Noted French Economist, legislator, and writer Claude Frederic Bastiat is famous for saying, "If goods don't cross borders, armies will." Nowhere does this appear more true than in the war-torn Middle East, where Israel and its Arab neighbors have been at each other's throats for over 60 years. 

Here's an example: In 2012, Egypt, which under its 1979 peace treaty with Israel was required to supply the Jewish state with energy, announced it would suspend the latest 20-year deal, which supplied 40% of Israel's gas needs. This resulted in electricity rates rising by 33%, rolling blackouts, and Israel scrambling to find alternative resources and become less dependent on its historical enemies. Interestingly enough, deposed Egyptian President Hosni Mubarak, who had orchestrated the latest 20-year arrangement, now faces criminal charges for what is a wildly unpopular decision in the country he once ruled with an iron fist.

The tables turn

Source: EIA

In a 2010 report, the U.S. Geological Survey estimated that the undiscovered resources in the Levant basin totaled 1.7 billion barrels of oil and 122 trillion cubic feet of natural gas and 3.1 billion barrels of natural gas liquids. To put that in context, the combined oil and gas reserves of Israel's neighbors total just 2.5 billion barrels of oil and 18.5 trillion cubic feet of gas, according to the U.S. Energy Information Administration.

Suddenly, it seems Israel has the means to achieve not just achieve energy independence, but possibly even help supply energy to its neighbors and historical adversaries. That would not only be a boon to its economy, but possibly a catalyst for long-term peace in the region. 

Israeli-Arab gas deals could achieve the impossible
Noble Energy (NYSE:NBL) recently signed a letter of intent to supply the National Electric Power Company (NEPCO) of Jordan with 1.6 trillion cubic feet of gas over the next 15 years from its holdings in the Leviathan gas field (part of the Levant basin). Noble Energy has secured 60% of the capacity from the Leviathan field, which is estimated to hold 22 Trillion cubic feet of gas, indicating that future deals could be easily supplied or expanded.

Those future deals could include a major LNG (liquefied natural gas) export partnership with Egypt, whose former President Mohamed Morsi (a member of the Muslim Brotherhood, a fiercely anti-Israeli group) was deposed in a July 2013 coup by the Egyptian military. 

According to the Middle East Monitor, Egypt is "desperate to import natural gas," and Bloomberg is now reporting that Noble Energy, in accordance with its Israeli partner Delek Group, is in negotiations to supply Egypt's Damietta port and the coastal town of Idku with 6.25 trillion cubic feet of gas over a 15-year period in a potential $60 billion deal. 

From Egyptian LNG export terminals as well as pipelines, Israel could export billions of dollars of natural gas across the Mediterranean sea to European markets desperate to diversify their natural gas supply from Russia. In fact, the escalating sanctions war between the EU, U.S., and Russia over Russia's actions in the Ukraine have left Europe, which obtains 35% of its natural gas from Russia (with some nations such as Finland and the Czech Republic 100% dependent) scrambling to establish an emergency stockpile of gas ahead of winter in case Russia flexes its economic muscle and turns off the gas taps.

Egyptian-Israeli tensions thawing
Under the former head of the Army and current Egyptian President Abdel-Fattah El-Sisi, tensions have greatly eased between the two historic enemies. This is partially due to Egyptian gratefulness with Israel's help securing the Sinai peninsula during its 2013 coup of the Muslim Brotherhood-led government. 

Reporter Amos Harol, writing for the Israeli newspaper Haaretz, claims the new Egyptian administration is forging stronger and more amiable ties with Israel then even existed under Mubarak, who helped sustain 39 years of peace between the two nations.

In fact, Egypt even brokered recent ceasefire agreements between Israel and Hamas during their ongoing conflict over Hamas launching rocket attacks into Israel from the Gaza strip.

Major threats remain
Despite the easing of tensions between Isreal, Egypt, and Jordan (the only two Arab states to ever recognize Israel's right to exist) and the major economic and energy security benefits these $75 billion gas deals represent, major threats to both peace and economic prosperity remain.

For example, despite an increasingly cordial relationship between Egypt's current government and Israel, the fact is, former President Morsi was the first democratically elected leader in Egyptian history. 

His ousting in a political coup didn't just infuriate the supporters of the Muslim Brotherhood (who hate Israel), but also many of the original (and more moderate) supporters of the overthrow of Mubarak. The fact is, that many Egyptians still harbor a strong animosity toward Israel over the ongoing Israeli-Palestinian issue, and as recent history has shown, Egyptian governments can change quickly. 

Another risk to the energy deals is terrorism. Prior to Egypt cancelling its gas deal with Israel in 2012, the pipeline supplying the Jewish state with gas was attacked no less than 14 times.

Finally, with trillions of dollars of oil and gas sitting in offshore deposits in the Levant basin, there is always the chance that other Arab nations might claim much of these deposits for themselves, perhaps even going to war over them. For example, in 2012, Lebanon made a claim on Isreal's largest offshore oil and gas fields, a claim backed by Iran, a major military power in the area.

Foolish bottom line
The thawing tensions between Egypt, Israel, and Jordan, as evidenced by $75 billion in announced and potential energy deals, represents what may be a breakthrough in Israeli-Arab relations. Despite the risks, if these gas deals can be safely and securely executed, the benefits of Israeli oil and gas could result in economic benefits to its Arab neighbors that could act as a linchpin to accomplish what many thought to be impossible -- lasting peace in the Middle East.

Adam Galas has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.