The new Europe-Asia crude oil pipeline deal is terrible for Israel

The environmental community is up in arms about an agreement between Israel’s Europe-Asia Pipeline company (“KATZA”) and Med-Red, a UAE company newly established to deliver crude oil from the United Arab Emirates to Europe. Activists are taking to the streets, holding vigils, hanging banners on bridges, protesting at ministers’ houses. Notwithstanding the popularity of the Abraham Agreements, greens have identified the agreement as a significant threat to the integrity of the aquatic environment in Eilat and Ashkelon.

I decided to go to see for myself and visit the company headquarters. A tour of their facilities left little doubt in my mind that the environmental concerns are well-founded. The new KATZA agreement is indeed a very bad idea. Here’s why:

First, a bit of history for the uninitiated: While hard to believe today, back in 1968 Israel and Iran were close allies. They decided to cut a deal. Iran was transporting copious quantities of oil to Europe via the Suez Canal, with its high-priced passage fee. Why not simply discharge the same oil in Eilat, Israel’s Red Seaport, and build a pipe that could carry the oil up to Ashkelon on the Mediterranean Sea? From there, tankers could receive the oil and deliver it to European ports for a fraction of the cost. A joint company, The Eilat-Ashkelon Pipeline, was registered (and became widely known by its Hebrew acronym “KATZA”). A pipe was built across the south of Israel and the oil began to flow.

The 254 kilometer-long, 42-inch pipeline delivered the crude oil to a specially designed Ashkelon oil jetty and its 3.7 million cubic meter storage facility. The entire project was considered to be sensitive diplomatically and militarily, so the actual activities of a government company overseen by the Treasury Ministry enjoyed almost complete secrecy. Little has changed about that. But everything else about KATZA has.

After the Islamic revolution in 1979, Iran ended the bi-lateral venture. With its unique infrastructure in place, Israel’s company began to look for other clients who might be interested in delivering oil in either direction, cutting travel distance and bypassing high Suez Canal prices. They found several, although the KATZA pipeline was used far less than during its Iran partnership heyday. Recently, the company renamed the pipeline the “Europe-Asia” pipeline, which allowed the Hebrew acronym, as well as the English initials of the company, to remain intact.

In practice, this means six or seven oil tankers deliver oil to Eilat each year and the oil is pumped north to Ashkelon along the Mediterranean. That might not seem like much. But each one delivers some 250,000 tons of oil and given the egregious damage caused by the 37,000 tons dumped in the notorious 1989 Exxon Valdez spill, environmentalists can be excused for fearing a possible catastrophe.

And they have ample reason to worry. The aging pipeline has been the source of massive leaks and extensive ecological damage over the years. In addition to intermittent foul-ups in the Gulf of Eilat during the 1970s, recent years have seen a litany of spills on land that left ecosystems reeling: most recently a massive spill in the Zim Stream (2011), a disaster that devastated Ein Evrona nature reserve (2014) and, on August 30 of this year, a significant release near Ashkelon.

In front of the KATZA oil jetty in Eilat: A small spill could destroy the local coral reef and tourism for the foreseeable future. (courtesy)

Rather than focusing on ensuring that their present level of activity is managed responsibility, KATZA kept its sights on opportunities for growth. In September 2020, it signed an agreement with Med-Red, a private corporation linked to the United Arab Emirates. The agreement’s contents remain a guarded secret – indeed so secret that both our previous Minister of Environmental Protection, Likud MK Gila Gamliel, and our present one, Tamar Zandberg, were not even allowed to peruse it. Nonetheless, the company has let it be known that under the terms of the contract, some seventy additional tankers would be coming to Eilat each year – increasing the present level of oil transfers from Eilat to Ashkelon ten-fold.

When I visited KATZA’s corporate headquarters at its Ashkelon terminal and met with the company chair and general manager, they insisted canceling the deal would be disastrous and presented a long list of reasons why the agreement was good for Israel:

Additional oil will ensure Israel’s energy security for the foreseeable future; the agreement will bring significant revenue to the state of Israel; the agreement solidifies our new alliance with the Gulf States; canceling the agreement would lead to a loss of all KATZA clients who would no longer have faith in the company’s integrity; and after all – Aqaba, right across the sea has more than 200 oil tankers loaded every year with no environmental consequences. The seamless transfer of massive oil quantities in Jordan proves the additional Israeli activity would also be harmless. Indeed, KATZA’s own “worst-case” risk assessment projects that a spill would only occur once every thousand years.

There is a great deal of disinformation embedded in these positions and it is worth the time to deconstruct KATZA’s arguments and offer some facts to refute them:

The ‘fuel shortage’ myth

To begin with, at present, Israel has adequate fuel reserves and has not faced shortages for half a century. Israel enjoys copious reserves of natural gas. There is also no shortage of oil suppliers around the world and Israel has the foreign currency to buy. This will not be affected by whether or not KATZA’s pipeline services 70 new oil tankers. Moreover, the country is in the process of liberating itself from its addiction to fossil fuels. Not only is electricity increasingly to be produced by solar energy, but like most developed nations, Israel envisions its car fleet making the transition to electric vehicles. Israel simply does not need to expand its supply of crude oil. Attempts to create the perception of an oil crisis are disingenuous.

The deal won’t fill the state’s coffers

KATZA is indeed a government corporation that contributes from its profits to the national coffers. As the terms of the controversial agreement are still secret one can only make informed conjectures about its dimensions. But one can assume that oil tankers will not be paying more than they would to pass through the Suez Canal. Unofficial estimates that appeared in the press spoke of an average of 70 million dollars in annual revenues for KATZA from the new agreement. Even assuming the company would have very modest differential costs associated with transferring such enormous quantities of crude oil hundreds of kilometers, the profits from the deal will not dramatically affect the solvency of Israel’s government, whose annual budget exceeds 120 billion dollars.

No diplomatic price for cancelation

Another unfounded claim of the company is that the agreement is critical to maintaining Israel’s diplomatic relations with the United Arab Emirates. In a recent interview with the Times of Israel, the new Israeli envoy to the UAE specifically stated that canceling the KATZA-Red-Med deal would not affect the countries’ relationship. He characterized the matter as a “technical environmental issue,” recognizing that the pipeline “is very old, is not well kept enough for the oil to pass through and there’s danger of leaks”.

The Aqaba comparison has no legs

Finally, there’s the claim that hundreds of comparable oil tankers receive or deliver oil at the Aqaba port each year. When Israeli environmental organizations began to confer with their colleagues in Jordan, they were informed that while there are a few hundred ships that come annually to the Aqaba port, the number of oil tankers is relatively modest – only seven or eight. Most of the oil that reaches Jordan arrives via pipelines.

One spill in a thousand years?

Finally, KATZA’s “once in a thousand years” confidence, belies the intermittent snafus and massive crude oil spills that have devastated Israel’s environment over the past decade. Indeed, the country recently paid out 100 million shekels in damages in a class-action suit that followed the Ein Evrona nature reserve fiasco.

Having debunked KATZA’s doomsday scenarios associated with rescinding the agreement, it is well to consider why canceling it makes sense:

The cities of Eilat and Ashkelon rely heavily on tourism with coastlines being their most valuable asset. Even a very small oil spill could irreversibly damage the integrity of the beaches and Eilat’s coral reef – and local economies for the foreseeable future. While in recent years KATZA has not caused a significant spill in its ports, increasing the number of tankers 10-fold raises the risks proportionally. Given KATZA’s abominable environmental record, a spill that ruins a significant piece of Israel’s coastline appears to be a far more plausible scenario than the country’s pollyannish and misleading declarations.

Recently, Israeli-owned vessels and ships coming to Israel have been attacked by anti-Israel terrorist forces in the Red Sea. Ensuring the safety of seventy new massive targets poses a meaningful new security challenge for the Israeli navy. Successful sabotage of even one oil tanker could devastate our neighbors’ marine environment and create a costly international incident.

Finally, Israel’s government recently adopted ambitious carbon emission reduction goals in its efforts to join the international community’s solemn commitment to stabilizing greenhouse gases in the atmosphere. Transforming the country into a functional “petrol station” for Europe flies in the face of the new government’s rhetoric, which sees climate change as an existential challenge for the planet. Doubling down on deals to deliver 1,7500,000 tons of crude oil puts Israel on the wrong side of history.

KATZA is a government company. Throughout the company’s history, it has enjoyed operating without public scrutiny under a cloak of secrecy. Even senior ministers have no idea of how its decisions are made. But its environmental record has shown that it is not trustworthy. The company is in desperate need of thoughtful, transparent government oversight. Given Ashkelon’s proximity to Gaza, Israel surely needs to preserve its capacity to receive oil via the Red Sea and the KATZA pipeline provides that. But that does not mean that Israel needs to ramp up the quantity of fossil fuel that passes through the country. On the contrary – after the government assesses the costs and benefits of the new KATZA deal, it should quite simply decide “no.”