Turkey's bluster over Cyprus oil exploring designed for domestic audience

By bne IntelliNews March 13, 2007

Nicholas Watson in Prague -

The Greek Cypriot decision to press ahead with oil and gas exploration off its coast unsurprisingly drew angry words from Turkey as well as dark warnings about instability in the region. But given the move is, as the US Ambassador there succinctly put it on March 7, Cyprus' "sovereign right" to explore these areas, there is a feeling that Turkey's bluster has more to do with the upcoming elections than signalling an impending confrontation.

The Cypriot government in February officially launched a licensing round for offshore oil and gas exploration licenses, inviting foreign firms to apply for licenses to prospect for oil and gas in 11 offshore blocks, totalling nearly 27,000 square miles of southern Cypriot Mediterranean waters. Cyprus said five international companies have already expressed an interest in exploring in the area, with reports saying the firms are Russian, Chinese and US.

The licensing round follows a deal signed in January between Lebanon and Greek Cyprus to explore for oil and gas off the eastern Mediterranean. A similar agreement was signed between Greek Cyprus and Egypt last year.

Turkey's response was to label the licensing round as a provocation. "We expect Greek Cyprus to end its initiatives to launch international tenders which violate the joint rights of the island's two communities and amount to a fait-accompli," Turkish foreign ministry spokesman Levent Bilman said in a written statement. "Continuation of the tender process will adversely affect peace and stability on the island of Cyprus and the eastern Mediterranean."

Going beyond words, the Turkish state also claims oil and gas rights in the area and so Turkish Energy Minister Hilmi Guler announced in February that the Turkish Petroleum Corporation (TPAO) would start exploring in the eastern Mediterranean, off the southern cities of Antalya, Iskenderun, and Mersin.

Here, say analysts, is where the danger begins. According to John Daly of the think-tank The Jamestown Foundation, complicating the issue is that under the Article 22 of the 1982 Third UN Convention on the Law of the Sea, the Mediterranean is regarded as a "semi-enclosed sea," with competing claims by 21 coastal states with delimited sovereign rights over exclusive maritime economic zones. Turkey and Greece, therefore, have overlapping maritime, air, territorial, and boundary disputes in the Aegean. Indeed, Energy Minister Guler has acknowledged that the areas designated by the Turkish and the Greek Cypriot government for oil exploration might overlap.

And this is not the first time this issue has almost led to conflict. Turkey and Greece came close to war in the 1987 over the issue of oil prospecting in the Aegean, and in 1996 a stand-off between Greek and Turkish coastguard vessels off an uninhabited island nearly resulted in fighting.

Clearly the issue has the potential for serious repercussions. However, most analysts believe that conflict over the issue is unlikely and exploration will go ahead, albeit perhaps more gradually than the Cypriot government would like.

Music to Turkish ears

After the two sides nearly came to blows in 1996, the governments, under pressure from NATO, instituted a series of military confidence-building measures designed to prevent potential clashes in the Aegean. "These efforts could well be extended to cover the Cyprus oil dispute," reckons Daly.

There is also some suspicion that Turkey's strong words on the subject are designed more to cause foreign firms to pause for thought before applying for licenses – Turkey has already berated Egypt and Lebanon for striking deals with Cyprus – and to appeal to a domestic audience rather than to actually indicate it's spoiling for a fight.

With the Turkish government facing elections later this year, it sees taking a hard line over the issue as playing well with an electorate that is becoming increasingly nationalistic and, thus, seemingly less enraptured with joining the EU.

"The Turkish government has taken an increasingly nationalist stance on a number of issues, not least energy. This includes painting a picture of a government keen to defend national security for the domestic electorate's benefit, which has sometimes resulted in a rather isolationist policy depicting Turkey facing a lone struggle, its potential misunderstood by outsiders — be they the EU, the United States or closer to home," says Andrew Neff of the consultancy Global Insight.

The European Commission has already said Cyprus has the sovereign right to sign international agreements - a view backed by US Ambassador to Greek Cyprus Ronald Schilcher, who said on a Greek Cypriot radio station that, "The countries which have suspicions about [Greek] Cyprus' right to sign deals on oil exploration should pursue legal and peaceful procedures."

The Turkish public is already riled by Greece following fairly puerile postings suspected from that country on the Internet video website YouTube, which showed pictures of Turks, including the founder of the modern state Ataturk, with references to their being gay. Access to the site was temporarily halted by a Turkish court.

While a big oil and gas find would probably ratchet up the tension between Cyprus and Turkey, experts are doubtful whether that's likely to happen before the island – which has been divided since 1974 when Turkey seized its northern third in response to an Athens-engineered coup in Nicosia seeking to united the island with Greece – is eventually reunited.

And some even question whether there are any big reserves there at all. There have been substantial oil and gas finds in Egypt's Nile Delta by BG Group, Edison, BP and Royal Dutch/Shell, and most media reports talk of as much as 10bn barrels of oil equivalent lying under the seabed. However, Panos Papanastasiou, head of the department of civil and environmental engineering at the University of Cyprus, is more guarded.

"There is absolutely no way of knowing whether there is oil out there or how much of it. Right now, it’s a shot in the dark. Making statements to the effect that $450bn worth of oil is out there waiting to be tapped is supremely arbitrary and, frankly, lacks seriousness," says Papanastasiou.

Business Monitor International's (BMI) country risk analysts argue that Turkey's objections over the prospecting are principally due to fears that exploration under the auspices of the Cypriot government will lower Ankara's negotiating position when talks regarding the island's final status resume. But given that Turkey's EU accession - which won't happen before 2015 – is contingent on a resolution of the Cyprus issue, its hand is already weak.

"While it may attempt to apply pressure to foreign companies and governments, the development of Cyprus' offshore acreage should proceed without undue political hindrance," it reckons.

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