Hamas-Israel War and Reminiscences from the Past

"Peace costs nothing. In addition, at all costs, it is infinitely more advantageous than any victory."

Thomas Paine

Organised in a desert in the south of Israel, the Supernova Festival was an event that music lovers had been eagerly awaiting for weeks. The festival was organised to coincide with the Jewish holiday of Sukkot. The organisers of the festival posted on social media, ‘The time has finally come for the whole family to come together. It's going to be a lot of fun. Only hours later, the same social media page would be filled with desperate pleas from families searching for their loved ones.’

It was 7 October 2023. Following the ‘Aqsa Flood’ attack launched by Hamas that day, Israel rained bombs on Gaza, killing thousands of Palestinians. Israel also displaced 1.1 million Palestinians. It bombed the al-Ahli Baptist Hospital in Gaza (Israel denies this and blames Islamic Jihad), killing more than 500 sick, wounded and children.

A new human tragedy continues, again with thousands of innocent civilians killed, thousands wounded and the Gaza Strip razed to the ground. The fact that the attack took place on the day immediately after 6 October has led to intense references both in Turkey and in the international media to the Israeli - Arab War, known as ‘Yom Kippur’, which took place exactly 50 years ago. The Yom Kippur War, which started on 6 October 1973 and lasted until 25 October of the same year, is also known as the 1973 Arab-Israeli (or October) War. It is also known as the 4th Arab-Israeli war, in reference to the three previous Arab-Israeli wars. The war before Yom Kippur (1967) resulted in Israel capturing the Sinai Peninsula, the Golan Heights, East Jerusalem, the Gaza Strip and the West Bank, nearly doubling its pre-war territorial holdings.

The fact that the Hamas offensive coincided with the date 50 years ago that ended in frustration and major territorial losses for the Arabs has rightly led to symbolic analogies and interpretations. The question ‘Is Hamas taking revenge for the 6-Day War?’ has begun to be asked and interpreted. The purpose of this article is not to seek an answer to this question. We will try to find answers to a few other questions of the day and those related to energy: ‘How far will these conflicts spread? If they spread, how will oil and natural gas prices be affected? What will be the impact of this on our country?’ Let us try to evaluate it in general terms.

Arab (or OPEC) Oil Embargo

Although many publications refer to it as the ‘Arab’ or ‘OPEC’ embargo, neither description is ‘technically’ correct. Apart from the Arab countries, Iran also supported the embargo, while OPEC members Venezuela, Iraq and Libya did not participate in the embargo. Saudi Arabia, which had repeatedly contacted the US administration and asked the US not to support Israel, was enraged when, on 18 October 1973, Israeli Prime Minister Golda Meir's request for $850 million in arms aid from the US was met by President Nixon with $2.2 billion in aid. In November 1973, the ‘full’ embargo began and lasted until March 1974. The embargo included the suspension of oil exports to the Arab countries and Iran, as well as to the United States, the United Kingdom, Canada, Japan, the Netherlands, Portugal, Rhodesia and South Africa, which had supported Israel in the war. Crude oil, which was around $3 a barrel before the embargo, skyrocketed to $12 a barrel in international markets. The rate of inflation in importing countries skyrocketed; long petrol queues formed. In the USA, petrol prices increased by about 50%.

In the aftermath of these problems, the International Energy Agency (IEA) was established in 1974, comprising almost all oil importing countries. In addition to the USA and Turkey, the founding countries were Austria, Belgium, Canada, Denmark, Germany, Ireland, Italy, Japan, Luxembourg, the Netherlands, Norway, Spain, Sweden, Switzerland and the UK. With subsequent accessions, the IEA now has 31 members.

Developing various measures for emergencies, such as creating a common pool of oil (crude oil and products), the IEA has implemented ‘Collective Action’ plans 5 times since its establishment. These were in response to the 1991 Gulf War, 2005 Hurricanes Katrina and Rita, 2011 Libyan ‘civil war’, (twice) March and April 2022 Russia - Ukraine Crisis. By supplying the appropriate amount of oil to the markets from the stocks held compulsorily by the member countries, the effect of the supply shortage and the price increases caused by it was tried to be balanced. How will the Hamas - Israel Conflict Evolve? How will it affect our country? I will try to clarify these questions by making use of my answers to similar questions posed to me by Deutsche Welle on 20 October 2023 (published on 21 October)4 .

Firstly, let us begin, as we always do, by recalling the share of oil and natural gas in Turkey's energy mix and its dependence on foreign sources. Turkey meets 27.6 per cent of its primary energy consumption with oil and 30.8 per cent with natural gas. We are 92.2 per cent dependent on oil and 98.4 per cent dependent on natural gas. Last year, we paid $96.6 billion for imports of crude oil, petroleum products, natural gas and hard coal. In 2022, the average price of crude oil (Brent) was $101/barrel. This year, while prices were relatively softer than last year (fluctuating between $75-80/b), they recently rose above $93 on 20 October 2023, driven by the Israeli-Ha mas war. Currently, the process is unfavourable to our country, which has to import a large amount of oil. According to some scenarios, if Hezbollah gets involved and Iran gets involved in the conflict, a more unfavourable picture will inevitably emerge in terms of oil prices. As a matter of fact, as of 17 October 2023, diesel prices rose again above 40 TL per litre with an increase of 23 kurus per litre. Gasoline prices were also raised by 1 lira 48 kurus, effective from 21 October.

Since some of Turkey's natural gas import agreements (Azerbaijan, Russia) are indexed to the TTF, they are adversely affected by natural gas price increases. Another part of the agreements is indexed to the prices of petroleum products; therefore, as oil prices increase, the bill paid for natural gas also increases. To make a comparison, the oil price-indexed formula is more favourable for Turkey than the TTF-indexed formula (in this period). In terms of supply security and resource diversity, Turkey also purchases liquefied natural gas (LNG) from the spot market. The price of natural gas (in the spot market) has increased by around 50 per cent in the last month and the TTF forward natural gas market price has risen to $623 per thousand cubic metres. Spot purchases have a major negative impact on our total import bill.

Considering the fact that natural gas is also used in electricity generation at a high rate (22.2% last year), and that very serious subsidies have been provided to households and food for a very long time, it would not be surprising to see a significant increase in both natural gas and electricity prices after the local elections, if not immediately. In addition to these, it is clear that after the local elections (remembering that natural gas and oil are paid in dollars), with the effect of the increase in the dollar, the increase rates will bring a significant economic burden.

Conclusion

- The impact of the Hamas-Israel conflict on the oil markets in October was that oil prices, which were 85 USD/barrel on 6 October, exceeded 93 USD/barrel towards the end of October and natural gas (TTF) prices reached 623 USD per thousand cubic metres.

- The escalation of the conflict to include Lebanese Hezbollah will push prices even higher and Turkey's oil and natural gas import bill will become even higher. This will inevitably lead to a further increase in petrol and diesel prices, as well as natural gas prices in the residential and industrial sectors (which, despite being heavily subsidised, will be a burden on consumers who are unable to pay).

- In our country, which meets 22.2 per cent of its electricity consumption with natural gas (data for 2022), the increase in natural gas prices will inevitably lead to an increase in electricity prices. - Price increases will be seen in all industrial products where oil, natural gas and electricity are inputs.

- The Israel-Turkey Natural Gas Pipeline Project, which has recently been revived and revived, is unlikely to be revived in the near and medium term due to the intense reactions against Israel.

- Looking at the region where the conflict is intense, Israel's natural gas fields such as Tamar and Leviathan not only meet Israel's domestic consumption, but also export 7-8 billion cubic metres of natural gas to Egypt via the Ashkelon - El Arish Pipeline. The fact that Israel has ordered US Chevron, the operator of Tamar, to halt production due to security concerns has the potential to adversely affect exports to Egypt. Due to rapidly increasing gas demand, Egypt can only maintain some gas exports to Europe with the contribution of Israeli gas.

Although the loss in Tamar production has so far been compensated from other fields, if this situation is prolonged, exports may face difficulties.

- OPEC+ countries (mainly S. Arabia and Russia) are steadfastly maintaining the supply cut decision they have taken to keep oil prices at the level most favourable to their interests until the end of the year. Therefore, it would be too optimistic to expect a downward trend in prices. It is seen that the US tactic of easing the sanctions against Venezuela has not contributed much to lowering prices.

- If the conflicts develop in a way to include Iran, the Strait of Hormuz may be closed and oil and natural gas prices may rise unpredictably as a result of this ‘Doomsday Scenario’. The closure of the Strait of Hormuz, through which more than 20 million barrels of oil are exported daily, may also be on the agenda. This ‘Doomsday Scenario’ could lead to an unpredictable increase in oil and natural gas prices, which could lead to major disruptions.

- Taking into account the energy-related dimension of the issue and our country's excessive dependence on oil and natural gas, we are going through a process in which we need cold-blooded policies that will be designed in the light of reason and science, away from hamasas, more than ever before.

Bibliography

1- ‘What happened at the festival in Israel where 260 people were killed in a Hamas attack?’ / https://www.bbc.com/turk ce/articles/c51l7330100

2- https://fikirturu.com/jeo-strateji/hamasin-aklin what-was-going-on/

3- Yom Kippur: Day of Atonement (cleansing from sin)

4- Israel-Hamas War: Will Turkey's energy bill increase?; https://www.dw.com/tr/i%CC%87srail-hamas-sava%C5%9F%C4%B1-t%C3%BCrkiyede-enerji-faturas%C4%B1-artar-m%C4%B1/a-67170911