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Israel freezes major oil deal with UAE

The Expedient regasification ship is anchored off the coast of Israel in the Mediterranean Sea on February 26, 2015 as natural gas began flowing from the vessel, hired by the Israel Electric Corporation, to its power stations [MENAHEM KAHANA/AFP via Getty Images]
The Expedient regasification ship is anchored off the coast of Israel in the Mediterranean Sea on February 26, 2015 as natural gas began flowing from the vessel, hired by the Israel Electric Corporation, to its power stations [MENAHEM KAHANA/AFP via Getty Images]

A landmark deal between Israel and the UAE that has the potential to transform the transportation of oil across the Middle East has hit a major snag, delaying efforts to deepen economic ties between Abu Dhabi and Tel Aviv. A joint venture to revive the secret Eilat to Ashkelon pipeline was meant to signal a milestone in normalisation between the two countries, but Israel's environmental protection ministry has called for a freeze on any further development.

Built by Israel and Iran in the 1960s, the 158-mile pipeline connected the Mediterranean and Red Seas, offering an alternative to the Suez Canal and thus threatening Egypt. Cairo generates around $6 billion in revenue every year from the canal which has just been widened by President Abdel Fattah Al-Sisi at a cost of $8 billion. However, the 1979 Iranian Revolution brought the pipeline project to a standstill.

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Moreover, Israeli environmentalists have pointed out that the pipeline will have a negative impact on Red Sea corals off the coast of Eilat. They are said to have challenged the plan in court, citing the risks of a devastating oil leak or spill if tens of millions of tonnes of crude oil are sent through Israel each year.

Far-right Israeli Prime Minister Naftali Bennett and Foreign Minister Yair Lapid are expected to hold a meeting in the coming weeks with advisers to examine the impact of the oil pipeline on the Red Sea reefs, the Negev desert, and the Mediterranean coastline.

Despite the delay, there is no indication that the deal between the UAE and Israel to revive the oil pipeline will be derailed completely. Once operational, it will transform oil transportation in the region.

Giant supertankers, for example, cannot fit through the Suez Canal, which has become a major bottleneck for shipping. Oil producers such as Azerbaijan and Kazakhstan will be able to offload at Ashkelon, from where the oil will be pumped to Eilat before being loaded onto tankers bound for China, South Korea, and elsewhere in Asia.

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