Situation in Egypt is Deteriorating, Says GMF's Ian Lesser

Natural Gas Europe had the pleasure to interview Ian O. Lesser, Senior Director for foreign and security policy at German Marshall Fund (GMF), with a focus on the Mediterranean, terrorism, and energy. While groups were preparing the attack to the Italian Consulate in downtown Cairo, we were speaking about instability in Egypt and in the Mediterranean. 

"The economic outlook in Egypt is anything but positive. This too will be observed by foreign investors. It does not mean that such projects cannot go ahead, but it seems that the overall climate is simply not an healthy one" he said during the interview. 

During a recent conference, you have been saying that there is not really room for stabilising the situation in the Mediterranean in the short to medium term. What did you mean by that? What’s the time span you are referring to?

When I look at the situation, not specifically about Greece and Cyprus, but the situation in the Levant, the situation concerning Libya, even the situation concerning the relationship between Russia and the West, I frankly don’t see a solution, a resolution of this chaos and instability. Perhaps, looking out to the next decade. I find it very very difficult to see a sort of likely near to medium term resolution.

So you are speaking about 10 years at least.

At least. 

Do you see any room for private companies to help stabilising the region? 

Well, it is very hard for commercial projects to drive the resolution of these crisis. They may exist and tolerate it, but it is very hard for them to resolve it. If you have more productive political conditions, resolved security conditions, then I think you can see a lot more easy commercial activity, but I think it comes that way around. Having said that, I think where you have essentially delicately poised political relations, there is a role for business to business connections in making things better. Look at what happened between Greece and Turkey in the 1990s, late 1990s in particular. The business community on both sides really led that detente.

It sounds that, apart from Turkey, the elephant in the room here is Egypt. The one player that, at the moment, is really able to create trust with different partners. Obviously the devil is in the detail. If you look at recent developments, you see that Egypt seems optimistic about its changes to become once more a gas exporter. For example, Egypt issued a five-year tender to lease a second LNG import terminal in May. And I would like to underline the contract duration: five years. Do you believe an increase in gas production in Egypt? Do you think that this eventuality might have repercussions on the political situation in the region, for good or for bad?

I can understand from the point of view of the Egyptian government that it makes sense to bet on stability, but the truth is that situation internally in Egypt is anything but stable. This will be observed by foreign investors. The economic outlook in Egypt is anything but positive. This too will be observed by foreign investors. It does not mean that such projects cannot go ahead, but it seems that the overall climate is simply not an healthy one. 

At the same time, UK's BP and Italy's ENI looked quite confident about their prospects there, both because the licences are in sparsely populated areas of the county and because the licenses are quite diverse. There are licences onshore, offshore. Licences in the sea and in the Nile delta. 

Ultimately, there are technical and commercial considerations that these companies are frankly in the best position to judge what is possible. But if one is thinking ahead to new projects, across that whole region of the East Mediterranean, I have to feel that the increasingly uncertain political-security situation is going to be a much bigger factor. It is not that they won’t be able to make a success of these things, but I think that the environment on the whole is deteriorating. 

So you are saying that the situation is deteriorating. 

I believe that it is deteriorating, which does not mean that is not manageable, but it is deteriorating.

Sergio Matalucci is an Associate Partner at Natural Gas Europe. He holds a BSc and MSc in Economics and Econometrics from Bocconi University, and a MA in Journalism from Aarhus University and City University London. He worked as a journalist in Italy, Denmark, the United Kingdom, and Belgium. Follow him on Twitter: @SergioMatalucci