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Slick Dealings

Slick Dealings

Jordan-Oil-1.jpg

  Surrounded by the largest oil reserves in the world, and the most politically unstable regimes of the 21st century, the Hashemite Kingdom of Jordan finds itself in a rather peculiar situation in more ways than one. Politically, Jordan is known to be a moderate country with a Western-allied ruling family that has withstood the wave of protests known as the Arab Spring. Jordan is also a resource-scarce country that relies on hydrocarbon imports from its neighbors, including Iraq, Saudi Arabia, and Egypt to supply 95 percent of its energy needs. While the region has been dealing with invasions by Western forces, the overthrow of autocratic regimes, and extremely violent manifestations of Islamic political ambitions, Jordan’s main problem remains energy scarcity. In a world where national borders no longer serve to insulate domestic from international affairs, regional events of the past decade, including the 2003 invasion of Iraq, the Arab Spring, the Syrian Civil War and the rise of ISIS have largely shaped and remodeled Jordan’s relationships to its neighbors, especially in relation to energy ties. While Jordan continues to consolidate the Hashemite political rule over the country, and to assert its stable position amidst regional conflict, it is also necessary to consider key aspects of the economy like energy security, and to move towards a more self-sufficient electricity and fuel economy.

Historically, Jordan’s political inclinations have largely been shaped by its energy needs. For example, in 1979, Jordan’s King Hussein allied himself with Saddam Hussein’s regime and enjoyed significant economic support and a desperately-needed discount on its oil supplies. These Jordanian-Iraqi relations obligated King Hussein to side with Iraq in his invasion of Iran in the 1980s, as well as his invasion of Kuwait in 1990. It can be argued that Hussein’s backing of Baghdad was motivated by factors other than energy: countering the threat of Iran’s Islamic revolution in 1980, and salvaging public opinion for a monarchy that was struggling to remain in power in 1990. Regardless of whether its motivation was or wasn’t oil, Jordan’s backing of Iraq provided only a short term solution to its energy needs. The US-backed invasion of Iraq in 2003 and the fall of Saddam Hussein’s regime led to the loss of sizable oil subsidies from Iraq, putting Jordan in a vulnerable situation with respect to energy needs.

King Abdullah of Jordan, who inherited the throne from his father in 1999, also inherited his legacy of energy vulnerability. Throughout his regime, Abdullah, who lost the historically reliable source of energy from Iraq, sought to diversify the country’s energy sources. His quest for energy security was aided by the construction of the Arab Gas Pipeline, which helped facilitate gas exports from Egypt to Jordan, as well as to Syria and Lebanon. The Arab Gas Pipeline allowed Jordan to rely on Egyptian gas for 80 percent of its electricity generation needs. But this over-reliance on gas from Egypt proved to be a grave mistake, as the country would learn in 2011. The Arab Spring, which brought down the Mubarak regime that January, created large disturbances in gas exports. The popular uprisings in Egypt, in addition to terrorist attacks on the Arab Gas Pipeline reduced gas exports to Jordan by about 65 percent, adding an additional cost of $1 billion to the Jordanian energy budget.

Jordan’s vulnerability as a result of external events coincided with internal economic turmoil. The popular uprisings in Egypt came at a particularly inconvenient time for the Jordanian government, which was facing pressure to reduce energy subsidies to its people in order to acquire a $2 billion dollar loan from the International Monetary Fund. Energy subsidies have cost the Jordanian government about one fifth of its annual budget. Despite the large impact they have had on the government’s spending, energy subsidies are the most prominent safety net policies supporting impoverished communities in Jordan. With about 20 percent of its population living below the poverty line, defined as less than $1.25 a day, the subsidy cut remains one of the most challenging reforms the government has dealt with to date. The cuts to energy subsidies subjected the government to public criticism at a time when the Arab Spring spread fears of a popular uprising and a revolt against the monarchy. In November 2012, when the subsidy cut was announced at the beginning of the winter, thousands took the streets of Amman to protest the reform.

King Abdullah has managed to overcome the largest uprisings in the wake of the Arab Spring in Amman, and continues to deal with questions of energy security today. The civil war in Syria, which has been ongoing for the past three years, poses a particular problem for Jordan that puts further stress on resource needs. Currently, Jordan is the only country with borders open to Syrian refugees, after Lebanon announced that it was closing its borders in November 2014. Jordan has absorbed more than 3 million refugees in three waves over the years, the first bringing in Palestinian refugees in 1948 and 1967, the second bringing in Iraqi refugees in the early 2000s, and now the third bringing about 1 million Syrians into Jordan’s borders. There is historical and growing resentment towards refugee communities in Jordan; many Jordanians argue that resource scarcities are exacerbated by large influxes of Palestinians, Iraqis and Syrians among other refugees. The government is placed in a difficult position of having to deal with the infrastructural and resource needs of its refugee populations while providing concessions for the host community of Jordanians who feel alienated by increased attention and funding directed at refugees.

With rising stress on energy resources in the country, Jordan has been looking for alternatives to solve its shortages. The country has taken an unprecedented step by signing a gas deal with Israel in October 2014. The 15 year deal to buy 1.6 trillion cubic feet of gas for $15 billion from Israel’s offshore Tamar and Leviathan reservoirs by 2017 will reduce Jordan’s annual energy bill by an estimated $1.4 billion a year. The deal, which is being referred to as a “pipeline for peace” in Israel, is controversial given Jordan’s relationship with Israel. Jordan signed a peace treaty with Israel in 1994, becoming the second Arab country, after Egypt, to normalize its relationship with the regional neighbor. In addition to defining the borders between the two countries, the clauses of the peace treaty address the issue of sharing natural resources. Despite a decade of bilateral economic relations with Israel, this is the first major deal of resource trade between the two countries.

The deal was met with enormous public disapproval from Jordanian civil society. This is expected and understandable considering that 50 percent of the population is of Palestinian origin or descent, and bitterness about the Israeli occupation of Palestine persists. The deal is viewed as a step toward the normalization of relations between Jordan and Israel, though no concessions on the Israeli side are made. There have been several protests organized by Jordanian groups, including environmentalists and engineers. There is also disapproval of the deal from within government ranks. Yahya Mohammad Al Saud, a member of the Jordanian parliament and president of the parliamentary committee on Palestine, emphatically remarked: “The Jordanian [people are] not willing to accept this agreement. I will return to riding on a donkey and heating my house with wood before I would consider taking gas from Israel.”

This deal is particularly striking for many reasons. First, it can be argued that most of the negotiations between the involved parties, including the Jordanian government, the Israeli government and members of the US State Department were conducted behind closed doors and kept hidden away from the eyes of the public. In addition, the deal was signed a month after Israel’s Operation Protective Edge in Gaza during the Summer of 2014. The operation killed 2100 Palestinians, mostly civilians, destroyed 17,000 homes and left a quarter of Gaza’s 1.2 million inhabitants displaced. The deal is thus extremely insensitive to the opinion of Palestinians, and shows the regime’s general disregard for public opinion and willingness to isolate its people.

 

Jordan Oil (1)

 

Putting aside public reception of the deal, it is important to consider the geopolitical implications of Jordan’s decision to import gas from Israel. Beyond providing discounted energy, this deal also guarantees Jordan an Israeli commitment to security vis-a-vis Washington. The deal promises Jordan all forms of protection, whether it be economic, political or otherwise, in an unstable time when its domestic economy struggles, the fate of Syria and Iraq is unknown, and the threat of ISIS persists.

The deal also has important implications for Israel’s position in the region. Despite some criticism, Israel has viewed the deal as an extremely important step in forming major economic ties with its neighbors. Situated in a region with abundant resources, Israel never dreamed of consolidating its economic position through energy exports. But now that Egypt, which not only supplied gas to Jordan, but also to most of the region through the Arab Gas Pipeline, is out of the question, and with a growing dependence on gas as opposed to oil, Israel is offered an unprecedented opportunity to become self-sufficient in energy production and to lead energy exports in the region.

Additionally, the Tamar and Leviathan Gas reservoirs are located in the Mediterranean Sea, off the coast of Haifa, just kilometers away from two gas reservoirs off the shore of Gaza. The two Gaza Marine reservoirs, discovered in 1999, contain 1.4 trillion cubic feet of gas that are owned by the Palestinian authority according to a 1994 agreement. After Hamas’ rise to power in 2007 however, the naval restrictions imposed as part of Israel’s siege on Gaza reduced offshore access. The US State Department, in an effort to foster peace in the region, hosted a series of negotiations addressing the Palestinian Authority’s rights to drill, explore, and export gas; however, these negotiations have failed to result in the Palestinian production of gas. As a result, the West Bank and the occupied Palestinian territories remain dependent on Israeli gas. Instead of attempting to empower the Palestinian territories to produce their own energy, the gas deal between Jordan and Israel undermines Palestinian efforts at economic independence and further isolates any opportunity for the Palestinian Authority to exploit its gas resources.

Lastly, despite the economic benefits of the deal, importing gas from Israel does not solve Jordan’s question of energy security. The Jordanian Ministry of Energy has claimed that the deal will diversify Jordan’s energy sources; however, given the projected import capacity, it is likely that Jordan will rely on Israel more than it had previously relied on Egypt for gas. Additionally, The fifteen year timeline of the deal is very long, especially considering the volatility of relations between Jordan, Israel, and the Palestinian Authority. In fact, the deal already came under threat immediately after the agreement in October 2014. In November, Jordan took the unprecedented step of recalling its ambassador after clashes in Jerusalem’s Al-Aqsa mosque. There is no guarantee of stability in the region in the coming fifteen years, making the decision to rely on Israeli energy a big gamble on Jordan’s part.

There is no denying that the Jordanian government is in an extremely challenging situation. It seems that the external events of the region have unraveled in Jordan, a country that does not have the resource capacity to even support its internal deficiencies. As the region enters into stages of continuing violence and uncertainty, Jordan must look towards internal sources of energy, making it more politically independent from its neighbors. Historical events show that over-reliance on one source of energy creates a situation that is susceptible to instability, and falling into the same historical mistakes by signing a gas deal with Israel is not the solution. Beyond all the political controversies relating to the current deal, and the way it undermines efforts to broker an agreement for a fair situation for Palestinians, Jordan should listen to the will of its people when making economic choices. In addition to the potential of producing liquefied natural gas internally, energy options for Jordan include the possibility of exploring nuclear power or renewable energy. Jordan’s nuclear program is already under examination, with two operational 1000 megawatt power plants to be operational by 2025. There is less work done on renewables, however the mostly desert climate of the country makes solar energy a viable alternative option. Whatever path Jordan decides to pursue to secure its future energy needs, the plans must be inclusive of the general public who are the primary stakeholders in the economic situation relating to energy.•

Denial on Trial

Denial on Trial

Seoul Mates

Seoul Mates