Will Turkey’s failed coup impact energy cooperation with Israel?

Barely a week has passed since a faction within the Turkish military attempted a coup d’état against the government and President Recep Tayyip Erdogan. The coup was a total failure, triggered a nation-wide purge of the military, academia, and Turkey’s judiciary. Thousands are under arrest for suspicion of supporting the putschists and alleged mastermind, Fethullah Gulen.

Many have written about the coup and its aftermath. I recommend reading some insights by Dov Friedman, Aaron Stein, and Burak Kadercan (just to name a few of many many quality pieces).

One of the lingering questions though, is how the botched coup and subsequent purge will impact Turkey’s foreign relations. Just weeks prior to the coup, Erdogan had launched a diplomatic charm offensive which entailed rapprochement with Israel, an apology to Russia, and some rumors about secret talks with Syria and Egypt.

The post-coup reality isn’t likely to change Turkey’s interest in rapprochement with Israel. Erdogan will continue to distant himself from the failed policies of the Davutoglu era (which were Erdogan’s policies) in the hopes of improving his international image (admittedly, a very tall task at this point). Senior Turkish officials were quick to reassure the Israeli press of Turkey’s commitment to the deal.

Still, uncertainties remain. As explained by Israel Policy Forum’s Michael Koplow, inter-military ties between Israel and Turkey will probably suffer as Erdogan “cleanses” the military. Israel will also keep a watchful eye on developments between the U.S. and Turkey, whose relations have been further strained by the recent request that Washington extradite Gulen (who resides in Pennsylvania) for trial, and the obvious weakening of Turkish civil institutions during Erdogan’s purge. Finally, while Turkish officials have not employed anti-Semitic/anti-Israel until this point, that could easily change, and bring with it all of the familiar diplomatic challenges.

But I am curious whetehr the coup will impact the likelihood of Israel exporting its natural gas to Turkey. As I have mentioned elsewhere, Turkey has long been perceived as the most financially viable export route for Israeli natural gas, and this was one of the primary drivers behind the reconciliation deal. Several Israeli politicians, including Prime Minister Benjamin Netanyahu and Energy Minister Yuval Steinitz, emphasized energy cooperation in order to elucidate the benefits of reconciliation. It was also an important factor for Turkey, which seeks to diversify its energy supply.

Energy development is dependent on a myriad of factors, but one constant is that investors need to believe that the reward outweighs the risk. If a state – whether it be the export state, transit state, or in some cases the importing state – experiences political or economic instability, many investors will be concerned about its potentially negative impact on the project’s viability. In particular, states importing or exporting via pipeline will seek alternative energy routes if they deem that the physical security of energy infrastructure cannot be guaranteed.

Israel has experienced this firsthand. In 2011, following the collapse of the Egyptian government, militant groups operating in the Sinai Peninsula began targeting a pipeline delivering natural gas from Egypt to Israel. Repeatedly, these groups succeeded in sabotaging the pipeline, eventually resulting in the termination of the route and a series of lawsuits between the Israel Electric Company and the Egyptian companies involved in the deal.

Similar incidents took place in Turkey over the last year; on repeated occasions PKK guerrillas have attacked the Shah Deniz and Kirkuk-Ceyhan pipelines. And it is fair to ask, following the Islamic State attack on Istanbul’s Ataturk International Airport and last week’s coup, whether Turkey’s security and intelligence institutions can still be relied upon.

Another major question is how the coup will impact the status of negotiations on the island of Cyprus. Following the signing of a reconciliation deal between Israel and Turkey, Cypriot officials stated that without a resolution to the dispute between Cyprus and the TRNC (Turkish Republic of Northern Cyprus) they would not allow the construction of any undersea pipeline in their territorial waters. While there is no evidence that Turkey’s position vis-a-vis the Cyprus talks has changed, it could further delay the process and force investors to consider alternatives. A surprise visit to Jerusalem by Cyprus President Nicos Anastasiades on July 24 should provide at least a little clarification as to where the parties stand.

The economic implications of the coup are additional concern. Turkey’s economy has struggled over the last year for a number of reasons, not least of all President Erdogan’s creeping authoritarianism, but in the days following the putsch the lira dropped to historic lows while the risk of capital flight remains high. Market unpredictability will dissuade foreign investment, and may delay large-scale projects such as an undersea pipeline that would cost an estimated $2-4 billion, especially if the political environment remains unstable.

Each of these obstacles can be overcome. Turkey could resolve its domestic political problems, stabilize its economy, and reach terms with Cyprus. However, what is the likelihood that these three things take place in the next few years? This is question Noble Energy, Delek Group, and the Israeli government are likely discussing with both their Turkish partners and other European companies who may be interested in investing in this project. In the end, they may determine that Turkey remains the best of an imperfect set of options for Israel’s natural gas – after all, energy companies operate in far less stable climates than the Eastern Mediterranean.

But if Turkey’s political instability worsens, don’t be surprised if the pipeline talks take a different direction.

Posted on by Gabriel in Israel, Turkey