Interview with Senior Advisor for Global Energy Security Amos Hochstein

February 9, 2021
Media Notice
For Immediate Release

Unofficial Transcript

LBCI:  Mr. Hochstein, thank you for your time, and thank you for being with us today.

Mr. Hochstein:  Thank you, Raneem.  It’s really a pleasure to be here with you.

LBCI:  Thank you.  In order to alleviate the power crisis, Egypt will supply Lebanon with gas.  I’d like to tackle three issues here: first, from a financial point of view, there is no clarity until today on the loan from the World Bank. Any comment on that?

Mr. Hochstein:  Well, let me take a step back. I think that Lebanon today faces a[n] acute energy crisis. We have blackouts, very few hours a day of consistent energy and electricity across the country, whether it is for businesses, for food, for, for people. So the idea is to have an arrangement where Egypt could supply gas to increase supply of electricity, even by just a few hours. But Lebanon also has an acute economic crisis, and therefore paying for it becomes complicated. So the arrangement that we have all been working on together is to see if the World Bank can be financing it. To do that, a number of steps have to be taken. There has to be work between Lebanon and Egypt to make sure that the contractual arrangement is there.  It has to be done with conditions that satisfy the World Bank. I think we’re making good progress on getting towards a World Bank arrangement and a facility to finance this purchase of gas.  And I hope that in a matter of weeks, we can have that done.

LBCI:  Ok.  Second, from a technical point of view, there is maintenance that needs to be done on the pipeline and there is a cost associated to that maintenance. The maintenance isn’t complete. Do you think that would hinder the deal?

Mr. Hochstein:  No, I don’t think it’ll hinder the deal. I think there’s work being done on the pipeline as we speak in order – and they, they need to conclude that work. And that started already a couple of weeks ago, and I think it’ll take a few, several more weeks. We have a lot of work to do on the mechanics of the deal of financing from the World Bank, the contracts, the approval from the United States, and so on. Those things all have to get done in parallel with the construction work on the pipeline. So I think we can get it all done around the same time, and that gives us the time to complete the work and get the gas flowing.

LBCI:  Third, from a political point of view, many in the U.S. spoke against a deal with the Syrian regime. Where do you stand on that, especially taking into consideration that Lebanon got a waiver on the sanctions imposed on that same regime?

Mr. Hochstein:  So I think that – I think in reality, most people who look at this issue understand why it’s important to do and support it and are probably on the same page. I think what leads to the disagreement is more some misunderstanding of how this is structured. There’s a concern that in order to do this deal to allow for Egyptian gas to go through Jordan and Syria into Lebanon, that this is a transaction with the Syrian regime and that this would lead to somehow normalization of President Assad and the regime itself.  That is not accurate. And even in your question, we have not given any waivers to anyone in order to allow this transaction to happen. There is no transaction with Syria. The transaction is between Egypt and Lebanon. The gas, however, unfortunately for all of us, the only three borders that Lebanon has are Israel, Syria, and an ocean. So ,in order to get the gas, you have to come through somewhere.  Egypt has to go through somewhere. Israel is probably not the right place for it to come, and therefore Syria is the only option. There’s no transaction with the Syrian regime. We do not believe in normalizing Assad. I do not believe in that, and the sanctions that are in place on Syria remain in place, and this is in no way shape or form a waiving of those sanctions or undermining them.  This will allow Syria to keep some of the gas – a small percentage of the gas in Syria, for electricity for Syrian people, in exchange – as a payment for the tariff, for the gas to go through Syria.

Mr. Hochstein:  But there will be no cash payments to Syria. So, therefore, we are – we, the United States have supported the region, trying to come together and support each other as Egypt and Jordan are doing.  But we have to make sure that it’s done in a way that doesn’t trigger and doesn’t violate the Caesar Act sanctions. I believe that that is possible, and I believe that if everybody understood how this mechanism works, we would be on the same page. We cannot allow Lebanon’s electricity system to degrade any further than it already is. How can we tell Lebanese people to stay in Lebanon, to work towards Lebanon, that there’s hope for a renewed economy and a [re-] building, after so much despair.  If you can’t even have reliable electricity, we will just see a continued degradation of the economy and the energy system, which will lead to loss of hope.  That leads to a failed state. We cannot allow that to happen. And therefore, even though we have to make some accommodation, and to take the risk of allowing this to go through Syria, I believe that for the benefit of Lebanon and for the stability of the region and the country, I think that it’s worth the risk-taking.

LBCI:  Interesting. Lebanon is hoping to strike a deal with Jordan, yet we still haven’t solved the financing issues.  Any update on that front?

Mr. Hochstein:  Well, I think that there’s progress made there. I have to –  we’re still studying the agreement with Jordan on the electricity synchronization and interconnection. But I think we’re focusing this one at a time. Let’s finish the the natural gas deal from from Egypt, and then once we can see that that is up and running and working, we can look at how else we can expand electricity production in, and fuel for, electricity in Lebanon. So the idea is, let’s see something that works, that the reforms that are necessary are passed, are in place, and are serious, and then we can work on expanding it to the Jordan electricity deal, and maybe expanding more gas. There are other options that we can do, but I truly believe that in this, we’re, we’re starting from such a low grade that it’s important to have something that works first.

LBCI:  Ok. You are promoting renewable energy not just for environmental reasons, but also to eliminate the use of energy as a political weapon. Yet, if we look at Lebanon’s current potential energy deals, we are striking deals with two nations: one of them is considered by many Lebanese as an enemy. In your opinion, how would that affect Lebanon’s energy security and its sovereignty?

Mr. Hochstein:  Well, I look, I think we’re at a place in the world – I’ve always believed that energy should not be used as a weapon, should not be used as a tool of coercion, and countries deserve to have affordable and reliable sources of energy. We are in an energy transition. The world is moving away from fossil fuels, away from coal first, then oil, then gas. That’s going to take time. So by and large, I don’t advocate for natural gas in almost any other place in the world, except when it’s for immediate use now, not for legacy projects that will be forever. If we’re going to be making investments into something into the future, it should be into renewables, renewable technology, hydrogen, et cetera. But the element of energy security is clearly important. And look at Lebanon – without access to reliable, affordable energy, look what’s happening to the country, look what’s happening to the economy. So we need to identify resources. And you mention doing a deal with your enemy to the South, with Israel, to doing gas deals with Egypt. What I don’t want to see is Lebanon having one source of energy – only from Egypt – right now, it’s only from Iraq, through a swap mechanism, only from Jordan, only from Israel. The idea is, can we develop on a long-term basis a diversified portfolio of energy resources. Lebanon is blessed with a number of things. You could have more renewables, you could have more solar here. You have all the conditions for wind and solar. You may have resources in your ocean and natural gas. So, it’s – you’re doing a deal with your adversary, with Israel, with a country that you don’t have.

LBCI:  Actually, I meant Syria because so many Lebanese consider the Syrian regime as as an enemy. So what do you think on that front?

Mr. Hochstein:  I think you’re trying to get resources into the country in any way that you can, right now.  You have – Lebanon needs to have more hours of electricity per day. So but again, having a portfolio is what the ultimate goal is. I don’t think the United States, the World Bank, or anyone in the region wants to see Lebanon dependent on Syria for energy. It is not going to be. This is not going to be the ultimate source of energy for Lebanon, but it’s a start, and where the – Lebanon is today, you need to have the resources that you can get and then build from there.

LBCI:  Before we move on to the border demarcation talks, there’s a lot of movement on the global energy scene. China and Russia agreed on a 30-year gas deal via a new pipeline. The U.S. is reconsidering East Med pipeline due to cost concerns and the U.S. and Qatar, they are looking at rerouting gas to Europe. Is it safe to say that the Biden administration sees energy as one of its top priorities?

Mr. Hochstein:  Well, I think it’s about how the – where the world’s going.  Energy, we have to see energy as a priority.  The Biden administration sees energy transition and, as a response to climate change, as it’s – one of its top priorities. Without a doubt, this is the most aggressive climate action president the United States has ever had. So we are very focused on accelerating the energy transition, more investment in renewables, more investment in things like hydrogen and other technologies that enable renewable and cleaner technologies. At the same time, we have to manage the transition. So, by focusing on where we want to be in 2030, where we want to be in 2050, we can’t ignore where we are in 2022. What we don’t want to see is on the pathway to a cleaner and more sustainable future, we don’t have energy shocks that lead to price shocks that lead to economic instability globally, that lead to recession, and ultimately will lead to a lower level of confidence in the energy transition itself.  So we have to manage currently, and that’s why, with Russia threatening its neighbors with invasion, and with Russia undersupplying the European market because it wants it to have – it wants to have leverage over Europe, through natural gas, and sending prices soaring across Europe, and and wreaking havoc for people as they struggle to heat their homes in the middle of the winter – we need to make sure that there’s enough natural gas and enough energy products for today’s world, while not losing focus on the energy transition.  If anything, the crises you mentioned, are the exact reason that we need to accelerate the energy transition. 

LBCI: Mm hmm.

Mr. Hochstein: And that’s why even in Lebanon, when we talk about natural gas from from Egypt, we talk about electricity from Jordan – my hope is that it’s not just reliant on this, but rather also looking at the natural, the other natural resources that Lebanon benefits from. And that’s wind and solar. But we have to start somewhere. We have to have a basis. You talked about financing of these deals to doing anything. At the end of the day, you have to be able to pay for it. So the international community is coming together here to support Lebanon. And – but Lebanon needs to support itself, too. And that’s why it’s coming – it’s about coming together with a strategy to address the concerns of today in Lebanon and then grow them into the future.

LBCI:  Moving on to the border demarcation file in November, you told both Lebanese and Israeli officials that if they could not agree to a compromise, you would end your involvement in the demarcation talks, and you also said that you are not planning to resume the joint talks held at the UN base in Naqoura. Instead, you would meet with both sides independently and then offer a bridging proposal.  Is that proposal ready?

Mr. Hochstein: Yes, those are all the things that I’ve said to both sides. I don’t – I think after 10 years of these discussions, it’s time for moving on to a deal. We – I came here in November.  I was in Israel, and now we’re at a stage where I understand the parties’ positions, and I think that we’re at the moment of narrowing those gaps towards a deal.

LBCI:  Ok.  Lebanon recently sent a letter to the U.N. confirming the disputed areas increase in size of 1,430 square kilometers, in addition to the previous 860 square kilometers. Will this letter affect the negotiations?

Mr. Hochstein:  Look, over ten years we’ve been negotiating, and during that period of time, especially over the last few years, there have – both sides have wanted to increase their leverage, have wanted to take positions that give them better positioning in the negotiations. That includes letters to the U.N. and other things.  But, at some point, you come to the table, and you discuss what the actual dispute is about.  And everybody in Lebanon and in Israel knows the dispute, at the end of the day, for the last more than a decade, is from Line 1 to Line 23, and how do we reach agreement that addresses both the boundary and the other strategic and national security needs of both countries.  And I think that’s where we are now.

LBCI:  Do we have a unified position in Lebanon?  Have you heard a unified position or are we still divided into two teams, one pushing for Line 29 and another pushing for another line?

Mr. Hochstein:  I think that we are – I’m here in Lebanon in order to hear from the Lebanese government. I think by and large, everybody understands that we – it’s the, it’s the right time to move away from the distractions of external pressures that both sides face, and stay focused on what this dispute is about. As I said, from Line 1 to Line 23, and how do we reach an agreement that probably neither side gets what they want? And that’s what – this is about negotiations, and it’s about reaching a settlement where neither side gets one-hundred percent of what they want. So, I think that I’m pretty, I’m pretty optimistic, and I hope that – and trust and am confident that, there will be a unified position in Lebanon, that there’ll be a unified position in Israel, and that we’ll be able to move forward.

LBCI:  Last time you were here, you adopted the oil field in exchange for an oil field negotiation principle. Are we still negotiating on that principle and also, you –  I mean, we heard some talk saying that in case the field versus field does not work, or fails to work, there would be a joint fund, so to speak, created by one drilling company who would get the resources and split them between the two countries.  Can you comment on that?

Mr. Hochstein:  So, one of the most remarkable part[s] of this process over the last several years has been the imagination of the media coverage of this issue, and I have to say both areas that you just mentioned were news to me.  I was not aware of those proposals or offers, so neither one is, is actually accurate.  Those, those were never bases for negotiations. So, I’m – I was not advocating for them before, and I’m still not.

LBCI:  Before ending this interview, let us watch this short video together.

[Mr. Hochstein in Video Clip From 2018:] It’s a different time in the market. A lot of gas, you got to compete now. So Lebanon missed the window of opportunity, that was the prime window. That puts them late. But not too late. Natural gas demand will grow in the 2020s.  So, they have another window. The other advantage Lebanon can have, and this is the silver lining in a negative story – you don’t have to repeat the mistakes that your neighbor has made. You can look back and have a critical thought that takes away all your political considerations.  Don’t worry about the politics. Worry about how did it work? What worked well for them?  For Cyprus, for Israel, for Egypt – and what didn’t? How can I take advantage of learning from those mistakes and putting a process in place, that if I don’t repeat those mistakes, maybe I can make up some time? But that’s going to be up to Lebanon to do.

LBCI: This was in 2018. Do you still think that it is not too late?

Mr. Hochstein: It’s later, but it’s definitely not too late. But there’s no doubt, that there is – there are windows. We talked before, you asked me about renewables and the energy transition. Peak gas demand in the world is coming. We still have probably in the 20-year range before that becomes a real effect in the market. So, not reaching an agreement means missing out. There’s no later anymore. This is the later.  This is the last minute.  The negotiations now for Lebanon that Lebanon has to consider – I don’t worry about the politics or the politicians or the leadership.  People in Lebanon today, what they – what I would – my advice to people in Lebanon: focus on what – not what you’re missing, not what you may lose if you compromise. Think about what you gain. You’re not at a hundred percent now and losing. You’re at zero now. The gas market in the Eastern Mediterranean all around you, went from nothing to everything. The Zur discovery in Egypt, the discovery is in Israel, the infrastructure in Cyprus, in the –  new infrastructure now in Greece. The infrastructure in Turkey. All around you – in 10 years, [it] went from literally zero, to transformational.  Except in Lebanon.  So you’re not losing by compromising.  You’re gaining.  You’re gaining new investment of foreign exchange into the country, of bringing some of the largest companies in the world to invest in Lebanon. To have a hope for a future of economic activity. To – instead of having only four hours of electricity a day, having twenty-four hours of electricity – instead of paying exorbitant amount of money for those few hours of electricity – having some of the lowest rates in the world. Creating some jobs. Refueling. A middle class.  And a small business economy. That’s the game. Sometimes, you make a compromise to get a game. And there’s really no loss here. That is what I think is on the table right now. That is what is at stake. And, that is what the Lebanese people have to either gain or lose.  Status quo is loss.  So, I don’t think it’s too late, but I also don’t think we have the ten more years of negotiations to be done.  This is it.  We have to make a decision.

LBCI:  Thank you so much for your time. Thank you. Thank you.