Israel and Jordan Work to Preserve Their Strategic Relationship

Israel and Jordan Work to Preserve Their Strategic Relationship 

Stratfor 17-Jan-14 

Summary 

Israeli Prime Minister Benjamin Netanyahu made a brief and unannounced visit to Jordan to meet with King Abdullah on Jan. 16. The visit is not altogether unusual, despite some media reports to the contrary; Netanyahu also visited Abdullah in December 2012 and March 2013, each time without giving advance notice. After the prime minister arrived, Amman issued a statement saying the visit reflected the king's desire to make "tangible progress" on peace talks with the Palestinians and "protects the interests of the Jordanian kingdom." Netanyahu's spokesman gave a more vague description, saying the visit was to discuss "economic cooperation between the two countries and other regional matters." 

There is little reason to expect much headway in negotiations over the peace process. However, there are less high-profile negotiations underway between Israel and Jordan over economic matters that carry much more strategic significance. 

Analysis 

It is natural to assume that the primary driver behind Netanyahu's visit is U.S. Secretary of State John Kerry's tireless efforts to promote a new framework for an Israeli-Palestinian peace deal. A major part of Kerry's proposal focuses on addressing Israel's security concerns by using advanced technology and weaponry to obviate the need for a heavy Israeli troop presence in the Jordan River Valley, which borders the West Bank. Any proposal concerning Israeli troops in the Jordan River Valley would necessarily involve Amman, and there are several issues related to the peace process that Netanyahu would have discussed with Abdullah during this visit. At the same time, Israel has shown every indication that it is not exactly taking Kerry's proposal seriously. According to Israel's defense minister, the proposal is not worth the paper it was written on. 

Either way, Israel currently has little incentive to concede much to a weak and fractured Palestinian negotiating partner at the behest of the United States -- especially when Washington is already proceeding with a nuclear settlement with Iran in spite of Israel's protests. While Israel can use the visit to ease some of the tension with Washington by demonstrating it is not completely neglecting the peace process, there is little reason to expect significant headway in the negotiations. 

Critical Economic Deals 

But Israeli-Jordanian relations are not relegated solely to the Palestinian issue. Israel is actively (and quietly) pursuing several deals with Jordan that are designed to tether the Hashemite Kingdom to Israel economically and thus improve their strategic relationship. Israel's Delek Group and Texas-based Noble Energy, both of which have led Israel's efforts to develop offshore natural gas reserves, are reportedly close to signing a 15-year contract with the Amman-based Arab Potash Company, one of the world's largest potash companies (and one in which the Jordanian government has a 26 percent stake). According to the deal, Arab Potash would supply Israeli natural gas to a potash facility in Jordan. A nine-mile natural gas pipeline would be built across the Dead Sea, linking an Israeli chemical plant to Arab Potash's facility on the Dead Sea shores. The project is slated for completion in 2016, though the timeline is subject to revision. 

Jordan's potash industry has suffered from water shortages, but there is a plan to resolve that issue, too. Since 2002, Israel, Jordan and the Palestinian National Authority have been working on a water deal that was finally agreed upon in December 2013, once the environmental and technical studies were completed. Under the deal, Israel will provide Amman with 50 million cubic meters of fresh water per year from the Sea of Galilee in northern Israel, and the Palestinian National Authority in the West Bank will be able to buy 30 million cubic meters of fresh water per year from the Sea of Galilee and up to 20 million cubic meters per year from a desalination plant in Aqaba. Israel will soon be putting out tenders for the construction of the desalination plant in Aqaba, which will sell potable water to Jordan and Israel, a project that is estimated to take about five years to complete. A pipeline to carry the water from the desalination plant to the Dead Sea is also part of the proposal. 

These economic deals are critical to Israel's strategy of preserving its relationship with Jordan, currently the only neighbor willing to absorb the political risk of maintaining a cooperative relationship with Israel. But the unrest that swept the region in 2011 has added some urgency to the initiatives. One of the biggest political casualties of the Egyptian unrest was a natural gas pipeline that begins in El Arish on the northern rim of the Sinai Peninsula and connects to Ashkelon in Israel via an underwater pipeline and to Aqaba in Jordan. This pipeline has become a popular target for insurgent attacks. And ever since details of the Israeli-Egyptian contract were leaked -- they revealed that Cairo was selling Israel natural gas at a preferential rate while Egyptians were struggling with natural gas shortages at home -- the pipeline has also been a major point of controversy for Islamists who oppose the military-backed regime. 

The Egyptian contract with Israel has been suspended indefinitely, and while Israel is relieved to see the military back in control in Cairo, it knows the regime will still be on rocky footing as it tries to quell ongoing unrest. Public displays of cooperation with Israel, such as a deal to export Israeli natural gas to Egypt, will not work in the regime's favor at this sensitive political juncture. In fact, the Egyptian regime will be more prone to playing up tensions with Israel for domestic consumption. 

Prioritizing Jordan 

Meanwhile, the Egyptian natural gas supply to Jordan has been sporadic, now delivering around one-fifth of the contractual rate of 240 million cubic feet per day. Given Egypt's persistent natural gas shortages at home, Jordan cannot expect a reliable energy supply from Egypt anytime soon. Jordan imports 97 percent of its energy, and most of its electricity generation has been powered by natural gas. After losing its main natural gas supply from Egypt, Jordan has had to import more fuel oils from Gulf Cooperation Council states. Consequently, Jordan's energy bill has skyrocketed, forcing the already economically challenged desert state to spend an additional $2 billion a year on energy imports. 

So far, the Jordanian government has effectively contained domestic political demonstrations, kept its opposition divided and fended off a spreading jihadist threat from the Levant. However, Amman is also well aware of its vulnerabilities and is not about to get complacent. Persistently high electricity prices could threaten Amman's ability to tame a restive populace. 

Jordan's stressful energy situation is also of great concern to Israel, which has a deep interest in the preservation of the Hashemite regime. Israel is thus prioritizing Jordan as it plans to export its excess natural gas. This is where politics trumps commercial interests in Israeli policymaking. With the Tamar field, which contains approximately 283 billion cubic meters of recoverable reserves, now online, and the larger Leviathan field, which contains 509 billion cubic meters of recoverable reserves, slated to come online in 2017, Israel is moving ahead with plans to become a natural gas exporter. In November, a High Court ruling confirmed a decision from the Israeli Cabinet, which proposed to keep 60 percent of its natural gas for domestic consumption and 40 percent for export. Negotiations are currently underway for Israel to export some 2.5 billion to 3 billion cubic meters of natural gas per year, in addition to 400 million to 500 million cubic meters of natural gas supplied to factories on the Jordanian side of the Dead Sea. The 15-year $2 billion natural gas contract proposal stipulates that Jordan would receive the natural gas only if Israel has excess supply, particularly during off-peak hours. 

The Jordanian market pales in comparison to the burgeoning Asian markets, where high premiums are an extremely tempting option for any rational energy producer. But while the debate continues over whether it is worthwhile for Israel to build an expensive floating liquefied natural gas terminal off its Mediterranean coast to reach markets further afield, Israeli politicians will be looking first at its neighbors as potential customers worthy of preferential rates. Deals with Turkey, Egypt and the Palestinian National Authority still carry their fair share of political complications, but Jordan for now remains the ideal business and political partner for Israel in the neighborhood.