Amid global energy crunch, Biden on track to boost Iranian oil, impede Israeli gas exports to Europe

Decision to engage Iran on supplying energy while obstructing Eastern Mediterranean allies' pipeline deal feeds concerns among experts that administration rewards foes, punishes friends in the Middle East

Updated: March 21, 2022 - 9:42am

Russia's invasion of Ukraine has thrown the global energy market into a state of turmoil, forcing the U.S. and Europe to look for substitutes for Russian oil and gas. In that process, the Biden administration has turned to Iran as a potential supplier — just two months after effectively killing an Israeli pipeline project that would have supplied natural gas to Europe.

The administration's decision to engage Iran, a decades-long adversary of the U.S., about supplying energy while opposing a close ally's energy project is feeding concerns among experts that he rewards foes and punishes friends in the Middle East.

After Biden announced a ban on American imports of Russian energy earlier this month, White House Press Secretary Jen Psaki said the "discussion of oil" was part of negotiations to revive the 2015 nuclear deal with Iran. Senior administrations officials, including Transportation Secretary Pete Buttigieg, have also declined to rule out purchasing Iranian oil, saying "all options are on the table."

Meanwhile, U.S. negotiators have been working with foreign diplomats in Vienna to revive the nuclear deal, one of the Biden administration's chief policy goals.

The deal, which may be imminent, will allow Iran to immediately gain access to an estimated $86.1 billion to $130.5 billion in foreign assets that currently are not fully accessible and readily available, according to Saeed Ghasseminejad of the Foundation for Defense of Democracies. In exchange, Iran will agree to temporary curbs on its nuclear program.

All parties involved were closing in on an agreement until the U.S. and European Union imposed sweeping sanctions on Russia for its invasion of Ukraine. Moscow then demanded that future trade with Iran not be affected by Western sanctions, leading talks to be suspended last week. 

On Tuesday, however, Russian Foreign Minister Sergei Lavrov said he had "received written guarantees" from the U.S. that Russia's demands would be met. According to reports, Russia said it would accept narrower guarantees, paving the way for a nuclear deal to be struck soon — perhaps imminently.

If an agreement is finalized, sanctions on Iran's oil exports will be lifted. Iran will then be able to ship an additional 500,000 barrels of oil per day to international markets from April to May, according to expert predictions, and could reach an additional 1.3 million barrels per day by the end of the year.

However, it may take Iran longer to ramp up production than some expect.

"Iran has had capped wells," said Gabriel Noronha, who served in the Trump administration as a special adviser for Iran at the State Department. "It does not have the ability to just ramp up oil production in a split second. If it did, it would probably move its oil exports from one million barrels of oil per day now to just around two million barrels. They don't have the tanker capacity to do this. They don't have the ability to just suddenly ramp up. One million barrels of oil on the global market is nice, but it is entirely insufficient on its own."

Either way, Iran stands to receive a windfall of cash from exporting energy as U.S. sanctions are removed.

Meanwhile, as Western countries try to wean themselves off Russian energy, there are growing calls to revive the EastMed pipeline, which would have connected Israel's extensive offshore natural gas reserves in the eastern Mediterranean with Europe via Greece and Cyprus. Most of the 1,300-mile pipeline would be undersea.

The Trump administration supported the pipeline, which the European Union deemed a "special project," as a boon to Europe's energy independence.

The Biden administration thought differently, informing Greece and Israel, both U.S. allies, of its opposition to the project in January. The State Department conveyed the new U.S. position to both countries, expressing concerns about the pipeline's economic viability and effect on the environment being antithetical to the administration's climate goals.

While the U.S. was not providing any funding, estimated at $7 billion, its support was considered crucial to move forward. The administration's opposition pulled the plug on the project, which was expected to be completed by 2025.

Before being appointed as the State Department's senior adviser for energy security last year, Amos Hochstein said he would be "extremely uncomfortable" with the U.S. supporting the project.

"Why would we build a fossil fuel pipeline between the EastMed and Europe when our entire policy is to support new technology ... and new investments in going green and in going clean?" he asked. "By the time this pipeline is built we will have spent billions of taxpayer money on something that is obsolete — not only obsolete but against our collective interest between the U.S. and Europe."

Now, however, with the Russia-Ukraine war spurring the EU to announce plans to wean itself off Russian fossil fuels by 2030, experts in the U.S. and Israel are advocating the U.S. change course and throw its support behind the EastMed pipeline.

"I think the war has made it clear to everybody the risks entailed for the West in continuing to depend on Russian gas," former Israeli Ambassador to the United Nations Dore Gold told the Jewish News Syndicate. "You have to take into account what are the long-term interests of your allies."

As of late last year, roughly 40% of the EU's natural gas imports came from Russia.

Gold wrote last week that the eastern Mediterranean as a whole has an estimated 10.8 trillion cubic meters of gas, roughly equivalent to 76 years of gas consumption by the EU.

Israel's share alone accounts for 1 trillion known cubic meters, with more than 2 trillion awaiting discovery.

A 2015 study by Israel's Ministry of Energy concluded there are 26 billion barrels of oil and 7,734 billion cubic meters of gas present in just the Israeli-controlled area of the Levantine Basin, the easternmost part of the Mediterranean Sea, and potentially an additional 6.6 billion barrels of oil and 2,135 billion cubic meters of gas yet to be found.

A European Commission study of the pipeline found there would be sufficient amounts of gas available to ensure the project would contribute "to the enhancement of energy security diversifying the supply sources for Europe and to the reduction of the EU-wide consumers' gas bill."

So far, the Biden administration isn't changing its position and hasn't made any new announcements on the pipeline, although it has echoed the need to prioritize energy security following Russia's invasion of Ukraine.

The optics of the U.S. engaging Iran on energy issues but not pivoting on the EastMed pipeline are likely to add to a narrative among critics that the administration is "strengthening America's enemies and harming its friends," to quote Michael Doran, a senior fellow at the Hudson Institute.

President Biden promised the U.S. wouldn't lift sanctions on Iran until the regime halted uranium enrichment. Since then, he has granted sanctions relief to Iran on multiple occasions, including entities the U.S. has sanctioned for financing Iranian-backed terrorism. The regime continued to enrich uranium.

At the same time, the administration reportedly discouraged employees from referring to the Abraham Accords, a series of historic peace agreements between Israel and Arab states brokered by the Trump administration, by name.

Biden also ended America's support for the Saudi-led war in Yemen and imposed a freeze on U.S. arms sales to Saudi Arabia — after he promised during his presidential campaign to make the Saudis "the pariah that they are."

Saudi Arabia and the United Arab Emirates (UAE), both U.S. allies, recently didn't take phone calls from Biden, and the Saudis are now considering accepting the Chinese yuan instead of U.S. dollars for Chinese oil sales.

Israel, the UAE, and Saudi Arabia have all expressed concerns about Biden pushing to reenter the Iran nuclear deal.