The geopolitical game that could transform the gas markets
As the media and financial analysts fully focus on oil futures, natural gas markets are on the move again. Eastern Mediterranean gas futures, in particular, appear to be improving due to some ongoing regional developments. The unexpected but highly successful visit of Abu Dhabi Crown Prince Mohammed bin Zayed to Turkey and Egypt may well have lasting consequences in the region. The multi-billion deals signed between Turkey and the United Arab Emirates, in particular the long-term investment agreements between the Turkish sovereign wealth fund and companies in the United Arab Emirates, such as Abu Dhabi Ports, appear to be an opening towards a new era of cooperation in the region.
The general optimism displayed in Turkish and Abu Dhabi-based media should be taken with a grain of salt, however, as the financial deals may not counter the ongoing power struggle between Turkish President Erdogan and the Crown Prince of Abu Dhabi. Mohammed bin Zayed. The two countries support projects of political, military and economic power in the Eastern Mediterranean and MENA regions designed to increase their influence. Turkish President Erdogan will see MBZ’s first visit in 12 years as a major triumph. Its regional power plays are still a bone of contention in Abu Dhabi, Cairo and Athens. While Turkish media sources are very optimistic about the perceived thaw in relations, other regional players have been watching with anticipation to understand the real outcome of the meetings.
MBZ’s movement is not linked to a major change in regional geopolitics but is based on geo-economics. When you consider the dire state of the Turkish economy, high inflation rates and the continued fall of the Turkish lira, there is a real threat of destabilization of Erdogan’s empire. MBZ is a master at identifying and understanding win-win situations. The decision to open direct lines to Turkey, especially to Erdogan’s besieged AKP government, is a wise one. The Turkish economy is in desperate need of liquidity, foreign direct investment is not only needed to support the exchange rate of the pound, but also the AKP’s nascent plans. Arab investors are more than willing to participate in the ongoing sale of Turkish assets. Large-scale energy, infrastructure and financial assets are up for grabs, at prices well below those of a year ago. MBZ also knows that by investing in Turkey, Ankara’s ties with others will be undermined.
MBZ’s trip to Turkey becomes more and more interesting when you understand it as a coordinated effort of the strategic geo-economic and military interests of the United Arab Emirates, Egypt, Israel and, quite possibly, Greece. Before flying to Turkey, discussions will have taken place between MBZ and Egyptian President Sisi, Israeli players and Greece. The UAE understood that it could act as a bridge between the two parts of the Eastern Mediterranean by exploiting Turkey’s financial crisis. The United Arab Emirates, and in particular the Crown Prince of Abu Dhabi, are behind Abraham’s agreements with Israel, are a major investor in Egypt, and are eager to invest in Greece and Cyprus. These factors make MBZ one of the main protagonists in the Eastern Mediterranean.
Investments, security and energy are all linked here, as all bilateral and multilateral agreements are based on these issues. Abu Dhabi’s ADNOC, Mubadala and even its defense companies are involved with Egypt, Israel and Greece. The benefit for the UAE to cooperate and support the East Med Gas Forum (EMGF), of which they wish to become a member, is clear. Not only could this open up new supraregional energy projects, but it will also significantly improve the overall security situation. Mubadala and AD Ports are even now involved in projects and discussions with their Israeli counterparts. Mubadala’s acquisition of a 22%, $ 1 billion stake in Israel’s Tamar offshore gas field is just one example. It now appears that MBZ’s decision to meet Erdogan in Ankara should be assessed in accordance with the supraregional aspirations of the UAE, EMGF and Abraham agreements. By forging and strengthening the ongoing East Med alliance while opening talks and investments in Turkey, Abu Dhabi is not only paving a win-win path to success, but could also dampen Turkey’s aggressive regional aspirations. Looking at Turkey’s grim financial future, Erdogan understands that he cannot afford to reject the UAE’s advances.
For EMGF members, especially Egypt, Israel and Cyprus, Abu Dhabi’s more direct and active involvement in Turkey’s affairs is a potential benefit. The financial power of Emirati investment funds should not be underestimated, especially not in times of financial market implosion as we are seeing in Ankara. All of this could force Erdogan to take a less adversarial stance towards gas exploration off the eastern Mediterranean. For both parties, this could be a real win-win situation. Some of the East Med offshore gas and LNG options are facing a brick wall, due to the energy transition and geopolitics. By taking political risks or mitigating a possible Greco-Egyptian confrontation with Turkey, investors and traders could be encouraged to return. For Ankara and EMGF, this could even lead to a future where Turkey becomes a market of choice for the region’s LNG.
Due to Turkish military and political intervention, notably linked to the Muslim Brotherhood in Egypt, all energy relations between the countries were frozen. Some analysts believe that MBZ and Erdogan have discussed the future of the Muslim Brotherhood in recent days and that the economy could persuade him to change his position, Egypt and potentially even Israel could then follow MBZ in a re-engagement with Turkey. At the same time, the ongoing European energy crisis has opened up new LNG and gas pipeline markets, so Turkey is really just the icing on the cake.
The first steps were taken by MBZ, but it all depends on Erdogan’s backers. Erdogan will have to withdraw his support for Muslim Brotherhood parties in the region, soften up on Assad’s Syria, decrease Turkish military support in Qatar, and leave Libya’s future to the Libyans before a large-scale rapprochement can. take place. One thing is clear, however, the geoeconomy is becoming an increasingly important factor in the region.
By Cyril Widdershoven for Oil chauffage
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