge of the Turkish Lira, there is the real threat of Erdogan’s Empire being destabilized. MBZ is a master at identifying and understanding win-win situations. The move to open direct lines to Turkey, especially to Erdogan’s embattled AKP government, is a wise one. The Turkish economy needs cash desperately, foreign direct investments are not only needed to support the Lira exchange rate, but also fledgling AKP projects. Arab investors are more than willing to take part in the ongoing sell-off of Turkish assets. Large-scale energy, infrastructure, and financial assets are up for grabs, at much lower prices than one year ago. MBZ also knows that by investing in Turkey, Ankara’s links to others will be undermined.
MBZ’s trip to Turkey becomes increasingly interesting when you understand it as a coordinated effort of geo-economics and strategic military interests of the UAE, Egypt, Israel, and, most probably, Greece. Before flying to Turkey, discussions will have been held between MBZ and Egyptian President Sisi, Israeli players, and Greece. The UAE understood that it could act as a bridge between the two sides in the East Mediterranean by exploiting Turkey’s financial crisis. The UAE, and particularly Abu Dhabi’s Crown Prince, is behind the Abraham Agreements with Israel, is a major investor in Egypt, and is eager to invest in Greece and Cyprus. These factors mean MBZ has become one of the leading protagonists in the East Mediterranean.
Investments, security, and energy are all interlinked here, as all bi- and multi-lateral agreements are based on those issues. Abu Dhabi’s ADNOC, Mubadala, and even its defense companies are involved with Egypt, Israel, and Greece. The advantage for the UAE in cooperating with and supporting the East Med Gas Forum (EMGF), of which it wants to become a member, is clear. Not only could it open up new supra-regional energy projects, but it will also enhance the overall security situation significantly. Mubadala and AD Ports are now even involved in projects and discussions with Israeli counterparts. Mubadala’s acquisition of a 22%, $1 billion stake in the Israeli Tamar offshore gas field is just one example. It seems now that the MBZ move to meet up with Erdogan in Ankara should be assessed in line with supra-regional aspirations of the UAE, EMGF, and Abraham Agreements. By forging and strengthening the ongoing East Med alliance while opening up discussions and investments in Turkey, Abu Dhabi is not only opening a win-win road to success but could also mitigate Turkey’s aggressive regional aspirations. Looking at the bleak financial future of Turkey, Erdogan understands that he cannot afford to spurn the UAE’s advances.
For the EMGF members, especially Egypt, Israel, and Cyprus, the more direct and active involvement of Abu Dhabi in Turkey’s affairs is a potential advantage. The financial power of Emirati investment funds should not be underestimated, especially not in time of a financial market implosion as we are seeing in Ankara. All this could force Erdogan to take a less adversarial stance towards offshore East Mediterranean gas exploration. For both sides, it could be a real win-win situation. Part of the East Med offshore gas and LNG options have hit a brick wall, due to the energy transition and geopolitics. By taking out political risks, or mitigating a potential Greek-Egyptian confrontation with Turkey, investors and operators could be incentivized to return. For Ankara and EMGF this could even result in a future where Turkey becomes a prime market for LNG from the region.
Due to the Turkish military and political intervention, especially linked to the Muslim Brotherhood in Egypt, any energy relation between the countries was put on ice. Some analysts believe that MBZ and Erdogan have discussed the Muslim Brotherhood’s futures in recent days and that economics could persuade him to change his stance, Egypt and potentially even Israel could then follow MBZ in reengaging with Turkey. At the same time, the ongoing European Energy Crunch has opened up new LNG and pipeline gas markets, so Turkey really is just the cherry on the cake.
The first steps have been made by MBZ, but everything depends on Erdogan’s backers. Erdogan will have to remove support for Muslim Brotherhood parties in the region, soften up to Assad’s Syria, decrease Turkish military support for Qatar, and leave Libya’s future to the Libyans before a full-scale rapprochement can take place. One thing is clear, however, geoeconomics is becoming an increasingly important factor in the region.
By Cyril Widdershoven for Oilprice.com
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