Lebanon – Local politics:
The excitement surrounding cabinet formation has cooled down in the past few days. Prime Minister-designate Tammam Salam is now confronted to the daunting task of distributing ministerial portfolios, having committed, from the beginning, to the principle of rotation among parties and sects. As Middle East Strategic Perspectives has said in its January 13 report, agreeing on an 8-8-8 cabinet lineup is only a step towards forming a new government, distributing key ministerial portfolios – including the jewel all factions are after, the Ministry of Energy and Water – might prove to be equally problematic for Salam. As we have said in our April 15, 2013 report, just days after Salam was tasked with forming the new cabinet, the rotation of ministerial portfolios concerns, above all, the Ministry of Energy. Names are starting to surface. Beside the Free Patriotic Movement’s Gebran Bassil, the current Minister who wishes to retain his post, the Future Movement has started floating the name of a Sunni technocrat, Dani Kabbani. In a press conference on January 26, Bassil accused Salam of making unilateral decisions and sidelining the Christians, by sidelining their biggest block in parliament. Retaining the ministry, he said, is of strategic importance, and if the cabinet marginalizes the biggest Christian party, it would be deviating from the National Covenant and, would be considered unconstitutional.
Lebanon, as always, is exposed to foreign influence, and is one of the playgrounds where Saudi Arabia and Iran confront each other. The first signs of a possible Saudi-Iranian rapprochement in Lebanon translated in a preliminary agreement to form a national unity cabinet after 10 months of deadlock based on the 8-8-8 formula. The withdrawal of Iran’s invitation to Syria’s talks in Geneva constituted a blow for Tehran and threatens, for the time being, the fragile rapprochement with Riyadh on a number of regional dossiers, including Lebanon. The Iranian, and their allies, will likely adopt a more radical approach on the ground. In Lebanon, this is reflecting in March 8’s intransigence regarding the ministerial statement and their support for the Free Patriotic Movement’s (FPM) insistence to hold on to the Ministry of Energy and be excluded from the rotation of ministerial portfolios. The FPM (rather rightly, it must be admitted) believes that it has completely transformed the Ministry of Energy and Water, offering the country the hope to one day exploit its offshores resources. Until 2009, ministerial candidates struggled to avoid the over-complicated ministry and the burdensome work associated with it. A few years later, all eyes are on the Ministry, which now crystallizes political divisions, and threatens to delay cabinet formation even longer.
On paper, Salam’s cabinet is short-lived. President Michel Slaiman’s term expires on May 2014, and a new cabinet must be formed after the election of a new President. That cabinet too is expected to have a short lifespan. Parliamentary elections are supposed to be held in November 2014, and, again, a new government will be formed afterwards. In reality, and given the reigning deadlock, the holding of a presidential election by May 2014 is far from certain. Salam’s cabinet – if he ever forms one – might live longer than expected. Once formed, and even if it does not gain the Parliament’s confidence, it will replace PM Najib Mikati’s current cabinet as the country’s caretaker government. Could a bidding round be held in such circumstances? If, in April 10, 2014 (the new deadline for holding the tender), the country is run by a caretaker government that has failed to obtain the Parliament’s confidence, then the first licensing round will almost certainly be delayed again. But we are far from this scenario. The local political situation requires constant monitoring in the coming weeks and months, as it will directly affect the bidding round and investments in the sector. A reading grid allowing a deeper understanding of the local political environment and the risks involved is even more necessary in such circumstances.
Lebanon – Security of offshore resources:
French Chief of Defense Staff Adm. Edouard Guillaud arrived to Lebanon on January 20, less than a month after President Michel Slaiman announced on December 29 that Saudi Arabia pledged $3 billion in military aid for the Lebanese Armed Forces. Guillaud’s visit comes in this context since the Saudi funds will be used to buy French arms exclusively. It is worth to note that Guillaud, whose term as Chief of Defense Staff will expire in February 2014, is expected to head ODAS, the French agency in charge of promoting defense sales in Saudi Arabia, where he will be following-up on the $3 billion military aid allocated to the Lebanese Army.
During his visit, which coincided with the visit of Emmanuel Bonne, President François Hollande’s adviser for the MENA region, Guillaud discussed the details of the military aid with Lebanese Army Commander Gen. Jean Kahwagi and Brigadier-General Georges Zakhem in order to establish an inventory of weapons and equipment needed by the Lebanese army. Among these is a list of materials to reinforce the Navy’s ability to monitor and control its territorial waters and to protect its maritime borders, including patrol vessels and radars. It falls within previously approved plans to improve the capacities of the Lebanese Navy to allow it to carry out its mission at sea, with a view to protect offshore installations. The subject has gained increased interest in Lebanon, as the country prepares to organize a bidding round to award exploration and production rights for companies in its exclusive economic zone (EEZ). This interest is not limited to Lebanese authorities; Hezbollah’s Secretary General Sayyed Hassan Nasrallah has indicated on more than one occasion that his group is ready to protect Lebanon’s resources in case the State is unable to fulfill its mission. The Israeli media has reported recently that Hezbollah may have acquired advanced equipment, including Yakhont missiles. The information cannot be confirmed. What seems certain at this point is the fact that Hezbollah is determined to address the issue of protecting the country’s EEZ if the authorities – Army included – are not capable of protecting it.
Lebanon – Onshore petroleum resources law:
Lebanon’s Petroleum Administration announced on January 15 that work on the onshore petroleum resources draft law has been completed, a week after the regulatory body completed its work on the petroleum tax law. The existing law dates back to 1933 and does not provide an adequate framework to conduct modern petroleum activities, while law 132/2010 is limited to offshore petroleum activities. The text was submitted to caretaker Energy Minister Gebran Bassil and still needs to be discussed and approved by the government and the parliament.
Lebanon – Corporate Social Responsibility:
The Lebanese Petroleum Administration and the United Nations Development Programme signed a Memorandum of Understanding on January 15 at the Ministry of Energy and Water to promote corporate social responsibility for oil and gas companies operating or planning to operate in Lebanon. UNDP provides policy support for the Lebanese government and is undertaking a number of projects with the Ministry of Energy. In 2012, they launched “SODEL”, Sustainable Oil & Gas Development in Lebanon, a 3-year project which aims to support the Petroleum Administration, particularly the Quality, Health, Safety and Environment Unit.
Cyprus – Diplomatic activity:
President Nicos Anastasiades arrived to Qatar on January 26 on an official visit, accompanied by Foreign Minister Ioannis Kasoulides and Energy Minister Giorgos Lakkotrypis. This is the latest in a series of visits conducted by Cypriot officials in the past weeks centered on energy cooperation. The President also visited the UK on January 14-17, Egypt on December 11-12, 2013 and Kuwait on October 8, 2013. Energy Minister Giorgos Lakkotrypis presented Cyprus’ potential and investment opportunities to Dutch businessmen and high-level entrepreneurs on January 21, a day after meeting Henk Kamp, the Dutch Minister of Economic Affairs (also responsible for energy policy). The noticeable diplomatic activity comes after the Aphrodite appraisal drilling results turned out to be below expectations, and is designed to keep the momentum behind Nicosia’s initial plans of promoting Cyprus as a regional energy hub despite the relatively disappointing results.
Eastern Mediterranean – Russian presence:
Russia continues to show interest in the Eastern Mediterranean. After gaining its first stake in the region’s offshore resources through the State-controlled Soyuzneftegaz, which was awarded an exploration and production license in Syria’s 2,190 km2 block 2 at an initial cost of $90 million, Russia is reportedly attempting to secure a $1 billion energy deal with the Palestinians, which would include a massive gas project off the coast of Gaza. It is unclear if any of those two projects would materialize given the local context in both Syria (well into its third year of conflict), and Palestine (the Palestinian Authority has little authority in Gaza). After the setbacks registered so far in Cyprus and Israel, Russia is still trying to expand its foothold in the region, and the frequent visits of its navy is but a small example of its desire to strengthen its influence in the Eastern Mediterranean. However, the type of deals Moscow is really eyeing is a stake in the oil and gas sector in either Cyprus, Israel or… Lebanon.
[box border=”full”]As of February 10, 2014, Middle East Strategic Perspectives will be publishing excerpts of its Oil & Gas report on its website. Interested readers may request to be emailed the full version of the report, free of charge.[/box]
Previous issues:
Lebanon: The Oil & Gas Week, January 13, 2014
Lebanon: The Oil & Gas Week, December 09, 2013
Lebanon: The Oil & Gas Week, November 25, 2013
Lebanon: The Oil & Gas Week, November 11, 2013
Lebanon: The Oil & Gas Week, October 28, 2013