Equilibrium: Issue #1

To the Global Energy Security Community,

As promised, we are excited to bring you Equilibrium, the bi-monthly newsletter of the Global Energy Security Institute! Here, we will present you with compelling and thought-provoking content that explores global energy issues and challenges.

We will present “Energy in Context” through articles from the GESI network of energy security experts. We believe this offers a unique opportunity to exchange ideas and stimulate dialogue between the worldwide network, taking a realist view of energy security.

In this inaugural edition, we bring you five articles to begin this conversation. First is an interview with former Israeli diplomat Ambassador Yuval Rotem on how Israel’s transformation from energy consumer to exporter affected its diplomatic and security policy.

We also include contributions from GESI staff, Deputy Executive Director Dr. Rich Outzen and Director of Program Development Matt Yocum, as well as from noted energy experts Dr. Brenda Shaffer from the Naval Postgraduate School Energy Academic Group and Sid Green, president and founder of Enhanced Production, Inc.

We hope you enjoy Equilibrium! We look forward to your feedback and, of course, to continuing the conversation at GEST 2024 in Tokyo!

– Mike Nelson
Editor, Equilibrium

An interview with Ambassador Yuval Rotem

by Darren Duke, Executive Director, GESI

Ambassador Yuval Rotem served as Israel's Ambassador to Australia (2007-2013) and later as the Director General of the Israeli Ministry of Foreign Affairs (2016-2020).

GESI's Executive Director Darren Duke recently sat down with Ambassador Rotem to discuss Israel's energy transition from consumer to exporter and how this transformation changed Israel's approach to foreign policy.

Darren Duke: After only a couple of decades of exploration and development, in 2019-2020, Israel went from being an energy consumer to an energy producer to an energy provider. How did this development shape Israel’s approach to security and foreign relations?

Ambassador Rotem: Well, in the beginning - to some extent - lines were not yet defined and well-expressed among different dimensions and sectors in Israel.  The possibility of being an energy player was very new to the mindset of many Israelis. There was a very big debate between those who cited all kinds of environment-related issues and those who strongly believed that there was a need to extract this potential energy from the floor of the Mediterranean. And the debate was not short. 

You saw two strong advocates in Benjamin Netanyahu, the Prime Minister, and Yuval Steinitz, the current Minister of Energy, who firmly believed that pursuing the development of the gas reserves was the right thing to do. They were the champions of this objective, realizing that it could turn the region, it could turn Israel, it could turn the entire dynamic into, yes, a kind uncharted territory, but also one that would definitely be more promising for Israel than a future without it.

Overall, in the beginning, we had the same approach that we previously had with water. Acknowledging that the shortage of water is an element that is embedded in the Middle East, with new technology Israel was able to overcome this issue to an extent.

Israel turned out to be more and more not just self-reliant through the production of a significant amount of water but also a provider of water to our neighbors like Jordan, for example.  It was actually an integral part of the peace agreement with Jordan. So, with energy, the idea in the beginning was that it could serve Israel's interests beyond merely being a resource for self-reliance. 

It's important to remember that we Israelis always carry an insecurity about the 1973 oil embargo associated with the Yom Kippur War and the difficulties that we had to address at that particular time. The realization that we lacked our own oil and gas was, from a strategic perspective, a very dark cloud over Israel's head. Israel's national strategy was driven by this requirement to find the oil we needed for our own security, let alone our own economy.

Also, remember that in the 1970s, Israel was still a very agriculturally oriented country, and the country was small in terms of population. In the late 70s and early 80s, this mindset was reflected in the peace treaty with Egypt. Israel wanted America to guarantee its supply of oil for 15 years against future oil embargoes. This agreement between Israel and America was an appendix to the treaty between Israel and Egypt. So, this same memory of '73 cast a shadow over the discussion in 2010 when gas was discovered.

But the idea that we can be free from this dynamic at last made a strong contribution to the overall campaign that Netanyahu launched in support of developing the natural gas infrastructure.

And the debate was not really about politics, between right and left. It was a debate about a new economic sector, a new dimension, a new dynamic versus the skeptics, whether the environmentalists or others who were unhappy with this idea that Israel will have offshore gas facilities or others asking questions like: How do you create competition? Or how do you create markets? They were saying that we didn't have the knowledge and we didn't have the expertise. Others were asking, who is going to be our mentor? There were millions of questions! With time, we evolved through the process. Looking back on it, we learned that we have a new card at our disposal.

Darren Duke: This was 20 years prior to the recent and increasingly commonplace entry of other energy investors into the Israeli energy sector? Was Israel merely stepping out on faith that it would be able to develop the expertise?

Ambassador Rotem: At the time, I was Israel's ambassador to Australia. We wanted to bring Woodside Energy into the scheme, but we could not guarantee them a secure regulatory environment within the Israeli bureaucracy due to our inexperience. Woodside wanted assurances of a secure deal. But we couldn't give them a final answer. If you're Woodside, you cannot go to your investors with that kind of situation!

So, I brought Uzi Landau, then the Minister of Energy, to Australia for two weeks to expose him to the challenges we were facing because of the bureaucracy in Israel, to say, look how big this issue is! It's huge!

Until then, the Ministry of Energy was responsible for importing energy into Israel. So, it was thin, irrelevant, and less important. We needed him to realize that the management of energy as a national asset could not remain in the hands of the Ministry of Energy alone. With this gas discovery, they emerged as the second most powerful in foreign relations. They now provided revenue. They brought benefits to the country. They gave us chips to play in foreign affairs. They became real players.

In the past, the Minister of Energy was almost unwanted. Now, if you look at Yuval Steinitz, you see a politician that now has some prominence. Take the three-way discussion between Israel, Cyprus, and Greece as an example. The Minister of Energy is now an important presence in the room! Ten years ago, there was no such dialogue, and the minister was irrelevant to any political discussion. But with the introduction of offshore gas, now he's in the room.

So, our approach to energy policy developed over time. It began with Israel's energy self-sufficiency, and that determined the size of the infrastructure. Then, we had to develop a security protocol to protect this resource.

Then, we began to ask ourselves, what do we do with this?  The idea of a sovereign wealth fund was floated. Then the idea emerged that we maybe could provide energy to the Palestinians, to Jordan. We might actually be able to provide some element of stability into the region by using these gas pipes for peace. So, suddenly, we saw that it could be relevant for purposes other than merely keeping the lights on in Israel.

And the more discoveries that took place, the more we understood that this was a real possibility. Like our previous use of technology with respect to water, we now had energy, so we had other issues to talk about. When you go to the Balkan countries, you can talk about energy. When you talk with Egypt, you can talk about energy. Now, we can talk about issues beyond security. This is how the Israeli view towards energy as a foreign policy asset was emerging as of 2015-2016.

Darren Duke: Israel joined the Eastern Mediterranean Gas Forum in 2021. How has this worked out for Israel and its new role as an energy supplier?

Ambassador Rotem: In 2016-2017, we realized that we were now a medium-sized power in the region. The size of our economy in 2000 was $100-130 billion. By 2020, it had grown to $400 billion. So, in less than 20 years, we tripled the size of our economy.  We could no longer afford to behave like a small, poor country. We began looking for new trading partners and markets for our new products. We finally had three or four other items on our agenda to discuss with other countries besides Hamas, Hezbollah, and Iran.

Darren Duke:  Had there been an earlier awareness of what this was going to mean for the country?

Ambassador Rotem: No. It wasn't until 2015, with the growing debate in the Knesset and in the government, as the discoveries grew, that people actually started saying, hey, this is a game-changer. The industry was still very immature.  It was very much a monopoly to some extent. And Noble Energy was not one of the giant players in the energy sector.

With time, there were more and more players in the region. We discovered a new section of the Eastern Mediterranean basin that developed very rapidly.  All of a sudden, we were playing with Chevron, with Shell, with British Petroleum. And I think what you have seen is a growing understanding that with discoveries, there are new challenges.

Part of the response to this challenge was to organize a more formal gathering of the countries around the Eastern Mediterranean Basin so we can talk to each other. The emergence of the gas forum in Egypt was, to some extent, a breakthrough.

For Israel, it was the first time we were invited to take part in a regional gathering. Energy was suddenly the sole element that brought all of us together and no other issue.

The second part of the response was to realize that the increase in the number and size of international energy players in the region would necessarily lead to a call by other stakeholders for better regional security. When you have Total, Eni, Chevron, Shell, or Energeia, you will suddenly have France, Italy, and America all involved.

And if you can bring the Arabian Gulf states into the equation as a second group of interested parties, if Qatar is helping the future offshore gas exploration in Lebanon by replacing Russia, and if the Emirates are investing in Israel, you suddenly have additional layers of interest that all have one thing in common: keeping the energy resources off limits from conflict. Too many interests are at stake.

Darren Duke:  Was the requirement to connect to neighboring regional infrastructure seen as a vulnerability or an advantage? This region does have a record of security crises. 

Ambassador Rotem: Investors will not invest in a place where they smell risk or vulnerability. In Israel's case, it was ten years before the big energy companies were ready to enter the Israeli gas sector. But now, we see the opposite.  The big companies are now applying for all of these tenders. This is almost like a dream come true! 

The question now has become, can we take all this commercial goodwill and bring it to the political level so that it will defuse or at least reduce some of the tension that exists in the region? Are these companies willing to be more involved? Could you step away from the organization culture, realizing that this is not the North Sea, it's not Norway, Sweden, Finland, or Scotland, but that this is something different?

We might need you to mediate from time to time and to help us solve difficulties that arise because we don't talk to each other in this region. Not all of us, but some of us. I think this is the story of Lebanon and Israel.

With all the other difficulties we have, we also have a source of prosperity for countries that desperately need the cash for themselves, whether it's the Palestinians, the Jordanians, or the Lebanese. Perhaps even Syria in the future.

And this must be done by realizing that energy can serve all of us, certainly within the energy dimension but also within the political one. For this reason, our gas discoveries have been a game-changer in this region.

Darren Duke: So, should Israel be viewed as a model for developing natural resources not only for internal use but for use in regional or global statecraft?

Ambassador Rotem: We should be a little humble, though this is uncharacteristic for Israelis! The exploration was all done primarily by large non-Israeli companies. While there were some Israeli companies, the expertise, the knowledge, and the experience belonged to those large companies that did the work. What you can take from our experience is that when economically viable energy is discovered, a country can certainly seek self-sufficiency but should also seek to impact the region as an energy provider.

There are always two groups: the "haves" and the "have-nots." We moved from the "have not" column to the "haves." And this transition is the model - not the actual discovery or development of the energy sector - but what a country does when it moves from one column to another by asking how you can use it positively in your region and be a constructive player.

The provision of gas to Jordan, the pipeline to Egypt, the demarcation line with Lebanon; these are all extremely positive - all of them - and all of them brought more companies into more countries, and they also stabilized regional security.

Darren Duke: How does another state do that?

Ambassador Rotem: The Israeli role in the energy sector was not pre-negotiated. It developed out of anti-trust regulations that were put in place to create a more competitive environment towards a market economy.

So, Israeli companies were there from the beginning, watching and learning a great deal. We watched Noble Energy and others handle the regulations, the marketing, and so on. Now, Israeli companies have been able to bring in players like BP and Mubadala to invest in parts of the sector. These companies are building more consortiums for the new tenders.

Darren Duke: Where is this all headed? When you look into the future, what do you see?

Ambassador Rotem: I think there is room to be optimistic. The trajectory since 2010 seems to be that we are moving into a better place, that energy can solve issues that cause distress for some countries, and that we can use energy as a reason to cooperate and talk, either directly or indirectly.

But we have to talk about more than just security or intelligence and the role of Israel in the region. In the wake of the Abraham Accords, there is a way now for us to really connect, let's say, the Eastern Mediterranean Basin bloc with the Gulf States.

Darren Duke: So, you're optimistic in the long run.

Ambassador Rotem: Let me quote Shimon Peres, my first boss in the Foreign Ministry, "Jews don't have the luxury of being pessimists."

US International energy policy toward the 2024 elections

by Prof. Brenda Shaffer, US Naval Postgraduate School

While international energy policy is not on the ballot in the 2024 US elections, the election outcome will profoundly impact the U.S. role in international energy developments. Current U.S. energy policies have determined new rules of American engagement in the international arena. Despite these new rules having received little attention from the wider American foreign policy community, they have had a tremendous impact on U.S. activity abroad.

Across successive U.S. administrations led by Democrats and Republicans, energy policy was integrated into American national security policy. Over the years, a cabinet-level official in the White House - often the Vice-President - directed American international energy policy and used energy as a tool to promote US national security goals. In contrast, in the Biden White House, no cabinet-level official has led international energy policies.

Energy policy is not climate policy, and pretending otherwise is risky

by Dr. Rich Outzen, Deputy Executive Director GESI

Public policy debate entails continuous struggle among factions to set agendas, specify alternatives, and prioritize issues for government decision and action. Such contests form a typical, even normal, part of the political process in Western democracies and help manage competition among organized interests, tradeoffs among problems, and the maturation of solutions.

Timing significant policy shifts depends upon correctly reading the “streams” of problems, solutions, and politics by sensing when they converge into windows of political opportunity for substantive change.

This evolutionary and episodic nature of policy change can frustrate attempts to force solutions before the streams align and tempt interest groups to constrain debate, vilify policy competitors, or deploy apocalyptic rhetoric to pre-empt normal, incremental policy processes.

The energy transition: more questions than answers

by Sidney Green, founder and president of Enhanced Production, Inc.

Energy drives prosperity. Globally, approximately eighty percent of today’s energy is provided by oil, coal, and natural gas. These abundantly available resources have fueled advances in world well-being and have the potential for even higher levels of growth.

Unfortunately, burning these fossil fuels leads to large carbon dioxide (CO2) emissions. The desire to reduce these CO2 emissions has spawned a huge effort to find alternative energy concepts, leading to a great “energy transition” away from hydrocarbons. 

This sought-after energy transition today is similar to the U.S. energy crisis of the 1970s. At that time, the energy crisis started as an oil embargo and changed to a rush to replace oil, driven by a theory that the world was running out of oil. By the early 1980s, no alternative to oil had been found, but it was becoming clear that the world was not running out of oil – thus ending that “energy crisis.”

DoD’s operational energy strategy: context and content

by Matt Yocum, Director of Program Development, GESI

Thirty-five centuries ago, feeding horses became the fuel to charge thousands of chariots forward into the first recorded battle in history at Megiddo. The need to fuel forces at home and in the field remains, leading the U.S. Department of Defense (DoD) to focus on “operational energy” in our own day.

DoD defines operational energy as “the energy required for training, moving, and sustaining military forces and weapons platforms for military operations.” This definition includes energy used by weapons platforms, power systems, and generators.

DoD released its latest operational energy strategy in May 2023 in a time dominated by the pursuit of energy transition away from fossil fuels. But do energy decisions still impact the operational level of war, and does DoD’s new strategy pave a pathway to military success on tomorrow’s battlefields?

Thank you for reading our inaugural issue of Equilibrium by the Global Energy Security Institute. We wish you all a very happy new year - we’ll be back with Issue #2 in 2024!