By JAMES KANTER New York Times March 27, 2013
BRUSSELS — With its economy in tatters, Cyprus
urgently needs to tap its natural gas deposits. But opening the
spigot will force the easternmost member of the European Union to make the
tough choices it has long been loath to confront.
Since the discovery of the gas two years ago in nearby waters, Cyprus
has been laying plans to get the gas to market by circumventing Turkey, which has occupied the northern third
of the island for nearly 40 years.
But in less than a week, those Cypriot ambitions have been dealt a double blow.
On Monday, Cyprus was forced to shrink a banking
sector that could have helped channel capital for vital energy infrastructure as
a condition for a €10 billion, or $13 billion, bailout from the European
lenders and the International Monetary Fund. The deal fended off an
uncontrolled default and the country’s exit from the euro, but snatched away
the keys to Cyprus’s prosperity in recent decades.
Three days earlier, Israel — on whose additional gas
Cyprus was relying to turn itself into an energy export hub — mended fences
with Turkey. The reconciliation, over an Israeli raid
three years ago that left nine Turks dead on an aid vessel bound for Gaza, has
opened the way for normal relations between Israel and Turkey that could
include direct cooperation in the energy sector, bypassing Cyprus.
The sudden reversal of fortunes implies that fiercely
self-reliant Cypriots may need to brush up on their own relations with Turkey
to make its gas wealth a reality.
“The saddling of Cyprus with so much
debt could be an indirect way of the E.U. pushing Greek Cypriots into some kind
of resolution of the Cyprus problem,” said Fiona Mullen, director
of Sapienta Economics, a consulting firm based in Nicosia. “If you have to
pledge the wealth of future generations to save your souls today, then this
puts a premium on making as much revenue out of the gas as fast as possible.”
E.U. lawmakers also regard the Cypriots’ desperate
need for cash as leverage for a settlement with Turkey, but underline the huge
political challenges.
For Cyprus and Turkey, “gas exploration and export
could be the coal and steel commodity that united France and Germany after the
war,” said Andrew
Duff, a British member of the European Parliament, referring to the foundations of
economic alliance that developed into the modern-day European Union.
“The thing that we haven’t as yet seen in the Eastern Mediterranean that
we saw after the war here is leadership of a statesmanlike quality that can
carry such a deal through,” said Mr. Duff, who participates in an E.U.-Turkey
Joint Parliamentary Committee.
The two halves of the island have been split between the mainly
Turkish-speaking north, occupied by Turkey since an invasion in 1974, and the
internationally recognized, mainly Greek-speaking Republic of Cyprus in the
south.
Both sides have sparred over ownership of the gas, creating another
obstacle to reunification rather than an incentive to cooperate. Yet the
closest natural customer is Turkey, which imports most of its oil and
gas and is the biggest potential, and rapidly growing, consumer.
Those tensions bubbled to the surface again last weekend when the
Turkish Ministry of Foreign Affairs warned the Cypriots against making the gas
part of a potential deal, now apparently off the table, to repay bailout loans
to the Union or Russia.
“It is not acceptable that the Greek Cypriot side uses the economic
crisis it is facing as an opportunity to create new fait accomplis,” the
ministry said in a statement. The “only way to exploit the natural resources of
the island” is “the clear consent of the Turkish Cypriot side regarding the
sharing of these natural resources,” according to the ministry.
On Wednesday, the Turkish energy minister, Taner Yildiz, said his
government was suspending planned projects with the Italian energy giant Eni
partly over the energy company’s involvement in energy exploration in Cyprus.
Cyprus has nurtured ties with Israel to protect future
gas facilities to produce and deliver liquefied natural gas, or L.N.G., drawn from offshore fields in the Eastern Mediterranean and
to avoid the need for a pipeline to Turkey to reach markets.
For its part, Israel had been turning to Cyprus as a regional
partner, signing defense and cooperation agreements partly aimed at protecting
their overlapping gas fields, since the raid on the aid vessel, the
Mavi Marmara. Then, on Friday, in a dramatic overture, and apparently with a
push from the United States, the Israeli prime minister, Benjamin Netanyahu,
apologized for the loss of life, a move immediately welcomed by the Turkish
prime minister, Recep Tayyip Erdogan.
The thaw is mainly aimed at containing the conflict in Syria. Rebuilding
trust still could take time. But the move already looks like a game-changer for
the region’s energy politics.
“Détente between Israel and Turkey could
make the export of Israeli gas to and through Turkey feasible,” said Michael Leigh, a senior adviser
with the German Marshall Fund of
the United States. “This is among Israel’s most commercially viable export
options.”
Cyprus’s diminished stature makes “a new
Israel-Cyprus-Greece Mediterranean energy corridor or political alignment
unlikely,” he said. “All
three countries should seek ways to cooperate with Turkey in developing the
region’s resources.”
Focusing on hydrocarbons would be a smart move for the Cypriots, who
need to diversify their “economy away from dependence on offshore
banking” and should “like the Israelis and the
Norwegians, develop energy-related high-tech industries,” Mr. Leigh added.
A key player is Noble Energy, based in Houston, which
is leading the drilling in Cypriot waters, along with Israeli partners, giving
both the United States and Israel huge stakes in the find.
Noble has announced finds of 35 trillion cubic feet and said last year
that about 20 percent of it is in Cypriot waters. Noble has been working with
Israeli partners under license from Greek Cypriot leaders, many of whom regard
the undersea area as theirs to exploit as they please.
A “potential” scenario is to build an L.N.G. plant in Cyprus, but cost
estimates and a timeline for the project still need to developed, Ben Dillon, a spokesman for
Noble, wrote in an e-mail Wednesday. The main alternative — a pipeline from Israel or
Cyprus to Turkey — “would need to be studied carefully in the light of the
difficult physical terrain,” Mr. Dillon wrote.
Significant investment is still needed to begin extracting the gas and
get it to market. Exports also may not begin until 2019.
But with its bailed-out and bombed-out economy, the
goal of building a liquefied natural gas plant on Cyprus now looks like an
insurmountable financial challenge, leaving the Cypriots with little choice but
to pipe gas to Turkey.
“You get higher and faster revenues — I
estimated €15 billion more — if you export gas via a pipeline to Turkey rather
than pour money into a costly and energy-intensive L.N.G. plant that will
initially not create jobs for Cypriots,” said Ms. Mullen, of Sapienta.
A bad assumption to start. Cyprus doesn't need to tap on its natural resources. Other countries are desperate. Cyprus robust economy was built on the banking and tourism industries.
ΑπάντησηΔιαγραφήCyprus correctly is laying the foundation for becoming an energy hub when the time is right.