Israel Natural Gas

In an effort to further elevate already strong ties, India and Israel have begun exploring cooperation in a new sector—energy. Both countries have started to gain momentum in this field, particularly following the signing of a Memorandum of Understanding (MoU) in 2018 to strengthen engagements in oil and gas sector. As Israel is gradually emerging as a key natural gas exporter in the Middle East, and India is diversifying its energy sources in this region and elsewhere, energy cooperation is a promising field for the two countries. Moreover, increasing importance given by both counties to renewable sources of energy may facilitate further cooperation. For now, India is involved in the energy exploration and drilling activities in the Mediterranean, but there are indications that both countries would like to scale new heights in the bilateral relationship. For instance, initiatives including the aforementioned oil-gas MoU, collaboration agreements, and joint ventures are indicative of the efforts being taken by both countries to strengthen cooperation in the energy sector.  

This article highlights recent developments in Indo-Israeli energy cooperation, factors that are instrumental for this engagement, and challenges India could face at later stages. Although India’s energy imports from Israel have yet to begin, given Israel’s growing role as an exporter there is a potential future for a stronger Indo-Israeli energy trade. Israel could emerge as one of New Delhi’s energy sources, alongside India’s reliance on the traditional Gulf suppliers, including Saudi Arabia, Iraq, Kuwait, Qatar, and the United Arab Emirates (UAE). This expansion of cooperation with Israel in the energy sector fits into India’s foreign policy calculus of deepening strategic ties with the wider Middle East, not just the Arab Gulf states, which account for 53 and 41 percent of India’s total oil and gas imports, respectively. By building out energy ties with Israel, India has the opportunity to enhance its energy security and to work jointly with a partner towards generating renewable power required for economic growth.

The Potential for Indo-Israeli Energy Cooperation

The emerging energy cooperation has come about alongside considerable progress in Indo-Israeli ties. An intensification of political contacts following the victory of the Bharatiya Janata Party (BJP) in the 2014 Indian elections has added depth to the strategic partnership, enabling both countries to expand the scope of bilateral cooperation. With a bilateral trade volume of USD $4.14 billion (excluding defense) from April 2020 to February 2021, India is Israel’s seventh largest trading partner globally—and the third-largest in Asia. Israel is also India’s third largest arms importer. Energy cooperation occurs in the context of efforts to transform the two states’ ties from a patron-client dynamic (where Israel is the patron and India the client) in favor of promoting joint ventures in other areas of the bilateral relationship.

As Israel is gradually emerging as a key natural gas exporter in the Middle East, and India is diversifying its energy sources in this region and elsewhere, energy cooperation is a promising field for the two countries.

Following its discovery of the gas field, Leviathan, in December 2010, Israel has steadily emerged as a regional natural gas exporter, with Egypt and Jordan as its key clients since early 2020. For India, this discovery has provided an opportunity to initiate cooperation with Israel in a new sphere. Indian firms officially entered into the Israeli energy sector—a major breakthrough in bilateral ties—in 2018, when the Israeli energy ministry granted a license to several Indian companies for oil and gas exploration and drilling in Israel’s waters. With its decades-old expertise in drilling and exploration, India indicated its readiness to engage with Israel with the signing of a MoU between their energy ministries in January 2018, which set out goals to cooperate in the oil and gas sector, including joint-economic projects. While thus far, India-Israel partnerships have focused on fossil fuels there is a growing realization in both countries on the need to substitute these materials with renewable sources of energy.

Renewable Energy Prospects

Over the past decade India has publicly expressed an interest in Israeli investments in its renewable energy sector. Israel has also looked at India as a potential partner in clean energy. Israel is currently aiming to increase its solar-based energy generation to 30 percent of electricity generation by 2030, which aligns with similar goals of the Indian government to generate 450 Gigawatt—about 60 percent—using renewable sources. The respective governments have focused on increasing investments to promote renewable energy domestically and in international partnerships. Both countries also have the technological skills and investments to jointly-develop renewable energy domain. For instance, the Indian Oil Corporation entered an agreement with an Israeli start-up, Phinergy, to jointly manufacture Aluminum-Air systems in India. Such initiatives support the domestic goals of the “Make in India” initiative, while laying the groundwork for diversifying India’s energy sources. However, as renewable energy is still in the nascent stages, with the two countries more focused on fossil fuels, there is still much more room for further growth.

Forging partnerships in the renewable energy sector has also gained increasing traction in India’s foreign policy. India’s current foreign secretary emphasized “augmenting India’s renewable power capacity,” while, last year, prime minister Narendra Modi called for more foreign investments in India’s green energy sector.  Israel has similar goals, considering its rising demand for electricity due to an increasing population, lack of natural resources, particularly hydro-facilities, and to reduce emissions. India’s initiatives are also well within its efforts to diversify energy sources due to increasing volatility in the international crude oil prices, which it intermittently faces from some of its Gulf suppliers, too. Diversification of energy sources, therefore, could be considered as an ideal step to augment its energy security in the long-run. In view of this, it would be an asset to have an energy-rich partner and Israel could become one of the new sources for India.

Tellingly, realignments in the Middle East could also open avenues for multilateral partnerships. Israel’s normalization of relations with the UAE and Bahrain in 2020 should push India and these states to explore opportunities for joint collaborations, including in the energy sector. This could be done by bringing together investments from these Gulf states, Israeli-origin technology, and India’s manufacturing skills. In recent years, realpolitik and strategic interests have been instrumental in bringing India’s ties closer to both Israel and the Gulf countries. For instance, in May 2021, as the first project of its kind, the International Federation of Indo-Israel Chambers of Commerce initiated a trilateral partnership between Israel, India and the UAE to develop an “innovative robotic solar cleaning technology”. Such an initiative could lead to further partnerships, and a similar arrangement could also be explored with Bahrain—where India is also ramping up engagements in renewable energy sector.

Tellingly, realignments in the Middle East could also open avenues for multilateral partnerships. Israel’s normalization of relations with the UAE and Bahrain in 2020 should push India and these states to explore opportunities for joint collaborations, including in the energy sector.

In the long run, there could be competition from China in oil and gas exploration in Israeli gas fields in the Mediterranean, an area where there is Indian involvement. This is considering China’s robust presence in Israel’s infrastructural development projects. Israel has also worked to promote energy ties with China. Lately, China and Israel have agreed to enhance their cooperation in energy technology as well as renewable energy technologies. Researchers from both countries have already begun joint projects, resulting reportedly in the development of “stable efficient solar cells.” A trilateral energy collaboration involving these three countries looks difficult given the existing tensions between India and China.

Conclusion

The emerging developments suggest that energy ties could act as another catalyst to strengthen Indo-Israeli cooperation. Adding an energy dimension to the two country’s bilateral ties will make the strategic partnership more comprehensive. To further cooperation, India could even explore of importing gas from the previously mentioned Israeli reserves in the Mediterranean in the future. Such a deal could be well within the ambit of both India’s diversification of its energy sources and Israel’s quest for its energy markets. Israel can also grant more licenses to Indian companies for further energy exploration and drilling activities, and it should increase its investments in India’s energy sector, which currently remains negligible.

Nonetheless, energy is relatively a new domain of the Indo-Israeli relationship and these ties will likely take some time to develop. The existing direction of energy cooperation, however, signals both countries’ investment in relations. To expand its international profile, Israel, a new player in the energy market, should strive to establish further energy partnership with India’s growing economy and lucrative consumer market. For India, meanwhile, energy cooperation with an upcoming regional exporter like Israel would allow better access to hydrocarbons (which is going to remain an important energy medium for a few more decades) and, in the future, renewable energy sources. The convergences of interests, therefore, have potential to pave the way for the furtherance of cooperation in this new domain.

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Image 1: MARC ISRAEL SELLEM/AFP via Getty Images

Image 2: ODED BALILTY/AFP via Getty Images

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