The UAE-Israel oil agreement: a geopolitical revolution?


Is the UAE-Israel oil deal a strategic turning point in the Middle East? In any case, this is the question that arises after the historic normalization of ties between the two countries. The Israeli government has just announced the opening of discussions with Dubai concerning the use of a common oil pipeline (the Europe Asia Pipeline). It connects the port of Eilat in the Red Sea to Ashkelon in the Mediterranean, bypassing the Suez Canal.

With a capacity of 600,000 barrels per day, this pipeline will be used primarily to transport crude oil from the Middle East to Europe. It will be co-managed by the Israeli state-owned company EAPC and the UAE company MED-RED Land Bridge. Operating in both directions, the pipeline will also be able to transport crude from Central Asia and Europe to the Indian Ocean. If this project were to become a reality, it could become a major oil route in the years to come.

The strategic importance of the UAE-Israel oil agreement

The announcement of the Eilat-Ashkelon pipeline talks sent shockwaves through the Middle East. The question of oil supply routes is indeed central in a region still very dependent on hydrocarbon exports. Several factors explain the strategic importance of this new road.

The vulnerability of the Suez Canal

The first factor is the vulnerabilities of the Suez Canal route and its pipeline, SUMED. Due to its lack of depth, the canal is effectively incapable of navigating the so-called VLCC supertankers. The latter can load about 2 million barrels, twice the maximum allowed on this route. As a result, crude oil carriers must use two vessels instead of one VLCC, resulting in additional costs.

They can also transport their crude oil through the SUMMED pipeline built parallel to the Suez Canal. The problem, however, is the limited capacity of the pipeline, which can only handle 2.34 million barrels per day. This represents only about 40% of the oil flows through the canal. With the increase in traffic, we can therefore expect a rapid congestion of this road in the coming years.

It should be remembered that the Suez Canal is the third largest oil transit route in the world. Nearly 6 million barrels are transported each day by this route. Therefore, the UAE-Israel pipeline is an interesting alternative to allow the use of VLCCs and relieve traffic congestion.

A conflict of influence with Turkey

The UAE-Israel oil deal should also be seen as a strategy for the influence of both countries on the regional scene. For the Israeli government, the agreement opens up the possibility of turning the country into a transit zone to Europe. In this perspective, Tel Aviv aims to become an oil and gas hub in order to increase its influence in the region. This ambition is shared by Turkey, which is the big loser in the rapprochement between Dubai and Tel Aviv.

For the Emiratis, the oil agreement serves to counter Turkish influence on transit to Europe. Dubai hopes to compete with the Kirkuk-Ceyhan route, which brings 500,000 barrels/day of Iraqi crude through Turkey. The UAE also has the ambition to deliver gas to Europe via an extension of the EastMed pipeline. This could help to develop the huge gas discoveries recently made by Dubai in its Jebel Ali field.

At this point, however, this gas project has hardly gone beyond the stage of mere discussion. Nevertheless, it could be an important element in the future relationship between the Israeli and Emirati governments.

The uncertainties of the UAE-Israel oil deal

In some respects, the UAE-Israel oil deal is very ambitious and not limited to the oil sector alone. However, there are still grey areas that cast doubt on the true strategic scope of the agreement.

Lack of transparency in the project

One of the first questions about the project concerns its relative lack of transparency. Indeed, the Israeli government has always refused to publish information on the physical and financial state of the pipeline. This is due to the special nature of the Eilat-Ashkelon pipeline, which was originally conceived as a joint project with Iran. After the Islamic revolution of 1979, it was unilaterally nationalized by Israel creating a legal dispute between the two countries.

Since then, there has been absolutely no information about the companies using the pipeline. This lack of transparency is particularly problematic for investors, especially in the event of an environmental disaster. Recall that in 2014, this pipeline was responsible for the worst ecological disaster in Israel’s history. The lack of transparency could thus considerably reduce investor interest in this project.

Uncertainties arising from regional geopolitics

Another question concerns the geopolitical effects of the UAE-Israel oil agreement. Indeed, by bypassing the Suez Canal, the draft agreement has provoked the ire of Egypt. For Cairo, this is a crucial issue for its public finances and its status in the region. Under these conditions, it is not impossible that the UAE and Israel limit their ambitions to satisfy the Egyptians.

Similarly, this agreement does not in any way address the problems of transit through the Straits of Hormuz and Bab-el-Mandeb. Rivalries with Iran and instability in Yemen will therefore continue to be major obstacles to Emirati exports to Europe. The solution would therefore be to use the East-West pipeline that runs through Saudi Arabia to the Red Sea. However, this will depend on the capacity of the pipeline as well as Riyadh’s recognition of the State of Israel.

It is therefore still too early to say whether the UAE-Israel oil agreement constitutes a real geopolitical revolution. In order for it to do so, the pipeline will probably have to extend to the Gulf countries. In reality, the scope of the project will depend largely on the attitude of the Saudi state towards Israel.

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