September 23, 2013 12:19 AM
By Hugh Pope
Israel is quietly challenging Turkey and Cyprus to make a choice: Move together to develop Israel’s share of the East Mediterranean’s natural gas riches, or stay on the sidelines and perpetuate their decades-old stalemate over Cyprus. The Israelis have stated their preference for export pipelines to both Turkey and Cyprus, and is in a strong position to elicit both countries’ cooperation: Only Israel has large proven reserves, while test drillings are still trying to establish whether Cyprus has major exportable quantities. Both fields are being developed by the same U.S. and Israeli operating companies, who will make the main export decisions – subject, in the case of Israeli gas, to Israeli government permission.
Israel’s strategy has steadily come into focus this year. In January, a top Israeli energy bureaucrat strongly hinted that Turkey was the natural anchor market for the gas. In June, the Netanyahu government committed to significant gas exports and said it could supply a liquefied natural gas plant outside Israel, with Cyprus the only likely host.
Then, last week, Israel’s energy envoy, Michael Lotem, put the pieces together. “An energy facility [to liquefy some Israeli gas exports in Cyprus] has less complications than other options,” he told energy executives at a conference in Paphos, Cyprus. This lent some support to the Greek Cypriots’ cherished goal: a big, expensive LNG plant that could be a regional gas hub. But, Lotem added, “there is also a clear tendency not to put [all Israel’s eggs in one basket] … positively, to have more than one energy destination.”
That extra destination, Israeli officials and Turkish company representatives explained, is a pipeline that one or more Turkish companies are now vying to build from Israel’s Leviathan gas field discovery to the Turkish coast. From there Israeli gas could feed into Turkey’s national grid, or join the Trans-Anatolia Natural Gas Pipeline that Azerbaijan and others plan to build across Turkey, or even link up directly to the Trans-Adriatic Pipeline that European and Azerbaijani oil companies plan to build from Turkey’s Greek border, across the Balkans, and on to Europe.
The offer looks elegant. The pipelines sidestep many of the chronic problems between Cyprus and Turkey by simply forking on the seabed. A shorter western arm would go to Cyprus, and a longer northern arm would go to Turkey. One Israeli official suggested 4-5 billion cubic meters of gas go to Cyprus as soon as possible, and some 8-10 billion cubic meters a year go to Turkey when that pipeline is financed and built.
There is a hitch, of course. The pipeline to Turkey would have to go through the internationally recognized Exclusive Economic Zone of Cyprus. Theoretically, under the U.N. Law of the Sea, a pipeline builder does not need formal permission to build through an EEZ. In practice, to do so without permission would be unthinkable (although some voices in Turkey, counterproductively, have threatened to do just that).
The Israeli plan would certainly help the atmospherics of the Cyprus problem. The two sides have failed to negotiate almost any confidence-building measure for years. The island has been divided politically since 1964, and militarily since 1974, when Greece staged a coup to annex Cyprus. Turkey invaded to prevent that and protect the 20 percent Turkish Cypriot community, and has defied U.N. resolutions and occupied the northern third of the island ever since.
While some Turkish and Greek Cypriot officials and businessmen would welcome an Israeli-prompted breakthrough, that outcome is far from certain. Cypriot officials rule out any possibility of allowing a pipeline to Turkey through their EEZ, at least before a settlement of the Cyprus dispute, for which a new round of talks is expected to start in October. And there is no sign yet that Turkey’s mercurial, anti-Israel prime minister, Recep Tayyip Erdogan, would approve a pipeline that might help Israel.
Yet Turkey will obviously lose out if Israeli gas goes elsewhere. And if Cyprus does not allow the pipeline to pass through its EEZ to Turkey, Israeli officials say Israeli gas will probably not go to the Cypriot LNG plant either. Israel is making clear it doesn’t want to be pulled onto one side or the other of the frozen Turkey-Cyprus conflict.
“What [feels] good in the short run may have a high price in the long run,” Lotem told the Paphos conference, adding that gas exports should be used to bind Israel, Turkey and Cyprus closer for regional peace. Continuing with the old zero-sum calculus, he warned, could leave “zero for some.”
This dilemma is particularly acute for the pragmatic Greek Cypriot leadership elected in February. Greek Cypriot media and nationalist politicians are notoriously reluctant to allow Turkey any advantage. In the bitter politics of the Cyprus dispute, both parties have long chosen to punish the other on questions of nationalist principle, even at great cost to themselves.
Yet without Israeli gas, the economics of any Cypriot LNG plant would be in grave doubt, at least until exploitation of Cyprus’s own natural gas fields proves to be economical. Cyprus can’t afford the wait. After bad Greek debts and mismanagement crushed its banking system and economy in March 2013, and with most shops on its capital’s main fancy shopping street dusty and shuttered, Cyprus desperately needs a positive story, economic growth and cash to repay the emergency funds with which the European Union bailed it out.
With a choice this tough, and with their inexperience in energy development decisions becoming more evident by the month, Cypriot officials may simply delay. But there’s another reason Cyprus doesn’t have long to dither: The Israelis want an answer by early next year, and are already looking at other, admittedly less easy, options, such as an LNG plant of their own, even one moored out at sea.
If this happens, Israel’s natural-gas export route may prove yet another lost opportunity for Greek Cypriots, Turkish Cypriots and Turkey to find a way out of their labyrinth.
Hugh Pope is director of the Turkey/Cyprus Project at the International Crisis Group, on whose website this article first ran. It is published by permission from the author.
A version of this article appeared in the print edition of The Daily Star on September 23, 2013, on page 7.
Read more: http://www.dailystar.com.lb/Opinion/Commentary/2013/Sep-23/232183-gas-offers-opportunity-for-cyprus-turkey.ashx#ixzz2friMKG00
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