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Energy and Our World

Mideast Chaos Scrambles Energy Equation
Lebanon Map

This article originally ran on Forbes.com on April 4, 2023. All rights reserved.

Daniel B. Markind is a Forbes.com energy column contributor. The views expressed in this article are not to be associated with the views of Flaster Greenberg PC.

Last week saw scenes of chaos never before seen in the Middle East, which is saying something given the history of that region.

In Israel, hundreds of thousands of people took to the streets to demonstrate, block roads, and otherwise express their displeasure with an attempt by Prime Minister Benjamin Netanyahu and his hard right wing coalition to curb the powers of the Israeli Supreme Court and insulate both the Prime Minister and the leader of one of his ruling coalition partner’s leaders from Parliamentary expulsion due to corruption convictions or accusations.  The demonstrations were met by the refusal of many in Israel’s citizen army to report for compulsory military reserve service, a move unthinkable in the country until this month.  So serious has the situation become that many believe the Jewish State is on the verge of civil war.

Just to the north, in Lebanon, which fought a brutal civil war from 1975-1990 from which it has never recovered, the citizens could not even tell the time.  A last minute move by caretaker Prime Minister Najib Mikati to delay starting Daylight Savings Time from its traditional March date to mid-April, so as not to conflict with the Muslim fast month of Ramadan, was rejected by much of the population.  It was possible to cross the street in Beirut and go from one time zone to another.  All national entities such as the airline and television stations had to decide which time they are on, and bizarre scenes were found throughout the country, such as multi-faced clocks in Beirut International Airport that showed different times on different sides of the clocks.   By the week’s end, the government had reversed its decision and the whole country turned the clocks ahead one hour, but the damage had been real.

The Lebanese confusion adds to the sense of helplessness and foreboding that has gripped that country over the last twenty years, with the politicians unable to form a government for over a year, the economy having completely collapsed, and the citizens of Beirut still reeling from the mass explosion at the Beirut port on August 4, 2020 that devastated much of the city.  No major political figure has ever been held responsible.

As if that wasn’t enough, just to the north of Lebanon, Turkey has threatened to stop allowing the export through its country of natural gas from Iraq’s semi-autonomous Kurdish-controlled region.  That decision, even more financially damaging to Turkey due to the devastation caused by the horrific earthquakes this winter, came following Turkey’s loss to Iraq in an international arbitration over a joint agreement between those two countries that Iraq had claimed Turkey violated by allowing the export of oil from Iraq’s Kurdish region to the Turkey port of Ceyhan without permission of the Iraqi government.  As a result, approximately 450,000 barrels of oil per day, or one-half percent of the global supply, is now off the market.

The continued chaos in Lebanon raises additional questions about whether that divided country will be able to develop its natural gas fields in the Mediterranean Sea at all.   Just six months ago, Lebanon reached an agreement with Israel on developing the fields, which straddle the never-demarcated maritime border between Israel and Lebanon. Lebanon has been hoping to follow Israel’s lead in exporting natural gas to Europe.  In 2022, Israel saw its natural gas exports to Europe rise by 22%.

Ironically, it is that same natural gas agreement which is part of the reason for the current convulsion in Israel.  The Israeli Supreme Court is one of the most powerful in the world, and recently it has seemed to many across the political spectrum to be usurping power that should rest with the Israeli Parliament, the Knesset.  Among those areas where the Supreme Court has acted in a seemingly expansive matter was in rejecting challenges to that natural gas agreement with Lebanon, in effect telling the Knesset that it had little say in the matter.  This was after rejecting a prior deal in 2016.

Riding on that popular discontent with the actions of the Supreme Court, Prime Minister Netanyahu’s far right coalition proposed a series of bills that would bring the Court under the control of the Knesset.  However, he also added bills that would have insulated himself from corruption charges and paved the way for a coalition partner to return to the Knesset after having been disqualified previously for bribery.

Israel erupted.  Massive street demonstrations occurred over a goal to protect the Court from political intrusion (despite the fact that, overwhelmingly, it is seen as being too powerful).  More ominously for the Jewish State, reservists in the Israeli military began refusing to report for duty, which posed an existential risk to the nation as a whole. Even Prime Minister Netanyahu admitted the country was verging on civil war.

Netanyahu agreed to a temporary pause, but said he still intends to push the bills through the Knesset.  Should he attempt to do this, there is no telling what will happen in Israel.  As always, Hezbollah, Iran, and the Palestinian radical groups are salivating at the idea of a weakened Israel.  Who knows if they will attempt to seize the moment to attempt to launch an attack to try to eradicate the nation?

Among the players involved, a very small percentage of the world’s oil and natural gas supply had been directly affected.  However, it is the indirect effects that could have global impact.  Middle East unrest invariably affects Saudi Arabia, Iraq (in its entirety), and Iran.  Together, these three countries own a large percentage of the world’s oil and gas reserves.  Despite a recent agreement between Iran and Saudi Arabia, should the Arab-Israeli conflict erupt into active war again, it is hard to see this not affecting the whole region, adding yet another level to world instability.

From the standpoint of each country, however, the big loser - as always - is Lebanon.  Its natural gas find gave it a potential way out from the economic disaster its unworkable political structure has caused.  However, now, potential investors will have another good reason to avoid touching anything related to that country.  For the long suffering people of Lebanon, the future only gets more bleak.

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