Eastern Mediterranean, Cyprus and Natural Gas #Energy
Why are Cyprus and Eastern Mediterranean Important?
Stimulated by the discovery of a series of natural gas fields in Eastern Mediterranean in recent years, strategic and tactical attacks by the great powers and regional players on the Eastern Mediterranean region, and in particular Cyprus, have gained momentum. Firstly, it should be emphasized that it would be lacking, and therefore, misleading to think of Eastern Mediterranean and Cyprus solely in terms of natural gas exploration and projects.
“The Eastern Mediterranean is a vital the gateway for the Middle East, which contains the world’s proven 47% of crude oil and 43% of natural gas reserves; to the Mediterranean, the Aegean, the Black Sea, the Red Sea and the Atlantic. Similarly, it acts as the gateway for Africa to the aforementioned seas as well as to Turkey.
Depending on its strategic position, the island of Cyprus, which constitutes one of the most sensitive tipping points for Turkey’s security and maintains its strategic and military significance for the United Kingdom, the US, Russia, the EU, Greece, Greek Cypriots and Israel.“
Approximately 30% of world trade travels through the Mediterranean basin. An average of 4,000 commercial vessels sail through the Mediterranean daily while an average of 40,000 Russian merchant vessels pass through the Turkish Straits (The Bosphorus and Dardanelles) towards the Mediterranean…”
Cyprus’ geostrategic importance stemming from its proximity to the Suez Canal which is one of the three gateways providing access to natural gas sources and the Mediterranean Sea, gives way to British (and NATO) bases, which have been placed in the region to ‘monitor’ the security of energy and international trade, and the listening and early response stations co-managed with the United States. The Royal Air Force Akrotiri Base enables NATO forces to reach the Syrian heartland in 15 minutes.
“In February 2014, just prior to the invasion of Ukraine, Russia announced its intention to strengthen the Mediterranean Squadron by adding stealthy Varshavyanka-class submarines. The stated purpose of those deployments was to “thwart any threat to Russia’s borders or security” (RIA Novosti, February 20, 2014). Given the mission and the situation in the theater at that time, this explanation could only mean thwarting ‘threats’ from the North Atlantic Treaty Organization (NATO). Accordingly, since then, Moscow has built what Admiral Mark Ferguson, the commander-in-chief of NATO’s Allied Joint Force command, calls an ‘Arc of Steel,’ which includes advanced air defenses, cruise missiles, new platforms, space, cyber and “hybrid warfare” systems, as well as submarines (Defense.gov, October 6, 2015).”
The following statements made by Prof. Dr. İlber Ortayli in his characteristic manner, may act as a wake-up call to those who underestimate the importance of Cyprus and Eastern Mediterranean:
“If you see Russia settling in Syria right under your nose, I beg of you to wake up. Russia is a terrestrial state, its meddling in maritime is only a three-century affair. They have their shortcomings in that respect. But let’s not forget: nuclear power is a naval power. With Britain coming and settling in Eastern Mediterranean, even setting up bases in Cyprus, the Americans sailing their navy in the region, and even the Germans, for whatever reason, are looking for a way in, it is only natural that Russia, too, will look for an opening. We have to be present there as well. After all, it is our homeland’s point of entry.”
On to Natural Gas
The share of natural gas in world energy consumption is increasing due to its efficiency and lesser greenhouse gas emissions compared to other fossil fuels. Currently, the share of natural gas in world energy consumption is at 24%. According to the International Energy Agency, the share of natural gas in world energy consumption is expected to increase while the shares of oil and coal are likely to decline in the coming decades. Granted, there are various scenarios in existence, the point we are trying to make here is that the importance of natural gas is not going to go down neither globally nor regionally.
The developments in Eastern Mediterranean and Cyprus are inherently vital for Turkey whose natural gas use comprises 28,2% of its total primary energy and 40% of its electricity consumption while 99,7% of its natural gas is imported in 2016.
Natural gas continues to be the most critical and strategical source of Turkey’s energy needs. When we consider that 53% of Turkey’s gas imports comes from Russia, and 17% from Iran and we couple that with our divergent interests and troubled relations with these countries putting our energy supply into risk, natural gas explorations in Eastern Mediterranean becomes a compelling choice in diversifying Turkey’s gas import sources.
Recent Natural Gas Explorations in Eastern Mediterranean
The most important recent natural gas explorations in the region have been those that were carried out in Israeli and Egyptian offshore fields. The discovery in Aphrodite reservoir in the southern offshore of Cyprus island might be significant in terms of the relationship between the island’s two nations, but the reserves seem to be too limited for the Greek Cypriots to use it against the Turks in any kind of meaningful way. However, the Greek Cypriots are playing a “carrot and stick” game through this discovery as an instrument hoping that would be effective to force the Turkish side to accept the Greek Cypriot’s terms and desired targets.
It should also be noted that the Turkish Cypriots have equal rights for these reserves under UN’s political, sovereign and binational equality principles. These rights are not limited to distribution of products, but they also cover equality for exploration and development rights. However without law, the Greek Cypriots are going ahead, announcing new bidding rounds and trying to find ways for exporting the gas found in the Aphrodite field unilaterally.
World Proven natural gas reserves at end of 2016 is 186.6 trillion cubic meters as given by BP Statistical Review of World Energy, June 2017. We might have a healthier and more realistic understanding of the value and merits of the recent gas discoveries in Israel, Egypt and Cyprus after comparing these figures with the global reserves. . And we should then try to answer some basic questions like: “Are these reserves of a global or regional significance? Are they feasible to produce and export? Which markets are the most viable and feasible ones?”
Israel’s proven gas reserves, including Leviathan and Tamar fields are around 1 trillion cubic meters. Following an internal and tiring discussion process, Israel decided to use 60% of those reserves for domestic consumption and the rest for exports. Incidentally, Turkey comes into prominence as the most likely market for such exports under its current economic and political situation, not to mention the influence of the private companies on the field. This alone should give Turkey, as the buyer, the upper-hand in the ongoing restoration of the bilateral relations. However, the self-interest of the companies might dictate Turkey to underplay its advantage. Israel mentions Egypt and Jordan as potential alternative buyers of its natural gas exports to force Turkey’s hand. Jordan, however, is a pretty low devourer of natural gas with its current natural imports totaling only 4 billion cubic meters. Egypt, on the other hand, has invested significantly in its own explorations, discovered a rich offshore gas field called Zohr and thus might not need Israeli gas at the end of the day.
Israelis have intensified their diplomatic efforts and relations with some private companies very eager to have Israeli natural gas flow into Turkey. Actually, these efforts were on full swing even during the tense period between the two countries. Israel hopes to get its gas to Turkey, and eventually to Europe, via the pipelines it is planning to lay under the Mediterranean. They claim that they don’t need the permission from Greek Cypriots or the other Eastern Mediterranean littoral states to do so. This claim seriously hurts the Greek Cypriots’ efforts to derail this project by counter-claiming an exclusive economic zone to which Turkey strongly reacts.
Egypt is no longer a viable candidate for neither Israeli nor Aphrodite gas exports since their recent gas explorations -particularly those in Zohr fields will be supplying the country’s recently growing local consumption and sweeping away its need for gas imports. Another difficulty for Israel in realizing their project is the fact that the companies who operate the fields may not be able to obtain a competitive gas export price from their target market countries. The development costs are high and given the gas glut in the global markets, Israeli gas has limited chance to compete against the Azeri, Russian or even Iranian gas in the Turkish market.
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Greek Cypriots keep using the discovery in Aphrodite field and the new bidding rounds as a trump card in their negotiations with their Turkish counterparts. Their rather arrogant stance basically states, “If you agree to our terms for the negotiations, we may give you a share from the gas sales.” This attitude surely takes courage from the explicit support by the EU, and implicit support by the US. Even Russia seems to be on the Greek-Cypriot side in the final run given their interests in Syria, Eastern Mediterranean being integrated with their interests in Cyprus. Moreover, Russia has multi-dimensional interests in Cyprus. When the global economic crisis hurt the EU zone in mid-2011, Russia was generous to open a 2.5 billion euro loan to Cyprus with a modest interest rate of 4.5 percent. The duration of the loan was extended and the interest rate was further reduced in 2013. A significant volume of Russian accounts are held in Cyprus’ banks and then reinvested in Russia or used to launder the elite’s money by cycling it out of Russia into the global banking system as claimed by several US analysts like Stephen Blank. When Turkey sent Barbaros Hayreddin Pasha seismic survey vessel for research in southern Cyprus waters in October 2014, Russia did not hesitate to join a reactionary military exercise together with Greek Cypriots, and Israel, in southern Cyprus offshore for two days from on October 20, 2014. Turkey reacted to Cypriot’s announcement about natural gas resources, declared Navtex and gained control over the maritime traffic. Before Turkey’s challenging Navtex declaration, which emphasizing its presence in the region, 2 vessels of Turkish navy were deployed the 3 miles away from the natural gas drilling area, which Cypriots proclaimed.
However, Aphrodite field reserves are not rich enough for a pipeline to by-pass Turkey and directly feeding Greece or the selling of liquified gas via the construction of an LNG terminal. Turkish side has equal rights to this field. The Aphrodite reserves were exaggerated to be around 198 billion cubic meters (bcm) initially and now revised downward to 120 – 129 bcm. Some estimates are even lower (103 bcm). Aphrodite gas isn’t likely to make its way to Egypt either, since Egypt has Zohr fields as well as new (Nooros, Baltim, etc.) projects. The Aphrodite field must first and foremost serve the needs of the two nations of the island and should be developed together and not exclusively by the Greek-Cypriots.
What to do?
Effectively against Turkish Cypriots. Most of the major gas conferences and/or panel discussions on Cyprus and Eastern Mediterranean hydrocarbon development are organized by Greek and/or Greek-Cypriot think-tanks and institutions who are the main actors in overstating the reserve figures and the significance of the Aphrodite reserves. The recently claimed reserves (120 – 129 bcm) of gas will cover the island’s needs for years to come, but it is not high enough to freely export. But the Cypriot Greeks, who are in full knowledge of that fact, are still insisting they can lay down a pipeline to Greece under the Mediterranean’s 2000-meter-deep waters, or else build LNG terminals to liquify the gas for easier export. The truth is that, for an LNG terminal to be feasible it has to process at least 250 billion cubic meters of natural gas. And for such a project to make any fiscal sense, at least two LNG terminals are needed. Turkish Cypriots, unfortunately, still lack a professional structure that can approach the subject cognitively in all areas, technical, fiscal, legal, political, etc.
The priority of the ongoing negotiations continues to be territorial compromises. But the case outlined above is the most crucial point in the security of Turkish Cypriots, and even Turkey at large and it would solve most of Turkish Cypriots issues (right to guarantee, two-state sovereignty, the veto power of the Vice President, two parliaments) if implemented correctly.
The Greeks are having the Turks run in circles with their natural gas policy -i.e. “let us determine how to market and sell the gas, and we will give you a share from the proceeds.” If we are talking about a real, long term solution, we have to give both nations equal say in hydrocarbon exploration, field development, production and sales processes. Such an approach will not only be fair, but it will be a good practice to start working together for a common goal.
What Turkey and Turkish Republic of Northern Cyprus (TRNC) must do is to pave the way for a new structure in which teams from both countries come and work together to cover all the aspects of the issue. This structure is easily attainable with contributions from several universities from each state, additional support by specialists from private and public sectors, and last but not least, the founding of a permanent Energy Policy Center in . TRNC.
A report of assessment of current situation followed by a period of suggestion gathering would be a good first step. Periodic reports to update the current situation should follow. At least two congresses a year in TRNC and Turkey, and others in Europe and the United States must be organized. This will amplify our views and suggestions on the issue on the international arena.
Exploring the potential for hydrocarbon reserves in Turkey and Northern Cyprus and their exclusive economic zones are of vital importance for the two states as well as the region. Still, this is only one of many points of importance of this strategically important geographical region.
 The Most Recent Developments in the Eastern Mediterranean (Doğu Akdeniz’deki Gelişmeler: Postmodern Dönemde Realizmin Yeni Bir Tezahürü mü; Eyyub Kandemir, A. Ü. Sosyal Bilimler Enstitüsü, 2013)
 From the Panel Transcripts (KIBRIS’TA SON SÖZ SÖYLENMEDİ Paneli, Türkiye Barolar Birliği, Ergün OLGUN (KKTC Cumhurbaşkanlığı E. Müsteşarı ve Görüşmecisi), Türkiye Barolar Birliği Yayınları : 327, Eylül 2016, Ankara)
 The Meaning of Russia’s Naval Deployments in the Mediterranean, Publication: Eurasia Daily Monitor Volume: 13 Issue: 44, By: Stephen Blank, March 4, 2016
 Putin’s Agenda: Gunboat Diplomacy, Publication: Eurasia Daily Monitor Volume: 8 Issue: 225, By: Stephen Blank, December 12, 2011
 Russia and Greek Cypriots to conduct drill in Mediterranean, World Bulletin, 18 October 2014; http://www.worldbulletin.net/news/146517/russia-and-greek-cypriots-to-conduct-drill-in-mediterranean