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Cyril Widdershoven

Cyril Widdershoven

Dr. Cyril Widdershoven is a long-time observer of the global energy market. Presently, he holds several advisory positions with international think tanks in the Middle…

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The Geopolitical Game That Could Transform Gas Markets

  • An apparent detente between the UAE and Turkey could be one of the most significant geopolitical developments in the region for decades
  • If Mohammed bin Zayed can succeed in exploiting Turkey’s economic crisis, the East Mediterranean natural gas fields could finally be exploited and sent to market
  • While this is a win-win situation for the UAE, it is unclear whether Erdogan will be willing to do what is necessary to ensure progress in the region

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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Leave a comment
  • George Doolittle on November 28 2021 said:
    Looking at USA weather forecasts for the next two weeks says to me anyways that natural gas prices are overvalued by *AT LEAST* 90% *RIGHT NOW.*

    Propane prices should plunge accordingly as well as Chinese demand for anything at the moment simply is not there sending *VAST* quantities of Made in Canada to start flooding into the USA in particular electricity but hardly only that. Steel, aluminum, copper, silver, lumber, building supplies of every type, food product...plus Industrial goods as well.

    And that would exclude products that would seem to be about to be flooding in from South America, Mexico, Europe...even as far away as Australia.

    I really don't see the US Federal Reserve even contemplating any interest rate increases for 2022 and quite possibly having to reverse policy should US Housing take a huge tumble going into 2022 here.
  • Mamdouh Salameh on November 29 2021 said:
    Buoyed by its financial prowess, very close relations with the United States and normalization of relations with Israel, UAE is trying to project an international powerful role for itself on the world stage. It is most probable that this very ambition was behind its crisis last year with Saudi Arabia which saw it as an attempt by UAE to usurp its position as both the leader of the Gulf Cooperation Council (GCC) and OPEC.

    Still, the astute Abu Dhabi’s Crown Prince Mohammed bin Zayed’s endeavour to mend fences with Turkey the most powerful regional power in the Middle East therefore makes a lot of sense. After all UAE and Turkey don’t see eye to eye in Libya, Syria, Eastern Mediterranean, Egypt and Qatar.

    UAE’s trump card is that it sees Turkey currently in need of huge investments and large financial support for the plunging Turkish Lira and thus being more amenable to it approach to persuade Turkish President Erdogan to take a less combative attitude in Syria, Libya, Qatar over its military presence particularly with the warming up of relations between Saudi Arabia and Qatar, the Eastern Mediterranean and Egypt. However, the Eastern Mediterranean is a completely different kettle of fish altogether.

    Turkey has three major energy objectives in the Eastern Mediterranean. The first is to become the energy hub of the European Union (EU). The second is to ensure a fair share of the gas riches in Cypriot exclusive economic zone (EEZ) for the Turkish Cypriots. The third objective is to prevent the construction of the proposed EastMed gas pipeline to transport Cypriot and Israeli gas supplies under the Mediterranean to the EU via the Greek mainland.

    Turkey opposes the EastMed because it could undermine its stated goal of becoming the energy hub of the EU by competing with the Turk Stream gas pipeline which will bring Russian gas supplies to Turkey and the EU under the Black Sea and also the Southern Gas Corridor (SGC) bringing Caspian gas from Azerbaijan to Turkey and then to the EU via the Trans Adriatic Pipeline (TAP).

    Turkey is planning an 80-mile long gas pipeline connecting the Turkish Cypriot enclave with the Turkish coast where it will connect with existing gas pipeline carrying gas to the EU. Israeli and Cypriot gas exports could be exported to the EU via Turkey using the proposed Turkish pipeline.

    However, while energy figures prominently in Turkey’s strategic objectives in the Eastern Mediterranean, speculation is growing that it is secondary to its real strategic goal of making the whole Eastern Mediterranean as its sphere of influence as was the case under the Ottoman Empire. This is rooted in Turkey’s new regional foreign and security policy, based on its “Blue Homeland” Doctrine”. President Erdogan adopted it in 2015 as an integral part of a national strategy of “forward defence”.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London
  • DoRight Deikins on December 09 2021 said:
    Dr. Salameh states, "Turkey has three major energy objectives in the Eastern Mediterranean."

    Besides these, or integral with these objectives, leaving a legacy equal to Mustafa Kemal Atatürk's is most certainly appealing to President Erdogan.

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