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Cyprus’ Gas Discovery Raises Political Stakes

Find could form basis for accord with Turkey, or risk increased tensions

The discovery of large quantities of natural gas offshore Cyprus could give a push for ending the decades-long dispute dividing the island. But it could also end up ratcheting up tensions with Turkey.

Disputes over how to divide the spoils of the eastern Mediterranean Sea’s vast gas reserves have pitted the island state and nearby Israel against Turkey in a war characterized so far by harsh language and stepped up naval activity. But the stakes rose as of Wednesday after Cyprus announced that an exploration partnership had discovered as much as eight trillion cubic feet of natural gas in its waters.

For Cyprus, the discovery is a bonanza – at current prices, the estimated reserves are valued at $32 billion in an economy whose output came to $23 billion in 2010. And that’s just the beginning: Last month, Cyprus’s government announced a second oil and gas licensing round that will cover 12 of 13 blocks in the ocean south of the island.

Known as Block 12, the field of the discovery announced on Wednesday covers about 40 square miles. It will require additional drilling prior to development, but it was hailed as a "significant" discovery by Charles D. Davidson, chief executive officer of the U.S. company Noble Energy, which led the exploration consortium.

The U.S. Geological Survey last year estimated a mean of 1.7 billion barrels of recoverable oil and 122 trillion cubic feet of recoverable gas in the Levant Basin Province, to which Cyprus belongs. Israel has already uncovered huge reserves in waters under its control

But to exploit the gas, Cyprus will have to reach an accommodation with Turkey over the future of the island, which has been divided into Greek and Turkish zones since 1974, said Sinan Ulgen, visiting scholar at the Carnegie Endowment for International Peace in Brussels. Without an agreement, Cyprus risks a perpetual crisis with its powerful neighbor, he said.

“This raises the stakes for reaching a lasting settlement with regard to the political division of the island,” Ulgen told The Media Line. “For Greek Cypriots, if such a settlement is reached they can comfortably take advantage of these offshore resources. If a settlement is not reached it will always be problematic … Turkey will always try to put up an obstacle one way or the other.”

Although the Greek Cypriot government is recognized as the official one and belongs to the European Union, Ankara backs the breakaway ethnic-Turkish northern part of the island and claims rights to the island’s energy reserves. It has employed its navy to confront Cypriot oil drilling and escort Turkish vessels conducting geological surveys in Cypriot waters.

Greek and Turkish Cypriot sides have held on-and-off peace talks under United Nations auspices for decades. The latest round began three years ago.

Both the rhetoric and the naval muscle-flexing peaked last autumn after the Noble began exploratory activities with a license awarded by Cyprus. Israel became ensnared by virtue of an agreement that Ankara rejects dividing economic rights to the seabed they share. Two Israeli companies are partners with Noble in the Cyprus drilling.

Speaking at Woodrow Wilson International Center for Scholars in Washington earlier this month, Cypriot Foreign Minister Erato Kozakou-Marcoullis called Turkey the  “neighborhood bully”  and said it had become a country that went from advocating a foreign policy of “zero problems” with its neighbors to one of “only problems.”

Nevertheless, tensions gradually wound down after Turkey reached a quiet understanding with the U.S. not intervene in Cyprus’ exploration activities. But Ulgen said Ankara may be under no obligation to restrain itself now that Cyprus moves out of the exploration phase into developing a gas infrastructure.

“What is still unclear is whether the agreement covers only the first step of exploration or whether it concerns the whole process. The incentive on Turkish side would be to try to hinder this process, to show to Greek Cypriots that settlement on the island would be beneficial to Greek Cypriots as well,” he said.

A rising economic and military power at a time when the U.S. and Europe are in retreat in the Middle East, Turkey is in position to make use of its navy, said Eric Grove,  director of the Center for International Security and War Studies at Britain’s University of Salford, said in an essay in World Politics Review this month. “Turkey’s current naval fleet is not only significant but also pre-eminent among those of local actors.”

But James Dorsey, senior fellow at Nanyang Technological University’s S. Rajaratnam School of International Studies in Singapore, said he is doubtful that Turkey would use it, pointing out that Turkish Prime Minister Recep Tayyip Erdogan has stepped back from possible confrontations with Israel over its blockage of the Gaza Strip and with Syria over its deadly crackdown of rebels.

“I would not be surprised if there would be more acrimony over where the maritime border line is and what is the Turkish Cypriot stake in this,” Dorsey told The Media Line. “Whatever bluster you have out of Ankara, it is clear that the Turks are gun-shy. I’m not saying that negatively. But this is not the OK Corral for them.”

Bu even the diplomatic route for Turkey presents a problem because Cyprus is due to take over the European Union rotating presidency in the second half of 2012, which will strengthen Cyprus’ hand. “Cyprus having the EU presidency for six months is a problem for the Turks. It’s going to be six months when Turkey will have a problem putting forward its issues,” Dorsey said.