While the U.S. labors to reduce Saudi dominance of global energy markets by bringing Iraqi oil back online, a Middle East country uniquely unendowed with petroleum is about to weaken the Saudi grip on the oil market even further.

A recent agreement between Russia and Israel will soon allow Russia to supply the Asian markets with crude oil through the Trans-Israel Pipeline (TIPline), a 150-mile pipeline running straight through Israel, thus breaking for the short term the Saudi near-monopoly on oil sales to East Asia, the world's fastest growing energy market. For the short term, since while Russia at the moment produces as much oil as Saudi Arabia, and occasionally more, Russia ranks but seventh in proven oil reserves, holding a mere 5% of the world's total, and at current production rates is depleting its reserves much faster than the Gulf giant.

TIPline will allow crude to run from the Israeli port of Ashkelon on the Mediterranean coast to Eilat on the Red Sea. The pipeline was built in 1968 to carry oil shipped up the Red Sea from Iran to Eilat and from there to the Mediterranean on its way to Europe. The 1979 revolution in Iran ended Iranian relations with Israel, but following the signing of the Israel-Egypt peace treaty Israel upgraded the pipeline and expanded its capacity to handle two-way traffic of 400,000 barrels per day enabling Egyptian oil to flow from Eilat to the Mediterranean. Due to a deterioration in Egypt-Israel relations since the outbreak of the intifada, these exports have also been terminated.

Now TIPline has been revived. Russian tankers bringing crude from Novorossiysk on the Black Sea can be unloaded in Ashkelon. Their oil will then cross Israel to Eilat, to be reloaded onto tankers and shipped to Asia. The route provides a much shorter link between the Mediterranean and Asia than the traditional route used so far around Africa. The only other passage to the Red Sea, the Suez Canal, is restricted to vessels of around 130,000 tons deadweight, about half the size of the average supertanker.

To anyone but the Saudis and other Gulf producers, the Russian-Israeli commercial venture is a win-win solution. Russia will be able to break the Gulf states' monopoly in Asia, assuming a stronger position in the world's energy market; Asian countries will be able to accelerate their economic growth by paying less for their oil. More importantly, Asian countries, especially India will be able to reduce their dependency on Middle East oil. Today, 58% of China's, 65% of India's and 88% of Japan's oil imports come from the region. Without Russia's oil, by 2020 the share of Middle East oil will stand at 80%, 85% and 90% respectively. Just like the U.S., Asian countries understand the problems emanating from over-reliance on the Middle East and are eager to diversify their suppliers. TIPline offers them Russian oil at a competitive price. The deal also allows oil-poor Israel to end its reliance on distant suppliers like Mexico, Australia or South Africa, replacing it with more accessible Russian oil.

Politically, the deal will strengthen Russian-Israeli relations while weakening Saudi Arabia. Both countries resent the flow of Saudi petrodollars to Islamist terrorist groups like Hamas and Chechen rebels operating in their midst and will be glad to dry the source of funding which allows suicide bombers to kill innocent civilians in the streets of Moscow and Jerusalem.

After a year in which Saudi Arabia saw oil revenues surging to a two-decade high of $61 billion, the TIPline deal foreshadows the beginning of the kingdom's economic decline. For years, the Saudi monopoly over the Asian market allowed them to charge consumers there a premium of anywhere between $2-$3 a barrel, amounting to an annual $1 billion to $2 billion in supplemental profit. TIPline is likely to bring an end to the Saudi rip-off, while quadrupling Russia's sales in Asia.

The Russian-Israeli deal is a testimony to how creative thinking and close cooperation between allies can alter the world's strategic and economic landscape, shifting economic power from regions marred by terror and instability to those controlled by western, democratic allies. Success of the project could make Israel an important transit station of the world energy market and might bring the U.S. to follow Russia's footsteps by transitioning Iraqi oil from Mosul to the Mediterranean coast through Israel's northern port of Haifa. Though the route of this neglected pipeline needs repair and redirection through Jordan, it is an idea worth serious consideration. Such a pipeline would spare Western oil companies the need to transport oil through the dangerous waters of the Persian Gulf where anti-Americanism is running high and al Qaeda sympathizers are rampant.

With hardly a day going by without news of looters and saboteurs attacking oil and gas pipelines in major oil producing countries like Iraq, Nigeria and Colombia, it is imperative that the lifeblood of the global economy flow through the safest of arteries, where the rule of law prevails and where disruptions can be minimized.

Gal Luft is executive director of the Institute for the Analysis of Global Security (IAGS)
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