31 Mar 2017 Turkey’s next moves over Cyprus and gas

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Last week, Turkey’s Ministry of Foreign Affairs issued another statement about offshore hydrocarbons exploration in the Cyprus Exclusive Economic Zone (EEZ). Turkey has been issuing statements since 2004, when the Republic of Cyprus (ROC) first delineated the EEZ. For reasons I shall explain below, the latest statement has been keeping me awake at night.

Turkey sees part of the Cyprus EEZ in the south-west as its own continental shelf. Turkey and the Turkish Cypriots see the rest of the EEZ as jointly owned by Greek Cypriots and Turkish Cypriots, in their capacity as co-founders and co-governors of the ROC.

The rest of the world does not recognise Turkey’s continental shelf claims and supports the sovereign rights of the ROC to exploit its own resources. As regards revenues, the UK and the US have said in the past that they expect hydrocarbons revenues to be shared by both communities “in the context of an overall agreement” (US) or “in the future” (UK).

“All necessary measures”

The latest statement from Turkey ends with: “Turkey will take all necessary measures to protect its interests in the Eastern Mediterranean as well as the rights of the Turkish Republic of Northern Cyprus.”

Previously, the term “all necessary measures” had been reserved only for the areas which Turkey claims as its continental shelf (parts of Blocks 1, 4, 5, 6 and 7). “All necessary measures” is essentially diplomatic language for “we are prepared to use force”. That is why you cannot even look for dolphins in these areas without being chased away by warships.

In the past, Turkey’s language on the rest of the EEZ was softer. For example, in 2013 Turkey said “Turkey will continue to support the Turkish Cypriot side’s activities”. This was part of the Turkish Cypriots’ ‘reciprocity’ policy. This policy argued that if Greek Cypriots explore in what Turkey and the Turkish Cypriots consider to be a unilateral move, then Turkey will support the Turkish Cypriots to explore unilaterally as well. This is why you saw the Turkish Petroleum Corporation (TPAO) sign agreements with the Turkish Cypriots in September 2011, just days after Noble started drilling in Block 12.

So what should we expect from this latest, stronger statement? At the very least we can expect a more aggressive response to the drilling due in the EEZ later this year.

As to what will happen when companies actually start producing gas, a clue comes from TPAO’s Chief Executive Officer Mehmet Uysal in late 2011, when interviewed for ‘The Cyprus Hydrocarbons Issue’, by Ayla Gürel, Fiona Mullen (me) and Harry Tzimitras.

Uysal said that the company wanted to be ready to drill within five years “if the international climate is ready”.

Sure enough, five years later, TPAO now has its own deepwater rig in the Black Sea. Turkey’s energy minister Berat Albayrak announced in March that Turkey will be “drilling in the Mediterranean in the next five to 10 years”.

More honey please

In other words, Turkey tends to give advance warning on what it will do. Cyprus is still some years away from producing gas. But this warning seems to be saying that, as long as the Cyprus problem remains unresolved, Turkey will actively prevent the production of gas.

By now you may be thinking: “Turkey won’t dare. We have NATO members the US, the UK, France and Italy involved in the EEZ, not to mention Israel.”

The world is unstable these days, so it is hard to predict. Moreover, Turkey probably does not have to do much to raise the insurance costs of gas companies to unsustainable levels (and maybe kill off Cyprus tourism in the process). The companies might just quietly shelve their plans and focus on other countries instead.

On the other hand, when Greek Cypriots feel they are being blackmailed, the last thing they do is concede. They are far more likely to do something that ends up inflicting a lot of damage on themselves.

I am not sure that Turkey has understood this, and that is why I am finding it hard to sleep at night. As the old saying goes, “you trap more flies with honey than with vinegar”.

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