Energy and Politics in Cyprus: The Gordian Knot
By Serhat S. Cubukcuoglu
In May 2015, leaders of the divided island of Cyprus resumed peace talks for re-unification under a federal government, visibly raising new hopes to catalyze a resolution to the decades-old dispute. Last year, unilateral pursuit first by Greek and then Turkish Cypriots for offshore natural gas in the eastern Mediterranean Sea heightened competition over the delimitation of Exclusive Economic Zones (EEZs) and legal rights to exploit rich energy resources beneath the seabed. Notably, the proven combined reserves of recoverable hydrocarbons around Cyprus could meet the region’s demand for the next one hundred years. Furthermore, on a geopolitical level, an underappreciated impact of the Arab uprisings that began in 2011 is the rising importance of natural gas and the power struggle over energy resources around the Fertile Crescent (Iran, Iraq, Syria, Lebanon, Israel, and Jordan). The politically-motivated unrest in the region coincided with an economic slowdown in Europe, creating diverging push and pull dimensions to inter-regional relationships and further complicating negotiations surrounding the Cyprus dispute. On top of this tectonic shift in energy geopolitics, Turkey, with a projected use of 2.5 trillion cubic feet of natural gas per year by 2020, has sought to diversify its energy resources geographically, also furthering economic and foreign policy gains. In December 2014, Turkish Prime Minister Ahmet Davutoğlu’s visit to Athens that coincided with Cypriot natural gas exploration was therefore given special attention. Hopes were high that an interim agreement between Greece and Turkey to jointly search for and produce hydrocarbons could serve as a confidence-building measure, providing a perception of ripeness to revive UN-led peace talks in Cyprus and leading to a regional benchmark in energy politics.
As it turned out, however, the resumption of talks was easier said than done. Ensuing political and financial crisis in southeastern Europe on top of deep divisions between Greek and Turkish views of the problem and long-term interests render a quick and immediate solution unlikely. First, despite the momentum of the on-going peace talks, national pride is an important psychological factor that influences decisions of the Greek Cypriot polity. Greek Cypriots perceive a solution to be a reduction in power that could negatively impact their negotiating position around the recognition and sovereignty of Northern Cyprus. Secondly, Greece – together with Egypt and Israel – issued statements not long ago backing the Greek Cypriot position to continue to engage in natural gas extraction, production, and exporting activities without a negotiated settlement of the EEZ delimitation dispute with Turkish Cypriots. Turkey was therefore left with its next best alternative course of action: To conduct seismic research and hydrocarbon exploration activities on behalf of Northern Cyprus in seven EEZ areas that overlap with those demarcated by the Greek Cypriot government. However, since then, Turkey has ended the hydrocarbon research activity and withdrawn its seismic vessel as a political gesture prior to the re-launch of peace talks between the two communities in May 2015.
These developments reveal not only that the dispute around Cyprus is inextricably linked to its geographical context, but also that energy-related conflict and diplomacy shapes the shifting power play of partnerships in the new global geopolitical environment surrounding the Middle East. Turkey has put itself on the map as an important player in energy geopolitics, acting first and foremost as a transit route between Central Asia, the Middle East, and Europe. Russian President Vladimir Putin’s recent announcement to drop the decade-old South Stream pipeline project in favor of Turkey as its preferred partner for an alternative route underscored Ankara’s tactical maneuverability and keen interest to consolidate its influence as an economic hub in the Eastern Mediterranean. Natural gas is the most important pillar of Turkey’s demand for energy and as the world’s energy supply and demand maps are being redrawn, Turkey emerges both as a major conduit and a heavy importer. Since safe access to high seas and the underlying resources of the seabed are of key significance to sustain its formidable economic growth, Turkey tries to reap the lion’s share of natural gas trade in order to become a regional powerhouse, energy supplier, and transit hub.
On the other hand, for Cyprus, the viability and security of international pipeline projects, if they ever come to fruition, depend on a just and equitable resolution of the EEZ delimitation dispute in the Eastern Mediterranean. The Greek Cypriot position is essentially based on the claim that the maritime delimitation between mainland Turkey and Cyprus must be done exclusively by the adoption of the equidistance principle irrespective of any “special circumstances” that may exist. According to this view, Cyprus has sovereign right to exercise jurisdiction over its 200-mile wide EEZ around the entire island as per Article 121:2 of the UN Convention on Law of the Sea (UNCLOS). Greek Cypriot EEZ overlaps the area Turkey claims as its EEZ in five of the thirteen offshore research blocks in the Mediterranean Sea. In addition, Greece would like to see Cypriot and Israeli natural gas exported via LNG terminals or pipelines across the seabed to mainland Greece, then linked with Greek natural gas to the south of Crete and the Ionian Sea, ultimately becoming the energy transit hub for Europe. This is by and large contingent upon Greek and Greek Cypriot EEZs having a common maritime boundary. According to Greece, Turkey is the only potential rival actor that can impede such a project, because consent of the coastal state with jurisdiction over the EEZ is required for the delineation of the course for laying pipelines on the continental shelf.
Turkey, on the other hand, is a non-signatory to UNCLOS and does not recognize Greek Cypriot EEZ delimitation agreements with Egypt, Lebanon, and Israel. Ankara claims that as a de-facto divided island, the “Republic of Cyprus” cannot represent the interests of Northern Cyprus unless the island is reunified with a single EEZ. Ankara’s position is based on the equity principle that calls for the consideration of “special circumstances” to respect proportionality and non-encroachment rules, as Turkey’s coastal length is over twenty times that of Cyprus. Due to conflicting claims by Greek and Turkish Cypriot communities on maritime delimitation within the wider context of bi-communal talks and reconciliation on the island, Turkey holds the view that the exploitation of natural resources should be deferred until a comprehensive solution to the Cyprus problem is reached.
Undeniably, an impasse between Turkey and Cyprus over EEZs would be a “lose-lose” outcome not only for both countries, but also for the entire region and the U.S. It would increase regional political risk and decrease affordability of potential pipeline projects. Standalone production and storage in an LNG liquefaction facility in Southern Cyprus would have insufficient capacity to economize on gas volumes in the Levantine basin, and would have lower net returns than a pipeline through Turkey to Europe. Furthermore, a multi-billion-dollar investment proposal to build an Israel-Cyprus-Greece pipeline would be too expensive due to market off-take risk and price-risk in project financing, let alone the enormous engineering challenge to build a deep-water gas transport pipeline over 1200 km of distance.
As a key actor, Turkey should realign its strategy and pursue value-creating maritime negotiations with all littoral states in the region. Polemic discourse, demagoguery, and stereotyping toward key stakeholders will only lessen the chances of reaching a resolution. Since sovereign rights for researching and developing the underwater resources belong to the entire island of Cyprus, not exclusively to Greek or Turkish Cypriots, Turkey should continue to foster a constructive dialogue whereby parties are able to invent options for mutual gains more easily and dismiss the assumption of a fixed pie. If Turkey can be part of a brokered peace deal in Cyprus, this would strengthen the EU-NATO partnership, decrease political risk, and increase the affordability of a Cypriot-Turkish pipeline project that could be linked with the “Southern Corridor” from Azerbaijan to Europe, bypassing Russia.
While Cyprus, Greece, Israel, and Egypt have committed to increase efforts to mark out their maritime zones, the tendency in Ankara has been to downplay such maneuvers on the assumption that “what states do matters a lot more than what they say” and that multilateral negotiations may anyhow take a certain period of time before a conclusive agreement may be reached. In light of the new political context, it is crucial for Turkey to change this bilateral negotiation geometry and address the complex, multipartite nature of the maritime dispute, utilizing overall patterns of deference and influence. Time will tell if Cyprus, Greece, and Turkey can avoid brinkmanship during the negotiation process and reach a consensus to ensure maximum utilization of opportunities for offshore gas exploitation in the Eastern Mediterranean.
Serhat S. Çubukçuoğlu is a Freelance Researcher in Global Development and Politics. With an MA degree in International Relations from The Fletcher School of Law and Diplomacy, Tufts University, his areas of interest are energy diplomacy and conflict resolution in the developing world. His most recent research is about energy geopolitics in the Middle East and the application of international law to maritime delimitation disputes for exploitation of hydrocarbons in the Mediterranean Sea.