Giorgos Iliopoulos: What the Israel-Emirates Energy Agreement signals – Eilat-Ashkelon pipeline activated

The recent signing of a preliminary agreement between Israel and the United Arab Emirates (OPEC’s third-largest producer of crude oil) marks a new era in the provision of black gold to European markets. The extremely important energy agreement is signed after the joint official statement of the two sides in September, focusing on the normalization of their relations and the entry into a new era of good cooperation.

The new agreement between the Israeli state-owned Europe Asia Pipeline Co-EAPC, and MED-RED Land Bridge Ltd based in the Emirates, provides for cooperation between the contracting parties for the transportation of crude oil via the pipeline connecting the city of Eilat on the Red Sea. with the port facilities of Askalon in the eastern Mediterranean. The preliminary agreement is being signed in Abu Dhabi by US Secretary of the Treasury Steven Mnuchin.

This pipeline, built during the 1960s, was intended to serve the oil producers of the Persian Gulf and their European customers. Israel had then proceeded with its construction with the assistance of Iranian technical companies, completing the project before the 1979 Islamic Revolution and the ousting of the Shah, at which point it had accelerated its nationalization and state control.

In 2016, the Swiss Supreme Court accepted Tehran’s lawsuit over the ownership of the pipeline and ordered Israel to pay $ 1.1 billion in compensation and interest. The Israelis, however, refuse to pay compensation and interest, citing the law on trade with hostile countries.

Veil of absolute secrecy

However, military and civilian officials in Jerusalem have kept the details of the flows to the Eastern Mediterranean a top-secret, although the Israeli EAPC states vaguely that MED-RED has entered the final stages of negotiations with major consumers so that in 2021 crude transport to Europe can be launched.

Over the next five years, the pipeline is expected to generate $ 800 million in revenue for Israeli funds, but the veil of secrecy surrounding the case leads many analysts to suspect that the pipeline will also serve flows of Iraqi and Iranian crude.

However, the agreement aligns, even temporarily, with Russian and Chinese interests in defiance of the solutions that the EU and the US are desperately pushing for the use of the Turkish Ceyhan junction in crude transport in an effort to keep ally Turkey active in the energy sector.

The Russians, who are at the forefront of exploiting the networks of Iran, Iraq, and Syria to transport crude and natural gas to the port facilities of Tarsus, Latakia, and Tarsus, from where they will be channeled to Europe, observe that in transport nodes is added and Askalon.

Undoubtedly, the next step, starting with the agreement on the establishment of an EEZ between Israel and Lebanon, to which Hezbollah quite strangely agrees (apparently due to the shadow of Beijing in Tehran after the twenty-five-year memorandum of early July), will be implemented in adding one more traffic node.

Russian moves

The United States Naval Institute warns in a recent report that Iranian tankers are now being escorted by Russian naval vessels to avoid inspections or confiscations by the Americans or their allies (especially by Turkey which has deployed warships in the Eastern Mediterranean for months). In reference, we should recall the incident in Gibraltar in which the Grace-1 was stopped and arrested by the British.

Satellite imagery confirms that the Iranian tanker Samah recently entered the Mediterranean via the Suez Canal and immediately switched off its positioning system, but soon two accompanying Russian warships appeared alongside the 300-meter-long tanker, one of which was a destroyer to escort it to the shores of Syria. Iranian crude oil tankers often use “ghost” techniques to cover their tracks with the most common being the deactivation of the position emission system.

But the mobilization of the Russian fleet in the Eastern Mediterranean to protect Iranian cargo is a new strategic escalation of the Kremlin’s intentions in the region. The Russian presence now has the power to upset the delicate balances, thus increasing political and military risks in the event that others try to halt Iranian crude oil shipments. In addition, the recent exercises of the Russian fleet (the first after three decades in the Mediterranean) focus on the safe navigation of merchant vessels and the protection of their crews.

Iranian “ghosts”

At the same time, Iranian tankers are approaching the shores of Iraq unseen, transmitting crude oil to tankers under other flags, in order to avoid the effects of US sanctions. Al Faw’s port facilities in Iraq are the usual transfusion site, where Iranian crude is mixed with crude from other sources, such as Iraq, to hide its origins.

The trick has turned into a lucrative business for various shipowners, who transport Iraqi crude oil on a regular basis. Transfusions are taking place elsewhere, however, as exports exceed 800,000 barrels per day in the first half of 2020, with China absorbing much of these.

According to Iranian sources, China has been storing cheap Iranian crude oil since the April crisis. It bought 8.1 million barrels in June-July, but Beijing denies buying any in June. The statement came as the Chinese bought Iranian crude oil at an average discount of 32% under the terms of the deal, following the signing of a major 25-year deal with Tehran in early July.

In September, with energy plant upgrades rapidly advancing thanks to Chinese borrowing, exports rose to 1.5 million barrels per day. According to the former US special envoy for Iran, the White House was notified two years ago of these developments and the international shipping community is aware of the dangers of shipping ranian crude oil, but now China’s official presence in Iran overturns all the previous balances.