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Cyprus

Cyprus-Egypt energy deal a possible PR stunt

Egypt’s Petroleum Minister Tarek El-Molla

Cyprus’ sovereign rights, including the right to commercially exploit its natural resources, cannot be sidelined because reunification talks are ongoing, the government said on Monday.

“The longstanding position of the Republic of Cyprus is that the natural wealth belongs to the state, and that subsequent to a solution to the Cyprus problem all the people of Cyprus stand to benefit” government spokesman Nicos Christodoulides told the Cyprus News Agency.

He was being asked to respond to an earlier statement released by Baris Burcu, spokesman for Turkish Cypriot leader Mustafa Akinci.

In his own statement, Burcu had commented on reports in the Greek Cypriot media of an upcoming interstate gas-related agreement to be signed in Nicosia later this week between Cyprus and Egypt.

According to Phileleftheros, who broke the story during the weekend, Egypt’s Petroleum Minister Tarek El-Molla will be visiting the island this week to sign a deal with Cyprus regarding natural gas that may be sold to Egypt in the future.

“Energy resources around Cyprus are the common wealth of Greek Cypriots and Turkish Cypriots.  The Greek Cypriot administration’s ignoring this fact and taking unilateral initiatives to enter into arrangements involving their exploration, production and transportation means the violation of Turkish Cypriots’ partnership rights and that is unacceptable,” Burcu objected.

“During such a critical period when we intensified the search for a comprehensive solution to the Cyprus problem, every approach that will increase the tension and poison the process must be avoided.”

However, press reports did not clarify precisely what the Cyprus-Egypt agreement entails.

The government spokesman confirmed that the Egyptian minister is due here on Thursday. The agreement is expected to be signed on Friday.

But from what can be gleaned in the media reports, the Cyprus-Egypt interstate agreement would simply be an understanding specifying how Cyprus’ natural gas – from the Aphrodite field – would be used in the event it is sold to Egypt.

In other words, the deal will likely spell out whether the Cypriot gas would be supplied to liquefaction terminals in Egypt for re-export to Europe, or to be used for domestic electricity generation inside Egypt.

“It does not sound at all like a commercial agreement,” energy analyst Charles Ellinas told the Mail.

“Without a signed gas sales agreement, specifying quantities, price and delivery timetables, there cannot be a project,” he added.

And in any case, said Ellinas, it is the energy companies themselves who take the lead in such deals.

Rather, the interstate agreement to be signed here on Thursday or Friday appears to be akin to a statement of intent, part of a framework agreement between the two nations which, while necessary, is neither binding nor does it necessarily foreshadow actual commercial agreements.

Given the apparent momentum in reunification negotiations on the island, as well as talk of possible pipeline cooperation between Cyprus, Turkey and Israel in the event of a Cyprus settlement, the Cyprus-Egypt agreement would seem to go against the grain, posing the question of why now.

A possible explanation might be the move is a PR stunt on Nicosia’s part. Last week Turkey’s parliament ratified a bill normalising relations with Israel. On the back of that, an announcement should be expected soon from Ankara and Tel Aviv regarding their normalised ties, re-establishing their diplomatic missions, as well as a reference to energy cooperation – plans for a pipeline running from the Leviathan giant gas field to Turkish shores.

It’s therefore likely that Nicosia, aware of what’s coming, is seeking to demonstrate that there’s another game in town – a Cyprus-Egypt axis, as it were.

Nicosia has meantime sought to downplay the possibility of a Turkey-Israel pipeline deal, noting that this subsea pipeline would need to traverse Cypriot economic waters.

Although the pipeline does not require Cyprus’ consent, it would require environmental permits from Cyprus.

Government officials here have made much of this, positing that should Ankara seek an environmental permit from Nicosia that would be tantamount to recognizing the Republic of Cyprus – a predicament for Turkey.

But Ellinas points out the flawed reasoning – given that an Israel-Turkey pipeline would be constructed by private companies, it is the companies who would request the environmental permit from Cyprus, not the Turkish government.

Earlier, on Sunday, a senior US official spoke on Washington’s hopes for broader energy cooperation in the eastern Mediterranean.

Amos Hochstein, US Secretary of State John Kerry’s envoy on energy affairs, told Bloomberg that countries in the region must work together if they hope to unlock multibillion dollar gas discoveries in Israel and Cyprus.

For Turkey, which already gets gas from Russia and Azerbaijan, deals with Israel and Cyprus would create diversity of supply.

With Cyprus now attracting large explorers to its own economic waters, the energy incentives may finally lead to a diplomatic resolution of that conflict, Hochstein told Bloomberg.

“If we can reach an agreement on the future status of the island, we unlock not only Israel-Turkey, we unlock Cyprus’s future production and destinations,” he said. “What gives us a reason for optimism is we have smart and committed leaders on all sides of the Cyprus conflict. The energy incentive is very clear for everyone.”

 


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