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Fuelling Controversy

By Peter Glover and Michael Economides - June 25, 2009 12:00 AM

Gaza on the Mediterranean, with an offshore natural gas resource worth an estimated $4 billion and with Palestinian statehood believed an imminent proposition, should be looking at the brightest possible future. But still abject poverty and hopelessness rack Gaza and the standard explanation by many Arabs and Western media is to depict the Palestinians as in a permanent state of Israeli-inflicted victimhood.

Gaza is the poster case of how radical Islamism, exemplified by Hamas, has such a difficulty to absorb modernity and Gaza's problems surely must be related to the 2006 Hamas takeover and the ensuing low-level civil war between Hamas and Fatah that controls the West Bank. As such it is hard to avoid the conclusion that the Palestinians are to a large extent responsible for their own misfortunes.

Back in 2000, the BG (British Gas) Group announced a major natural gas find via its Gaza Marine 1 and 2 wells. A conservative estimate suggests a potential reserve of 1.4 trillion cubic feet of gas, 60 percent of which lies within waters controlled by the Palestinian Authority (PA). The economic and political impetus for the establishment of a self-declared Palestinian state escaping international aid dependency, and able to pursue economic self-reliance, had never been more tantalizing. Natural gas production and associated multiplier in the economy could more than double Gaza's per capita income and the economic activity could reduce the pitiful unemployment enormously.

Under Yasser Arafat the PA immediately negotiated a deal with BG to export the gas directly to an increasingly gas-hungry Israel. With the outbreak of the second Intifada, Ariel Sharon's government vetoed the deal fearing gas revenues would be funnelled to finance terror attacks in Israel. Further negotiations remained mired in the ensuing political stand-off for the next six years. In 2006, Israel also scotched an attempt by the BG Group to pursue a deal that would see the gas piped through Egypt.

That same year, the situation was further complicated when Islamist Hamas unexpectedly swept to power in the Palestinian parliamentary elections. Like it or not, as Mark Twain put it: "The people have spoken -- the bastards". A voting majority in the West Bank and Gaza proactively backed a Hamas that continued to refuse to recognize the state of Israel -- a situation that again brought not just negotiations over a gas deal to nought, but derailed any serious prospect of a two-state solution. When in 2007 Hamas succeeded in a military takeover of Gaza, isolating itself from the West Bank, the gas issue, literally, went on a back-burner as Hamas refused to cede control of such a key resource to their Fatah rivals.

Even so, in May 2007, Ehud Olmert's Israeli administration attempted to kick-start negotiations by agreeing to the terms of the original 2000 deal made with Yasser Arafat. The proposed contract was for $4 billion with half due to go to the Palestinians. In the negotiations that followed, however, Israel made it clear it was only prepared to pay for the gas in goods and services again to prevent cash reaching Hamas. Once again, the deal fell through. By January 2008, a thoroughly frustrated BG Group closed its offices in Israel. In October the same year Israel attempted to re-open discussions with the BG Group. But discussions were again derailed in December as Israeli tanks once again rolled into Gaza in a bid to stop the relentless barrage of Hamas rocket attacks against Israel border communities.

Immediately, and over ensuing months into 2009, many 'it's all about the oil' (or on this occasion 'the gas') Western media commentators went into overdrive asserting the Israeli incursion was all about gaining control of the Palestinian gas. In early 2009 however, a huge natural gas discovery off the Israeli coastline at Haifa, estimated at 5 trillion cubic feet -- four times the size of the Palestinian field -- together with a unilateral Israeli withdrawal, suggested Israel's concern had been security, not energy. Though Lebanon may well make a claim disputing sole Israeli rights to the latest offshore find, it seems clear that there may well be more than enough energy deposits to fulfil the energy needs and enrich the pockets of all the countries along the coastline. Not to mention the potential for finding oil too along with the gas fields of the eastern Mediterranean basin. An energy hungry Europe at the mercy of Russian natural gas would be an obvious and willing market for Israeli, Gaza and other Mediterranean natural gas, transported in the form of liquid natural gas (LNG) or more appropriately compressed natural gas (CNG), if only the actors were to get their act together.

There may be one ray of light. In May 2009, a poll found that 58 percent of Palestinians wanted a unity or coalition government to represent them. Unusually for the PA, the poll gave a breakdown of opinion in both Gaza and the West Bank. It revealed that over 37 percent of Palestinians in Hamas-ruled Gaza would vote for Abbas's Fatah movement with just 23 percent voting for Hamas. If the poll fairly reflects growing opinion, it may be that the Palestinians are recognizing that Hamas' supremacy, and its agenda, is the chief impediment to attaining the life-transforming, natural gas-fuelled, economic miracle that beckons just beyond the horizon.

Peter Glover is European Associate Editor and Michael Economides is editor-in-chief at Energy

1 Comment

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