Turkey-Israel: the new Great Game

by Daniel Dombey | Financial Times

There is a new Great Game afoot and it is taking place beneath the sea floor of the eastern Mediterranean.

Turkey and Israel’s tentative reconciliation is a process so fraught that US Secretary of State John Kerry appeared in Istanbul at the weekend to chivvy the two sides towards restoring full diplomatic ties. But if the steps he set out can be taken — agreeing compensation for nine Turks killed by Israeli forces in 2010, avoiding inflammatory talk, exchange of ambassadors — then a whole series of changes could be unleashed from Damascus to Brussels.

 In particular, there is the question of a pipeline that could ferry newly discovered Israeli natural gas to energy-hungry Turkey — a move that would knit the two US allies closer together, despite enduring suspicions.

“It is possible that cooperation in energy between Turkey and Israel could follow an anticipated rapprochement,” said Taner Yilidz, Turkey’s energy minister, on Monday.

Turkish officials caution that bilateral talks on such cooperation can only really get going after ambassadors are exchanged — but add that business contacts on the topic are already burgeoning.

Ozgur Altug at BGC partners in Istanbul contends that rapprochement means that “relatively weak Israel-Turkey economic relations will pick up again”. He observes that although Turkish exports to Israel have risen over the last decade (falling back slightly in 2012) to their current level of $2.5bn, they have declined as a proportion of Ankara’s total exports (of which they now account for about 1.5 per cent rather than more than 2 per cent previously).

While noting that the two countries have relatively tiny levels of direct investment in each other, he highlights the potential for tourism. Israelis represented more than 2 per cent of tourists coming to Turkey in the early 2000s, a level that fell to just 0.3 per cent as of the end of last year.

But the biggest economic issue is probably gas. Altug calculates that Turkey could save $1bn a year in energy costs if it entered into a gas joint venture with Israel, a figure that could dramatically escalate if other initiatives, such as a possible Turkish energy deal with Northern Iraq, were factored in. Because of such developments, he reckons that Turkey’s current account deficit, the country’s economic Achilles heel, which reached 10 per cent of GDP in 2011 and was still above 6 per cent in 2012, could be kept below 5 per cent from 2016.

Such an economically significant relationship would have other consequences as well. Though diplomats from both sides warn the Israeli-Turkish relationship is unlikely soon to return to 1990s-era warmth, cooperation on Syria, which both sides hope will avoid becoming a failed state and which Israel wants to keep out of the control of the Muslim Brotherhood, is a distinct possibility.

Turkish-Israeli energy cooperation could also have an impact on Cyprus, which has gas finds of its own that are adjoining but smaller than Israel’s discoveries. If Cyprus finds itself bereft of Israeli cooperation it may lack economies of scale to proceed with a multi-billion dollar LNG plant or a pipeline to Greece.

Although Turkey, which invaded the island in 1974, has no diplomatic relations with the internationally recognised Cypriot government, Yildiz pointedly remarked on Monday that if energy cooperation with Israel went ahead Turkey might “also like to see Greek Cyprus involved”.

If, somehow, Turkey and Cyprus managed to establish a relationship, this in turn would unblock one of Ankara’s biggest problems with the EU, since not a single negotiating chapter of Turkey’s membership talks can be closed as long as a standoff continues in which Ankara bans Cypriot vessels from its ports.

The stakes are high, therefore, in the Turkey-Israeli reconciliation. But two questions hang over the whole scenario of mutual economic benefit, closer cooperation in a region in chaos and a roadblock removed from the highway to Brussels.

First, can the Turkey-Israeli rapprochement prosper without a change of Israeli policy on the Palestinians, whose cause is a rallying cry for prime minister Recep Tayyip Erdogan? And second, do Erdogan and Benjamin Netanyahu, Israel’s prime minister, see the healing of their own frayed ties in strategic terms, or simply as a tactical measure, taken in part just to keep the Americans quiet and not worth investing much more political capital in?

The future of the region — and the geopolitical map of the Eastern Mediterranean — depends on the answers.

Source: http://blogs.ft.com/beyond-brics/2013/04/08/turkey-israel-the-new-great-game/#axzz2PyQX4T70