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Could Cyprus’ gas really be a catalyst for peace?

comment ellinas it is quite likely that the government of cyprus would be happy to discuss eez delineation with turkey
It is quite likely that the government of Cyprus would be happy to discuss EEZ delineation with Turkey
Rejecting Turkey’s energy proposals is not enough. Cyprus should also be ready with counter-proposals that could contribute to reviving and speeding-up the Cyprus talks

By Dr Charles Ellinas and Andreas Mavroyiannis

With a deal to develop Aphrodite gas under discussion and another likely to follow early next year to develop block 6, Cyprus’ natural gas is receiving renewed attention. Pre-empting agreements, Turkey’s foreign minister, Hakan Fidan, was quick off the mark, proposing in October that Turkish and Greek Cypriots could jointly exploit the island’s gas resources without prior solution to the Cyprus problem, similar to agreement between Lebanon and Israel brokered by the US.

Since then, the war in Gaza has complicated geopolitical balances in the region causing a rift between Turkey and Israel, postponing ‘sine die’ their anticipated cooperation in the energy and other sectors. It is also affecting energy flows, particularly gas flows from Israel to Egypt and Jordan.

Cyprus did not reject Fidan’s proposal, but responded by reiterating its long-standing position: Recognition of the Republic of Cyprus to be followed by discussiions with Turkey based on international law and the law of the seas for the delimitation of the EEZ between the two countries.

However, rejecting Turkey’s energy proposals is not enough. Cyprus should also be ready with counter-proposals that could contribute to reviving and speeding-up the Cyprus talks.

But can the Fidan proposal be used to create organic conditions for solutions without falling back on the long-standing position that solution of the Cyprus issue is a prerequisite?

However, before answering this, let’s look at the realities on the ground. The first question that should be asked is who actually has the right to develop this gas? Under the Production Sharing Contracts (PSCs) entered into by the government of Cyprus, the operating oil company of a licensed block is granted exclusive rights to conduct all hydrocarbon operations in the block. This includes development and exploitation of any gas finds. Even though such plans require approval by the government, the government cannot prescribe its own plans, unless the operating company agrees. Hence the current dispute with Chevron on the plan to develop Aphrodite.

The second question is what exactly does the Lebanon-Israel agreement entail and how could this relate to Cyprus? Foremost, it is an EEZ delineation agreement. As a result of it, the two countries now have an agreed boundary between their EEZs. Secondly, it includes a provision to share any gas finds that straddle this boundary. But it does not give any rights to Israel on what Lebanon does within block 9, affected by this agreement.

The operator of Lebanon’s block 9 remains TotalEnergies, and it is TotalEnergies that is responsible for exploration and exploitation of any gas finds according to its licence with the Lebanese government.

So, how does this translate to Cyprus? What is meant by “joint exploitation”?

It is quite likely that the government of Cyprus would be happy to discuss EEZ delineation with Turkey, and even consider mediation as happened between Lebanon and Israel –where successful mediation was provided by the US. This could be extended into wider discussions between Greece and Turkey to normalise their maritime zones, should these take place.

But the legally-binding PSC licensing agreements -and the rights to hydrocarbon exploration and exploitation- with the operating oil companies remain in force, as in Lebanon.

In addition, with more or less all blocks in Cyprus’ EEZ likely to contain hydrocarbons licensed, no new licensing rounds are expected to take place in the foreseeable future. So, new licensing does not come into the equation.

That leaves management and supervision of PSCs, approval of development plans of any gas finds and sharing of any revenues that accrue from the exploitation of such finds.

As Cyprus is finding from its dispute with Chevron regarding development of the Aphrodite gasfield, disagreeing with and taking-on a major oil company is fraught with difficulties. Prolonged disputes risk delaying development and, in an era of accelerating energy transition, place future exploitation itself at risk.

That leaves as the key issue sharing of revenues, something that has been under discussion ever since the start of negotiations for the solution of the Cyprus problem. Former leaders Christofias and Talat reached agreement on the development and exploitation of natural resources for the benefit of the two communities, that were later accepted in the context of the Anastasiades-Akinci negotiations in 2015-2016. The only remaining issue was final distribution that was to be discussed in the broader framework of the negotiations. Yet a generous transitional arrangement to help the Turkish Cypriot community to catch up economically had already been agreed. Furthermore, it was agreed that all activity on this issue should be in line with the UN Convention on the law of the sea, of which Cyprus is a party.

Anastasiades and Akinci also agreed that natural resources, as well as revenue sharing, will be under federal responsibility. Former-president Anastasiades confirmed on a number of occasions that all legal citizens of the Republic of Cyprus have rights to these revenues.

Thus, the basis to agree how both Greek and Turkish Cypriots can benefit from the exploitation of hydrocarbons in Cyprus EEZ exists. But it requires the right conditions to take this forward.

The above analysis shows that generic, vague, statements such as “the Lebanon-Israel agreement can be a model for Greeks and Turkish Cypriots” and “it is possible to exploit Cyprus’ energy potential from which both parties will benefit equally, without having to wait for a political solution,” other than reviving the issues, do not mean much in practice. They remain generic, with interesting intent, but by themselves do not lead to practical, tangible, outcomes. For that, there is a need be more specific.

Fair distribution of hydrocarbon revenues has been under discussion between the two communities and can be approached again if it is deemed to promote cooperation and contribute to solution of the Cyprus problem.

Amos Hochstein, the US Special Presidential Coordinator for Global Infrastructure and Energy Security -that brokered the Lebanon-Israel agreement- has pointed-out that the US has communication channels with all parties and is willing to use these to promote discussions.

Interestingly, in making his suggestions, Fidan never used the phrase “two separate states in Cyprus” and so far – under his tenure – Turkey has refrained from exploring or drilling in Cyprus’ EEZ. Some interpret the messages coming from Turkey to indicate that, in the context of the rapprochement with Greece, it is open to negotiations.

In addition, the gathering momentum towards reviving the EU-Turkey relationship, in spite of its ups and downs, based on the principle “more-for-more,” could provide new opportunities through the implementation of the Ankara Protocol.

This could create a win-win situation: ultimately acceptance of Cyprus existence by Turkey, access of ships under Cypriot flag to Turkish ports, opening discussions for the modernisation of the EU–Turkey Customs Union and Turkey being able to buy natural gas that it direly needs from Cyprus with all the avantages that proximity offers for both. We cannot think of better catalysts for creating organic conditions facilitating settlement of the Cyprus problem

The war in Gaza has destabilised regional balances, but the negotiations that will surely follow the end of the war to underpin peace, seeking longer-lasting solutions, are likely to be extended to the wider region. Turkey certainly expects to be a player in this, but so are most of the other countries in the region, including Cyprus. Energy and maritime differences could also feature in this process, that is likely to be led by the US. This could open up opportunities for which Cyprus must be ready with imaginative proposals.

 

Dr Charles Ellinas is a Senior Fellow and the Global Energy Centre, Atlantic Council.  Andreas D Mavroyiannis, an Ambassador (ad hon), is the former Chief Negotiator for the Greek Cypriot side and was a candidate in the 2023 presidential elections. @CharlesEllinas

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