Lebanon-Israel deal: The state of war (over gas) is over

Beirut and Tel-Aviv did it. After years and years of dispute over the offshore gas deposit, they finally signed an agreement despite the fact that Lebanon and Israel are still in a state of war.

The deal comes at a time when there is a global shortage of LNG and when Lebanon faces unprecedented, extremely challenging economic conditions with the downfall of the Lebanase Pound which recently reach 40,000LP for 1 dollar. © ByTheEast

Was it a true historic moment? Future will tell after, after Israel and Lebanon having concluded a “historic agreement” over a shared maritime border following month of US led negotiations.

The landmark agreement, with years in the making, not only marks a breakthrough in bilateral relations, but also increases the supply of LNG globally.

The two countries had been at way since Israel came into being in 1948. While the deal has reportedly been completed, there are still some burrs, including political and legal challenges, that need to be ironed out. On their part, Lebanese officials have indicated that they are ready to approve the deal.

Impact of the deal

The deal comes at a time when there is a global shortage of LNG and when Lebanon faces unprecedented, extremely challenging economic conditions.

At stakes here are the rights to exploit undersea LNG reserves in areas located in eastern Mediterranean region, claimed by both Israel and Lebanon. Hammering out the deal was especially tough since both countries do not even have diplomatic relations.

The agreement will enable additional production of natural gas production in the Mediterranean. For Lebanon, this is a huge deal since it could enable gas explorations which in turn could help lift its anaemic economy from a series of spiralling crises. As for Israel the exploitation of natural gas reserves will not only bring in more foreign currency in terms of LNG sales, reduce much needed tensions with Lebanon, but also enable it to supply much needed gas to Europe, which needs it desperately following disruptions in the LNG supply from Russia.

Israeli Prime Minister Yair Lapid termed the deal as a landmark “historic achievement that will strengthen Israel’s security, inject billions into Israel’s economy, and ensure the stability of our northern border.”

Both, Lebanon and Israel, have laid claim to around 860 square kilometres (330 square miles) of the Mediterranean Sea. The agreement now lends some clarity and divides those water along a line straddling the strategic Qana natural gas field.

As per a senior Israeli official speaking on the condition of anonymity since he was not authorized to speak on the matter, Lebanon will be able to commercially exploit that field but has to pay royalties to Israel, for any LNG that it produces from the area owned by Tel Aviv. On its part, Lebanon has been partnering with French energy giant Total on preparations for exploring the gas field.

Furthermore, the deal sets in place a “buoy line” that serves as the de facto border between the two countries, said the Israeli official.

The deal has the backing of many prominent figures, in active service and those that have retired, who have hailed it saying it would loosen Hezbollah’s grip over Lebanon’s economy. While Iran-backed Hezbollah has repeatedly threatened to strike Israel natural gas assets in the Mediterranean, experts believe that with Lebanon holding a stake in the offshore Karish field, it could force Hezbollah to think twice before it takes any drastic measures and enable France’s Total Energies SE-led consortium, to start exploring the Kana gas field, and pay royalties to drill in the sections in Israel’s territory.

In 2006, Hezbollah fought a month long war with Israel and Tel Aviv views the militant organization as an immediate military threat.

“It might help create and strengthen the mutual deterrence between Israel and Hezbollah,” opined Yoel Guzansky, a senior fellow at Israel’s Institute for National Security Studies. “This is a very positive thing for Israel.”

“Energy—particularly in the Eastern Mediterranean—should serve as the tool for cooperation, stability, security, and prosperity, not for conflict,” said US President Joe Biden. “The agreement announced by both governments today will provide for the development of energy fields for the benefit of both countries, setting the stage for a more stable and prosperous region, and harnessing vital new energy resources for the world.”

Prices of fuel have soared since the Russian invasion of Ukraine and the deal will enable Israel to boosts its exports to Europe.

London-listed Energean Plc, which will operate the Karish floating production vessel, which arrived in the region in June angering many Lebanese politicians and Hezbollah. But with the deal now in place, Karish can begin production in the coming weeks, said a spokesperson from the company.

The agreement has been a key goal for the Biden Administration in the Middle East, with Amos Hochstein, Biden’s senior adviser for global energy security, visiting both Lebanon and Israel several times, to clinch the historical agreement.

In a statement, Lebanese President Michel Aoun’s office said, the accord “satisfies Lebanon, meets its demands, and preserves its rights to its natural resources”.

As per a senior official involved in the negotiations, Lebanese Prime Minister Najib Mikati, Speaker Nabih Berri are both satisfied with Hochstein’s latest proposal of the maritime border agreement.

While Hezbollah did not make any immediate comment on the pathbreaking deal, its leader, Hassan Nasrallah said that it would respect the position of the Lebanese government. Once again, only future will tell… But knowing the Lebanese political scene and corruption system, one question remains: will Lebanon be the next oil-cursed country?