Europe’s $29 billion Iran War bill is driving a scramble for new energy routes

Here is a look at what the European Union is contemplating to bolster its energy security and minimize the impact of future conflicts as it turns to Gulf states and India.

A corridor to India is one option

European Commission President Ursula von der Leyen has expressed renewed interest in what is known as the India-Middle-East-Europe Economic Corridor.

She told G7 leaders at this week’s summit that “alternative export routes have been created that are more resilient and offer choices” while “other routes will be built — for example, a typical one is IMEC.”

IMEC is seen as potentially offering the EU greater economic resilience, supply-chain diversification and energy security to bolster the bloc’s strategic autonomy at a time when Russia shows few signs of curbing its belligerence and the U.S. chips away at strategic bonds.

While the EU itself has supported IMEC through a memorandum of understanding, only a handful of its 27 member states are formal signatories. But behind the scenes, political commitment to IMEC is strong, according to a high-ranking EU diplomat who spoke on condition of anonymity because he wasn’t authorized to disclose the contents of confidential discussions.

“The focus now is on translating that vision into practical implementation across its three pillars: transport and trade connectivity, energy connectivity and digital connectivity,” said the diplomat, who has participated in high-level meetings to discuss the initiative. It could involve new pipelines and transmission cables, among other infrastructure.

The EU’s press office declined to provide a prospective timeline for the project.

IMEC would pass through Israel and enjoys its support. Israeli Prime Minister Benjamin Netanyahu last year said he had spoken with his Indian counterpart Narendra Modi about IMEC, calling it “a very revolutionary and transformative development that we want to bring into place.”

Lianne Pollak-David, co-founder of the Israel-based Coalition for Regional Security, told a recent online briefing that U.S. leadership would be key to moving IMEC forward by helping in the normalization of relations between Israel and Saudi Arabia, an essential player in the project.

“Without normalization between Israel and Saudi Arabia, IMEC cannot be truly realized,” she said.

Saudi Arabia has said it will only normalize relations with Israel if accompanied by a clear pathway to Palestinian statehood, something Netanyahu opposes.

It remains unclear how the Iran war, launched by the U.S. and Israel and damaging to Gulf Arab countries, may influence Saudi Arabia’s thinking.

Asked about their position regarding IMEC, Saudi officials declined to comment.

Skirting Middle Eastern trouble spots is a goal

Von der Leyen has said the EU in the first 54 days of the Iran war shelled out 25 billion euros ($29 billion) more to import oil and gas while facing the risk of a longer-term jet fuel shortage.

She and European Council President Antonio Costa said during an EU leaders’ meeting in April that the bloc is “ready to team up with Gulf countries” to help set up new energy infrastructure circumventing conflict hot spots like the Strait of Hormuz.

The value of such alternatives is evident in the East-West Pipeline running across Saudi Arabia from its eastern oil fields to the Red Sea. After the Iran war started, Aramco ramped up transport to the maximum capacity of 7 million barrels of oil per day.

The leaders of G7 nations are discussing ways of financing and building infrastructure, “sometimes on the terrestrial part, that will be able to go outside of the track of the Strait of Hormuz,” French Foreign Ministry spokesperson Pascal Confavreux told The Associated Press.

Neither Von der Leyen nor Costa have provided specifics on EU-backed projects, which could also form part of IMEC. But an EU official told the AP that the bloc would encourage European companies to invest in renewable energy projects in the Gulf to supply the EU’s energy demand. The official spoke on condition of anonymity because they can’t speak about the EU’s plans publicly.

Getting the EU involved with collaborative projects in Gulf countries will take time, according to Gabriel Mitchell, an analyst with the German Marshall Fund think tank. The most likely projects in the near term are oil and gas pipelines, which have the shortest construction timeline, and subsidizing repairs at Gulf facilities that Tehran targeted during the war.

Mitchell said any new projects would need to fall in line with the EU’s green policies, which means pipelines, for example, would likely be built with future “dual-use” capabilities of transporting both gas and possibly hydrogen.

A transmission line would connect regions

Another project is the Great Seas Interconnector, an EU-backed electricity cable envisioned to stretch 1,208 kilometers (750 miles) to connect the power grids of continental Europe with EU member Cyprus and eventually Israel.

The GSI is bogged down in red tape over its financing, but its potential is significant not only for ending the energy isolation of Cyprus and Israel but also acting as an energy link to India and likewise forming part of IMEC.

Gallia Lindenstrauss, senior fellow with the Israel-based Institute for National Security Studies, hailed GSI as a “very pragmatic solution for the modern energy needs” that paves the way for the transition to green energies.

“As energy security and grid backup move to the forefront of the global agenda, this project provides a flexible platform,” Lindenstrauss said.

The U.S. is helping to foster closer energy ties among Greece, Cyprus and Israel as it sees the Eastern Mediterranean as “an increasingly important region for global energy development,” U.S. Secretary of Energy Chris Wright said last week.

Wright was in Houston to inaugurate the Eastern Mediterranean Energy Center at Rice University that aims to boost cooperation on developing natural gas deposits, U.S. liquefied national gas infrastructure and energy transportation networks in the European region.

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Associated Press writers Sam McNeil in Brussels and John Leicester in Paris contributed to this report.