Natural gas can power progress in Cyprus
Natural gas can power progress in Cyprus
Fresh Thinking Needed on Cyprus
Fresh Thinking Needed on Cyprus

Natural gas can power progress in Cyprus

The discovery of significant natural gas deposits off the southern coast of Cyprus in late 2011 and the possibility of more finds in the eastern Mediterranean offer a fresh and compelling incentive to settle the Cyprus problem. But the gas also poses risks to the island's future security and stability, entrenching the nationalist positions that for decades have blocked progress towards reunifying the Greek Cypriot and Turkish Cypriot communities.
If the sides cannot find a mutually agreed way of dealing with this new resource, the Greek Cypriots will find it harder to profit from their share of the hydrocarbon wealth, Turkish Cypriots will be deprived of inherent rights, and Turkey will miss another chance to fix this long-running drain on its diplomatic and economic future.

Escalating tensions in the eastern Mediterranean coincide with an impasse in Cyprus's reunification negotiations. The latest round of UN-mediated talks under way since 2008 have stumbled, and their stated goal of a bi-zonal, bi-communal federation is losing credibility. Few expect a breakthrough in the talks over the next year, as the Greek Cypriots will be distracted by their EU presidency in the second half of 2012 and a presidential election in May 2013.

The discovery of natural gas in the Aphrodite field -- with about 7 trillion cubic feet (200 billion cubic meters), enough to meet a century of Cypriot energy needs -- has so far not helped the process. The Republic of Cyprus, which has since 2003 delineated its exclusive economic zones (EEZ) with Egypt, Lebanon and Israel, has an internationally recognized sovereign right to explore and exploit subsea resources inside such areas. Nonetheless, the Greek Cypriots' unilateral start of drilling in September 2011 flouted an agreement they had reached with the Turkish Cypriots in bilateral talks that natural resources and maritime boundary agreements were to be shared in a joint federation. The Greek Cypriot president's vague promise to distribute future revenues did not allay Turkish Cypriot concerns that they were being cheated out of their fair share.

But unilateral and provocative actions by Turkey and the Turkish Cypriots have also violated the spirit of talks. They have agreed to delimit the continental shelf between their respective coasts and awarded licenses for prospecting in areas, including waters south of Cyprus. Now Turkey is finalizing preparations to begin onshore drilling on behalf of Turkish Cypriots in the north.

Turkey and Turkish Cypriots have objected to Greek Cypriot exploration and exploitation around the island since 2003. They reject the latter's claims to exclusive sovereignty, saying this is being negotiated and that the Republic of Cyprus does not represent Turkish Cypriots and their interests. Ankara also argues that five Republic of Cyprus licensing blocks west of the island overlap its own continental shelf claims. It believes its long coastline entitles it to a large share of maritime zones and views with suspicion the unofficial but apparently competing Greek Cypriot (and possibly Greek) claims to much of the eastern Mediterranean. To underline its objections in 2011, it provocatively sent research vessels, planes and warships to fly the Turkish flag near the Cypriot Aphrodite field and research vessels to areas closer to Greece.

Unilateral actions by all sides inevitably increase frictions and make accidents in the eastern Mediterranean more likely. At the same time, it is unrealistic to expect that the Republic of Cyprus will halt its offshore activities. Cyprus' economic and eurozone woes, which dragged its credit ratings down to junk status at the beginning of 2012, would make it very difficult for any Greek Cypriot politician to leave the gas in the ground.

Still, any significant revenues are several years away, and the two Cypriot sides can make the current situation better with confidence-building measures. Greek Cypriots should formally pledge to share an interim 20 percent of the resource with Turkish Cypriots, on the basis of their relative populations. The two sides should agree on a bi-communal advisory committee to work on ideas for joint domestic use and distribution of the gas. Alongside these steps, Turks and Turkish Cypriots should stop aggravating tensions through their actions inside Cyprus's EEZ, which are indefensible from an international law perspective.

Also, the long-term investment climate around the island suffers from apparent Turkish threats to blacklist any petroleum company that takes part in Republic of Cyprus licensing rounds and to physically challenge any drilling in what it sees as contested maritime areas. Even assuming the Greek Cypriots successfully extract the gas, the current political stalemate complicates plans to efficiently market it. Without Turkish cooperation, Greek Cypriots are leaning towards a liquefied natural gas (LNG) plant, which will need foreign financing in the range of half of Cyprus's annual gross domestic product (GDP) and will take a long time to build. Furthermore, to be truly profitable, a Cypriot LNG plant would need to process at least double the amount of gas available from the Aphrodite field, possibly from Israel. But it is unlikely that Israel will trust another country with such an expensive and strategic facility.

On the other hand, a Greek Cypriot commitment to LNG would likely cut Turkey and Turkish Cypriots out, thus deepening the de facto partition of the island. And Turkish and Turkish Cypriot plans to drill on their own are rife with technical, diplomatic and marketing difficulties.

Starting a dialogue on more imaginative energy options may prove a catalyst towards normalization of the island's frozen conflict. A pipeline to take eastern Mediterranean gas to Turkey, for instance, would give access to an attractive market and possible routes onwards to the EU. However, it is hard to imagine such a development being powered without a Cyprus settlement, itself a greater and more quickly available prize than the natural gas and probably the only way for everyone to truly profit from the recent discoveries off the Cypriot coast.

Fresh Thinking Needed on Cyprus

A new round of talks has begun in Cyprus and the key parties seem eager to reach a settlement. However, the official goal — a bizonal, bicommunal federation — has stymied negotiators for decades. It is possible that the time has come to consider a mutually agreed separation, within the European Union, of the Greek and Turkish parts of the island.

The closest the two sides have come to an agreement on federal reunification was a decade ago under the Annan Plan, named after United Nations Secretary General Kofi Annan. It built on decades of work and won the support of the UN, EU, United States, Turkey, and even Greece. Indeed, any federal deal will have to look pretty much like the one hammered out in those years of intense negotiations.

Yet the reality of public sentiment bit back. 76 percent of Greek Cypriots said no to this plan at referendum. As Annan wrote to the Security Council afterwards, “what was rejected was the [federal] solution itself rather than a mere blueprint.”

Today the two sides — whose infrastructure and administrative systems are almost completely separate — are, if anything, further apart. The numbers of people crossing the border have fallen, while polls show weakening support for a federal outcome. In 2004, the Turkish Cypriot side supported the Annan Plan with 65 percent of the vote. But in 2010, they firmly voted back to power a leader whose whole career has been dedicated to a two-state settlement. 

Miracles may happen — and there are many on the island who remain desperate for a settlement — but my judgment is that any federal deal will have an even tougher time succeeding now.

Fresh thinking is needed.The two sides should broaden the agenda alongside the well-worn process of UN-hosted talks between Greek Cypriot and Turkish Cypriot negotiators.

One idea that should be fully explored is what the terms might be if Greek Cypriots — the majority of the island’s population — were to offer Turkish Cypriots citizens full independence and fully support them to become members of the European Union. 

Such a deal would have to be agreed to by Greek Cypriots, voluntarily and through a referendum. This will be hard. Greek Cypriot public opinion still, in theory, absolutely rejects any partition. But even senior Greek Cypriot officials agree in private — especially around the dinner tables of business leaders seeking a way out of Cyprus’s crushing banking crisis of 2013 — that there is an increasingly urgent need for a new way forward for the economy and for society.

There is also a growing drumbeat of expert opinion urging Greek Cypriots to consider outcomes beyond the traditional federal goal, which has become so discredited that few on Cyprus are paying much attention to the new talks. International Crisis Group has just published Divided Cyprus: Coming to Terms on an Imperfect Reality, while the U .S. Congressional Research Service concluded last year that “a ‘two-state’ solution seems to have become a more prominent part of the Turkish Cypriot/Turkey rhetoric and unless a dramatic breakthrough occurs early in the negotiations… that reality may gain more momentum.”

Polls show that key parts of what Greek Cypriots and Turkish Cypriots really want can look surprisingly similar. The Greek Cypriots have long wanted a solution securely embedded in European values and structures. That is what Turkish Cypriots say they want too: to become part of the European Union, not part of Turkey, even if they do wish that, in extremis, Turkey would protect their small community. The European part is crucial.

This can only happen with voluntary Greek Cypriot agreement, something that will have to be persuasively won by Turkey and the Turkish Cypriots. They will need to offer convincing terms: withdraw all or almost all of Turkey’s 30,000 troops on the island; end the demand to continue the 1960s “guarantorship” so hated by Greek Cypriots; guarantee compensation of Greek Cypriots for the two-thirds of private property in the north that is owned by them; return the ghost resort of Varosha to its original owners; and pull back to hold 29 percent or less of the island. 

After what will necessarily be a multi-year transition, this will also produce the European solution that Greek Cypriots so often say they want. The two sides will share the same basic legal norms and regulations, the same currency, and the same visa regime. Secure and confident in their new sovereign rights, the Turkish Cypriot side will likely waive the un-European demand for “derogations,” or limits on property purchases by Greek Cypriots in the new entity. 

Nobody is completely right on Cyprus: all parties share responsibility for the frozen conflict on the island. At the end of the day, an independent Turkish Cypriot state within the EU is not rewarding one side or another. Europe will doubtless flinch at accepting a small new Turkish, Muslim state in its midst. 

But Europe helped create this situation, since Brussels breaking its own rules contributed to the clumsy 2004 accession of the disunited island to the EU. 

Moreover, at least 100,000 of the 170,000 Turkish Cypriots are already EU citizens through their Republic of Cyprus passports.

Europe will also be among those who gain from resolving a dispute that has for four decades burdened so many local and regional processes, not least the long-hamstrung relationship between the EU and NATO, and the new question of how the countries of the East Mediterranean can most quickly, profitably and safely exploit new offshore natural gas reserves. This is not partition: it is reunifying Cyprus within the EU.

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