Cyprus Mail

Pushing a solution of the Cyprus problem further out of reach

WHILE I agreed that gas will not save us any time soon, there are a number of assumptions in Hermes Solomon’s article ‘Conspiracy or truth: is the Cyprus problem fixed?’ published in the Sunday Mail on June 16 that need challenging, especially because they have the effect of pushing a solution of the Cyprus problem further out of reach.

First, the idea that some foreign powers plotted to undermine the Cyprus economy ignores the facts. I have been covering the Cyprus economy now for around 12 years. We did not need George Soros to undermine it. A finance minister, two bank CEOs, a bunch of supervisors (all the way up to Basel II) and a former president did it all by themselves, even before the Eurogroup finished us off.

Also, most of this ‘plot’ by foreign powers is simply what one might reasonably expect from any solution to the Cyprus problem, for several reasons.
First, Turkey has a massive deficit on trade in energy so any resolution of the Cyprus problem will of course involve gas.
Second, you don’t need foreign powers to persuade companies with deeper pockets than Noble to get involved in regional gas cooperation.

A great deal more investment in gas would be unlocked if Greece-Cyprus-Turkey-Israel could cooperate on exploration and exploitation. If you disagree, ask yourself why Blocks 1, 4, 5, 6 & 7 – around 40% of the 13 blocks – will never be licensed? Answer; because Turkey will shoot over this particular area which it claims overlaps its continental shelf Why are the really big players Exxon-Shell-BP absent from Cyprus and Israel? Answer; because they are in Turkey + Lebanon.
Third, Anastasiades has already talked about smaller central government – makes perfect sense when both sides are broke and don’t trust each other an inch after not governing together for 50 years.

Fourth, the ECHR has already massively reduced Greek Cypriot compensation, see the Loizou – not to be confused with the Loizidou – case, in which the claimants for over 100 individual properties were awarded on average only 15% of the amount they claimed.

Fifth, as an EU and Eurozone member the Republic of Cyprus is already run from Frankfurt/Brussels.
And while we are in the process of mythbusting, the main barrier to exploring the EastMed’s gas was the technology required to drill several thousand kilometres below sea level followed by several thousand km of salt layer, not some decision by foreign powers. Israel tried in shallower waters in the late 1960s.

Also, Noble’s find may be massive compared with the domestic consumption of less than a million people but it is only around 2% of annual EU consumption (Russia supplies 25%). There is also the unexpected factor. As Mr Solomon said, a week is a long time in politics. As the Taksim Square protests enter their third week, Turkey looks a lot further away from – and a lot less interested in – EU
membership than ever. How does that fit into the plot, especially when Erdogan says foreign powers are plotting against him?
The unexpected factor also includes the good old stubborn Cypriots, who have had had foreigners running them over for thousands of years.

As the ‘foreign plotters’ learned to their horror in the rejection of the Annan Plan on 24 April 2004 and the rejection by parliament of the haircut on small depositors on 19 March 2014, Cypriots do not respond well when they think they are being pushed around.

Although many now regret parliament’s vote, it had widespread support at the time, not so much because Cypriots did not want to lose 6.75% of their bank deposits, but because they knew that, with only half a bailout and some very unusual and ‘exceptional’ terms, they were being treated more harshly than the other eurozone members, who got a full bailout and a lot less propaganda besides.

Finally, these foreign plot stories are always predicated on the assumption that foreign powers are far more organised and cooperative when it comes to plotting against Cyprus than they are at agreeing world trade deals, invading Iraq and Afghanistan, or keeping their spies quiet. In other words, the plots give these often chaotic powers and their muddle along policies far too much credence.

But the main reason I dislike foreign plot stories so much is that by robbing Cypriots of power, it robs them of the courage to shape their own future.
Yes the economic crisis does present an opportunity to solve the Cyprus problem, but only if it offers a clear path out of the economic crisis.

So yes, solving the Cyprus problem is about solving the gas issue, especially because it certainly means more revenue, and might mean doubling the amount of gas investment on offer.
So let’s start thinking how to achieve that, instead of robbing Cypriots of their initiative and legendary adaptability to adapt to difficult new challenges with conspiracies that do not even add up.

Fiona Mullen, Partner, Strata Insight; Director, Sapienta Economics



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