Averting a collision between Cyprus and Turkey fueled by natural gas

In the wake of the drilling operations headed by Noble Energy in Block 12 of Cyprus?s Exclusive Economic Zone (EEZ), the polemic rhetoric by Turkey against the Republic of Cyprus continues unabated. Turkey claims that the Greek Cypriots have unilaterally taken the decision to explore the island?s hydrocarbon reserves without regard to the Turkish Cypriots? right of ownership. Turkish officials have on several occasions threatened military action if Cyprus proceeds with its plans. Remarkably, the Turkish Cypriots have not explained what it is exactly that they are opposed to, but contend that any drilling by the Greek Cypriots will jeopardize the negotiations on the future of the divided island.

If this collision course is fueled by unfairness, as some are saying, then there are a few steps that the Cyprus government could take to defuse the tension. Normalizing relations with respect to the incident is key to shunning a diplomatic impasse between the two sides. Instead of making general public statements that both Turkish and Greek Cypriots stand to benefit from the recovery of the island?s natural resources, Nicosia should have moved swiftly to establish a fund in which a proportion of the returns will be deposited in the event that gas and/or oil are/is discovered. Under the auspices of the United Nations, a portion of these funds could be used to settle the financial aspects of the Cyprus problem should a settlement between the two sides be reached. Another part of the funds could, in the near future, be used for the benefit of the Turkish-Cypriot people. As a friendly gesture toward the Turkish-Cypriots for providing electrical power to the Greek Cypriots following the catastrophic damage to the Vasilikos power plant in July this year, the Cyprus government could supply them with low-cost gas-powered electricity. Understandably, the economic benefits of hydrocarbon findings ought to be used for the benefit of all Cypriots.

In the same spirit, Nicosia could allocate a proportion of the royalties from the natural gas/oil reserves to finance the solution of the Cyprus problem. Of course, these steps assume that hydrocarbon reserves are discovered, first of all, in sufficiently large quantities to justify a viable investment. Provided the preceding measures materialize, then the Turkish side?s claims, in the absence of convincing arguments, will be seriously weakened. Along the same lines, it will be nearly impossible for Turkey?s threats to find support in European and Middle Eastern countries. Surprisingly, at this critically heated moment involving Cyprus, Israel and Turkey, the Republic of Cyprus has announced its intentions to open up more offshore blocks for commercial exploitation. Perhaps owing to the politically weak internal standing of the government, the decision makers ought to opt for more diplomatic statements designed to assuage the tense situation. There will be plenty of time for Cyprus to call another licensing round for hydrocarbon activities in the island?s EEZ when Nicosia takes over the EU presidency in the latter half of 2012.

It seems that the reasons why Turkey does not want Cyprus to become a gas-producing country are geopolitical and economic. First, if the reserves are proven to exist, then, along with the financial benefits, Cyprus will also automatically broaden its geopolitical leverage at the regional and European levels. Cyprus?s gas is also seen as a potential competitor to the proposed Nabucco pipeline, which will be laid in Turkey to pump natural gas from Azerbaijan to Europe. However, in order for Nabucco to become an economically viable pipeline, enough gas to justify the investment needs to be found first. Instead of seeing Cypriot gas as a potential challenger to Nabucco, Turkey could reap benefits from partnering up with Cyprus to siphon the Cypriot — and probably the Israeli — gas to Europe via Turkey.

From an energy standpoint, exporting natural gas from Cyprus to Europe via Turkey through a pipeline is more efficient than constructing a land or offshore natural gas liquefaction plant on Cyprus and then using liquefied natural gas (LNG) carriers to transport it. Large-scale joint energy projects involving both Greek and Turkish Cypriots, necessary to exploit significant natural gas reserves, have tremendous potential to drive progress toward a solution to the Cyprus problem. Moreover, forming a partnership with Israel and attracting large energy companies will increase the chances of reaching out to more subsea reserves. Sustainable exploitation and management are instrumental to benefiting a country?s citizens.

Another aspect of the disagreement between Turkey and Cyprus is the former?s ambitions of assuming a hegemonic status in the Middle East and North Africa (MENA) region. In an attempt to fill the ?leadership gap? in the region once occupied by Egypt, Turkey has recently expressed excessive zeal in favor of the Palestinians. Although the Palmer Report on the Gaza flotilla incident claims that the Gaza Strip?s naval blockade by the Israelis is legal, Turkey has exploited the event to gain sympathy from the Arab world. Turkey went one step further, claiming that the Mavi Marmara incident amounted to a casus belli episode which Turkey has downplayed in favor of peace.

But how does one link Cypriot hydrocarbons exploration to Israel?s efforts to exploit its subsea resources? Since relations between Tel Aviv and Ankara deteriorated, progress in Cyprus-Israeli relations, including their EEZ accord, has tarnished Cyprus?s image in the Arab world. Seizing this opportunity, Turkey has mounted a offensive of rhetoric against both Cyprus and Israel. The Harper Report has played a catalytic role in exacerbating the situation.

But the question still lingers: What can Cyprus do in the near future to get Cyprus and Turkey off a collision course? The Cyprus government needs to announce reconciliation measures which can also aid negotiations on the Cyprus problem in a timely fashion. It might be that Turkey is only bluffing to reap other concessions from the USA, such as allowing Turkish troops to fight Kurds on Iraqi soil. Another scenario is that Turkey, by not obstructing Noble?s operations, sends a clear message that it has backed off but in the future it will take decisive military action against any other gas-drilling exploration by Nicosia. Decoupling the drilling operations from the Cyprus problem is another equally important matter. Up to now, neither the Turkish nor the Greek Cypriots had any formal agreement regarding the exploitation of the island?s natural resources, be they underground aquifers or mining and quarrying operations for sand, gravel etc. However, hydrocarbon resources have been dealt with in a radically different manner mainly because of the political influence and economic benefits they carry. According to the US Geological Survey, the Levantine Basin, to which Block 12 belongs, holds an estimated 1.68 billion barrels of oil and 122 trillion cubic feet of gas. Natural gas alone, at a price of $4 per 1,000 cubic feet, has an estimated market value of about $500 billion.

Approached from the European Union perspective, Cyprus?s oil and gas exploration efforts are a step closer toward diversifying the energy supply and enhancing the energy security of EU countries currently dependent on Russian gas and Middle Eastern oil. In the aftermath of several prominent environmental accidents at sea, such as the sinking of the oil tankers MV Erika in 1999 and MV Prestige in 2002 in European waters and the Deepwater Horizon oil spill in the Gulf of Mexico in 2010, this time around the EU will be more carefully monitoring the environmental and safety standards of drilling operations by a member state. To minimize such risks, Cyprus should proceed, as soon as possible, to the signing of strategic agreements with companies and sovereign states, such as Norway, able and willing to help manage the technical, economic and environmental issues connected to developing oil and gas fields.

Universities have a crucial role to play by offering courses designed to educate students and (re)train professionals from other areas in subjects such as reservoir engineering and ocean engineering. Given the fact that the Cyprus government and Turkish-Cypriot leaders currently have open channels of communications, they should start discussing joint measures such as employment opportunities and setting up a fund to deposit some of the natural gas returns. Cooperative agreements constitute a win-win situation which all Cypriots could benefit from. As game theory teaches, everyone gains from a win-win game, as opposed to a zero-sum game in which a participant?s gains are subtracted from the loss of the other player.

* Constantinos Hadjistassou, DPhil, is a conventional and low-carbon energy researcher at the University of Cyprus.

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