Eastern Mediterranean gas

SEYFETTİN GÜRSEL

An important development occurred quite recently that could affect the Middle East and Turkey’s strategic position in the region: the rich natural gas fields discovered in the eastern Mediterranean. U.S. company Noble Energy discovered rich natural gas fields first in Israel’s exclusive fields, and then in ones belonging to southern Cyprus. Natural gas started flowing to Israel recently, while southern Cyprus’ natural gas will be ready for production in a couple of years.

Meanwhile, there are attempts to repair Turkish-Israeli relations, which plummeted after the Israeli army’s bloody raid on the Mavi Marmara flotilla in 2010, following a recent Israeli apology over the matter. While all this is happening, the economy of southern Cyprus has collapsed because of the banking crisis. Greek Cypriots are heavily indebted at an amount almost equivalent to their national income.

These dizzying developments have initiated new dimensions in the strategic game in the Middle East. The main actors of the game are Turkey, Israel, southern Cyprus, the European Union and, naturally, Noble Energy. In the new game, developments will be determined by the course of the Palestinian-Israeli and Cyprus conflicts, as well as the economic problems of the actors. Noble Energy has a 36 percent share in the natural gas reserves, which contain more resources than Israel and southern Cyprus could use in 100 years. The company has spent huge amounts, and they want to export natural gas as soon as possible in vast quantities. So does southern Cyprus, whose only hope is natural gas.

Israel’s situation, though, is different. In her article published recently in Al-Monitor, Tülin Daloğlu wrote that two aspects were highlighted during her interviews with Israeli government officials. According to Daloğlu, the Israelis have not yet decided whether or not to export the gas. Besides, even if they have decided to do so, they are skeptical due to security concerns about the gas passing through a pipeline through Lebanese and Syrian fields and about shipments to Turkey.

The curse of oil

It is not difficult to understand the concern for security, but the first aspect needs to be scrutinized a bit. There is a well-known concept in economy literature: The Dutch Disease. It is also known as the “curse of oil.” In the 1960s, when natural gas fields were discovered in the Netherlands, their national currency, the guilder, became strong very fast and dangerously weakened the Netherlands’ competitiveness in an economy based on industrial exports. From that day on, it has been a matter of conjecture as to whether it is good or bad for countries that do not have a foreign trade deficit problem to discover natural resources. Israel’s situation is no different than the Netherlands’. Its economy is based on industrial exports, they have a foreign trade surplus, and the shekel has already become stronger. They do not want it to get any stronger.

The EU, on the other hand, has at least four important expectations from the eastern Mediterranean gas: First, southern Cypriot gas exports may save the country’s economy, meaning the EU can recover its loans. Second, the energy dependency on Russia will lessen. Third, the expectations related to gas may “motivate” Greek Cypriot leader Nicos Anastasiades to be more competitive in the search for a solution to the Cyprus issue. Fourth, if this becomes possible, then the biggest deadlock in Turkey-EU relations would be solved.

Now, you will ask, “Right, these things are all nice, but how will the gas be shipped?” There are two ways for this: By a pipeline through Turkey or by ships after liquefaction. The cheapest way is the pipeline. It can easily be connected to the pipelines being built in Turkey. Liquefaction, on the other hand, requires an investment of $10 billion. The cost of the natural gas drilled from quite deep is already high. Liquefying the gas further increases the cost. It is doubtful that Israelis will become partners for such an investment. Greek Cypriots, on the other hand, do not have the money to do that on their own.

Moreover, Turkey says that it will not allow the rights of the Turkish Republic of Northern Cyprus to be violated. Besides, Turkey does not need the eastern Mediterranean gas while Iraqi Kurdistan gas is standing right next door. In other words, it has a strong hand.

Seyfettin Gürsel is a columnist for daily Radikal in which this piece was published on April 24. It was translated into English by the Daily News staff.

SEYFETTİN GÜRSEL - seyfettin.gursel@radikal.com.tr