Gaza

Greek PM’s India visit to once again raise IMEC corridor plan

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The war in Gaza may have stalled India’s ambitious project for a trade and energy corridor to the Middle East and, from there, to Europe, but the world’s most populous country has not stopped looking for trade routes to the West.

The prospect of Greece playing the role of European gateway for India, as geographically, Greece is the EU’s closest member state to India, is expected to be raised once more during meetings between Greek Prime Minister Kyriakos Mitsotakis and his Indian counterpart Narendra Modi in New Delhi this Wednesday and Thursday.

India’s PM had discussed the matter at a meeting with the Greek leader in Athens last August, and is expected to do so again, even though the plan’s prospects have weakened as the war in Gaza has changed the geopolitical balance and ruptured crucial Israel-Saudi relation without any signs of normalization in the foreseeable future.

Everything concerning the India-Middle East-Europe Economic Corridor (IMEC) will depend on the outcome in Gaza and the stance of Israel, refusing to discuss an independent Palestinian state, as Saudi Arabia is demanding in order to establish diplomatic relations with Israel.

India’s envisaged trade and energy corridor, a 4,800-km corridor planned to link the ports of Mumbai and Haifa, already controlled by Indian investors, remains on the table, but is at the mercy of geopolitical developments due to Gaza.

 

Further step taken for Greek-Saudi grid link, routing an issue

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Greek power grid operator IPTO and the National Grid Saudi Electricity Company have taken a further step for the development of an electrical interconnection linking Greece with Saudi Arabia by establishing a special purpose company.

The Greek-Saudi project, to stretch over 2,000 km, is planned to serve as a segment of a bigger corridor for transportation of renewable energy from the Middle East and Africa to central Europe.

As a next step, Saudi Arabian Greek Electrical Interconnection, the special purpose company just established by IPTO and National Grid, is expected to conduct environmental, technical and feasibility studies for a High Voltage Direct Current (HVDC) interconnection. However, a series of Greek and Saudi Arabian ministerial approvals are still needed.

The two sides had reached a preliminary agreement in Athens last autumn, following a visit to Greece in the summer of 2022 by Crown Prince Mohammed bin Salman Al Saud, Crown Prince of Saudi Arabia, for talks with Prime Minister Kyriakos Mitsotakis.

The formation of a special purpose company indicates that both sides are eager to push ahead with a Greek-Saudi electrical interconnection, despite fears that the Israel-Gaza war could lead to delays and revisions.

The Greek-Saudi interconnection’s eventual route, a crucial factor in the outcome of the project’s feasibility study, stands as a major challenge and will greatly depend on the condition of bilateral ties between Saudi Arabia and Israel.

Though this relationship appeared to be improving, the Hamas attack on Israel on October 7 and its resulting Israel-Gaza war has impacted ties between Saudi Arabia and Israel.

If current conditions do not change, Saudi Arabia, a Sunni Islam kingdom, will choose a longer route for the project that bypasses Israel and instead runs through Egypt’s Suez Canal to Greece. Should Saudi-Israeli ties improve, the Greek-Saudi interconnection will take a route running from Saudi Arabia to Jordan, Israel and on to Greece, possibly via Cyprus.

IPTO considering fiber optics for EuroAsia Interconnector

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Grid Telecom, a subsidiary of Greek power grid operator IPTO, is considering to attach a fiber-optic cable system onto EuroAsia Interconnector, a prospective grid link to connect the Greek island Crete, Cyprus and Israel, in order to meet rapidly growing demand in the wider region for online services.

Investments in data centers, storing ever-increasing information via the internet, require fiber-optic cables. IPTO has identified a key opportunity in the region, given the solid basis of its relations with the Israeli side.

Grid Telecom is considering taking on the project, whose budget is expected to reach tens of millions of euros, with two partners, one of which is Tamares Telecom, a fiber-optic network operator and subsidiary of the Israeli fund Aluma.

The project is planned to serve the needs of EuroAsia Interconnector as well as those of other customers.

Interest in the Greece-Cyprus-Israel interconnection is extremely strong. Aluma is awaiting the results of a due diligence procedure before becoming a shareholder in the EuroAsia Interconnector project. The Israeli energy ministry is also very keen on its development. Highlighting the level of interest, the ongoing Israel-Gaza war has not altered project plans.

Just a month ago, Grid Telecom and Tamares Telecom announced that they had completed the initial design for the intercontinental fiber optics linking Greece with Cyprus, Israel and the Arabian Peninsula.

 

Ruptured Israeli-Turkish ties to reshape regional energy map

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The rupture in Israeli-Turkish ties, vanishing any hope of Turkish president Recep Tayyip Erdogan’s unlikely proposal for the transfer of Israeli gas to Europe via a Turkish transit route, threatens to rebalance ties in the wider region and reshape the east Mediterranean’s energy map. Hydrocarbon exploration plans and major projects in the east Mediterranean will be impacted.

As an initial consequence, Erdogan’s open support for Hamas in the Israel-Gaza war ends any hope of Turkish collaboration with Israel on energy interests for a very long time.

Up until the outbreak of the Israel-Gaza war earlier this month, the Turkish president had seized on every opportunity to claim a role for Turkey as a constructive player on the east Mediterranean’s energy map.

Erdogan had proposed a closer energy partnership with Israel during a meeting with Israeli prime minister Benjamin Netanyahu in New York last month, even though such a prospect would have been highly improbable, given Israel’s mistrust of Turkey.

The latest deterioration in Israeli-Turkish ties provides Cyprus and Greece with an opportunity to establish themselves as trusted transit partners for transportation of Israeli natural gas to Europe.

Turkey could now reemerge as an aggressive player in the region, which could prompt Ankara to engage in illegal hydrocarbon exploration and drilling at undefined areas, as was the case in 2020, or even obstruct exploration and drilling plans by ExxonMobil consortium off Crete, testing Greek-Turkish ties.

Ministry’s single variable tariff intended to boost competition

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A decision by energy minister Thodoris Skylakakis to introduce – as of January, for 12 months – a single variable tariff formula for all electricity suppliers, whose level they will set depending on respective profit-margin strategies, is intended to intensify competition leading to lower prices, or at least, price containment at reasonable levels.

The application of a single pricing formula, to be made available to all electricity suppliers, will enable consumers to make instant price comparisons with the push of a button, not possible under the current complicated system.

“If I were to ask you who the lowest-price supplier is would you know? The problem is that we don’t have a common tariff offered by all suppliers. A common tariff will now exist. All details will be announced within the next ten days,” Skylakakis, the energy minister, told local radio station Parapolitika yesterday.

All electricity consumers will be automatically transferred to the new single variable tariff as of January 1, unless they opt, prior to this date, for any other supply deals offered by suppliers.

The energy ministry estimates over 4 million consumers, or at least 70 percent of 5.7 million in total, will favor an automatic transferal to the new single variable tariff over any of the new products to be made available by suppliers.

Some market officials believe consumer preference for the new single variable tariff will be even greater.

Authorities are preparing for the Greek electricity market’s return to normality as of January 1, when subsidies are planned to end and indexation clauses reintroduced.

However, market conditions are currently adverse and challenging given last week’s outbreak of the Israel-Gaza war as an addition to Russia’s ongoing war in Ukraine.

A continuation of current market trends and conditions, which have pushed natural gas prices up 36 percent since the beginning of October, to 49 euros per MWh, would inevitably result in higher domestic electricity prices in January.

Power suppliers project sharp price rises if conditions persist

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Domestic electricity prices will inevitably rise by up to 15 percent as of January – when energy-crisis measures are planned to be lifted, reactivating indexation clauses – if current unfavorable international trends continue, local electricity market officials has projected.

Upward trajectories of natural gas and CO2 emission right prices, as well as the danger of a further rise in already-elevated interest rates, are worrisome factors whose combined effect could push up electricity prices, one official pointed out.

In Greece, wholesale electricity prices have soared by 80 percent over the past three days. On Sunday, wholesale electricity was priced at 93.49 euros per MWh, rose to 127.75 euros per MWh yesterday, before reaching 168.43 euros per MWh today.

Worse still, these wholesale electricity prices have yet to factor in October’s sharp rise in the price of natural gas, up approximately 30 to 35 percent in the first half of the month, to a peak of 56 euros per MWh, as Greece’s wholesale electricity market factors in gas prices from a month earlier.

Natural gas holds the dominant share of Greece’s energy mix, at 43.35 percent, followed by renewables, well below with a 21.37 percent share.

Though still well below last year’s astronomical price levels, natural gas prices of as low as 30 euros per MWh, recorded early this month, now seem to be a thing of the past.

The Israel-Gaza war and threat of a wider conflict in the Middle East – a negative development that has already disrupted operations at Israel’s Tamar gas field, from where gas quantities are delivered to Egypt and processed into LNG for export to Europe – is already impacting prices.

Price levels have been hit even harder by last week’s discovery of damage to the Estonian-Finnish Baltic-connector gas pipeline and telecommunications cable.

As for CO2 emission right prices, they have skyrocketed to levels 500 percent higher than pre-energy crisis levels, reaching approximately 90 euros per ton and, according to analysts, are projected to remain elevated over the next three years.

Latest events prompt energy market turmoil ahead of winter

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Last weekend’s outbreak of the Israel-Gaza war, undermining any attempt at peace in the Middle East and the process of normalizing Israel’s relations with the Arab countries, and, in addition, the suspected sabotage of the Baltic-connector gas pipeline, used by Finland and Estonia for access to an underground gas storage facility in Latvia, are two developments that have come at the worst possible time for European energy security and cost concerns, right before winter and following an EU decision to end energy crisis-related support measures for consumers all over Europe.

The two developments would have impacted energy markets any time of year, but their pre-winter emergence makes them even more critical. This is the time of year when demand for natural gas and oil increases in Europe, along with prices. In Greece, the heating oil trading season is set to begin October 13.

Markets around the continent have not been appeased by the fact that European storage facilities are 95 percent full, but instead, are being driven higher by the unease brought about by the latest events.

Besides the Israel-Gaza war, the Baltic-connector pipeline has just been shut down after a sudden drop in pressure, raising fears of Russian sabotage as retribution for Finland joining Nato in April this year.

The damage to this infrastructure has revived concerns about energy security following the Nord Stream pipeline blasts last year.

According to macroeconomic research consultancy Capital Economics, the combination of events could raise oil prices to levels well above 100 dollars a barrel for some time.

Wholesale natural gas prices rose 12.3 percent in a day, to just under 50 euros per MWh at the Dutch TTF hub.

The Greek government may need to reconsider its decision to end energy subsidies for all consumers. Supply companies may need to hedge prices and factor in the new risk factors. Also, refineries and gas importers may need to secure loads before prices escalate.

With Israel preparing for a ground attack on Gaza, it has become clear that decisions such as the choice of route for Israeli gas exports to Europe; promotion of Israel’s energy cooperation with Greece and Cyprus; and the development of projects such as the Israel-Cyprus-Greece electricity grid interconnection, are, for the time being, not a top priority.

 

Major east Mediterranean projects brought to a standstill

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The Brent crude price began trading today 5 percent up, over 88 dollars a barrel, as markets have not ruled out stricter US sanctions by the US against Iran, which supports Hamas, responsible for the weekend’s shock attack on Israel.

European and US markets are also expected to rise today, reflecting anxiety over an escalated conflict that would be brought about by an Israeli ground military operation in Gaza and the involvement of the powerful Hezbollah from the Israel’s north, with the support of Iran and Syria.

Should the US impose stricter sanctions on Iran, global oil supply would be reduced, creating an opportunity for Russia to increase its share, analysts have noted.

Washington, since late 2022, has turned a blind eye to an increase in Iranian exports circumventing US sanctions, on the basis of an informal détente with Tehran, analysts have reminded. The US has pursued such a course knowing it would hurt Russia.

Israel’s energy-related interests in the eastern Mediterranean, including talks with Cyprus and other regional players for gas exports to Europe, will now be put on hold following the Hamas attack on Israel.

Earlier today, Israel’s energy ministry ordered US oil giant Chevron to halt operations at the Tamar gas field, off the coast of Israel. The company stated it is complying with the ministry’s request.

The development of a Cypriot LNG terminal, planned to receive Israeli pipeline gas, and, even more crucially, a recent push by Israeli Prime Minister Benjamin Netanyahu for decisions promoting exports from east Mediterranean fields within the next three to six months, are now being brought to a standstill.

As for the role of Turkey, statements made yesterday by President Recep Tayyip Erdogan, who called for restraint from both sides without condemning the Hamas attack on Israel and spoke again of a Palestinian state with Jerusalem as its capital, probably reinforce Israel’s reservations against Turkey.

At a recent meeting in New York, Netanyahu and Erdogan agreed to schedule an exchange of visits aimed at restoring relations between the two countries. Erdogan, at that meeting, had proposed the transportation of Israeli gas to Europe via a subsea pipeline running alongside the Turkish coast.

Operations by Greece’s Energean Oil & Gas, listed on the London Stock Exchange, at licenses within the Israeli EEZ have not been disrupted by the conflict, company officials informed, noting the Energean Power FPSO and all other company facilities are not situated close to the battle zone.