A Blue Growth Strategy for Cyprus

While sitting in my office in Ankara, I was reading the Bruegel study on the “Geopolitical implications of the Green Deal,” which claims to be “a plan to decarbonize the EU economy by 2050, revolutionize the EU’s energy system, profoundly transform the economy and inspire efforts to combat climate change.”

With bold action in the White House, the plan has been turned into a broader transatlantic agreement, and we see the beginnings of a new green-digital trading zone taking shape. This will have far-reaching geopolitical repercussions.

It occurred to me that the Green New Deal might also change the context of the situation in Cyprus, and the old problem we have in this part of the world. The U.N. talks on Cyprus started again last week, which makes this a very good time to talk about the island’s future. Resuming the talks for the first time since 2017 is a positive development in itself.

The two communities of the island, the Greek and the Turkish Cypriots, can now come together
again with the guarantors - the United Kingdom, Greece and Turkey - under the auspices of the U.N. Talking is better than the alternative. It is also good for ending the frustration of the Turkish Cypriots, who live in limbo, hoping for reunification for decades now.

Since 2015, Turkish Cyprus has turned itself into a self-sustaining economic entity. Note that Turkey has current account deficits, but Turkish Cyprus boasts a current account surplus. It made two good strategic bets ten years ago: Tourism and university education. I now think that the strategy could easily be enlarged to the biotechnology sector. We can call it the “Blue Growth Strategy” for Cyprus.

Despite their successes, however, the Turkish Cypriots have been getting more frustrated in recent years. This is because, in Cyprus, we once had a small and relatively contained conflict between the Turkish and the Greek populations. When the Greek Cypriots rejected the Annan Plan for reunification in 2004, they also looped the EU into the conflict. They hoped that this would allow them to dominate terms in the future by upgrading the local dispute into a regional dispute between Turkey and the EU.

The finding of prospective underwater hydrocarbon resources around the island more than a decade later made all this worse. The find led the Greek Cypriots to start distributing drilling rights to French and other Western petroleum companies while shutting out the Turks. As the dispute heated up, Greek Cypriot leader Nicos Anastasiades created an anti-Turkish Alliance around prospective hydrocarbon resources. The East Mediterranean Energy Forum took shape in Cairo without even inviting Turkey.

Now the Green New Deal has the potential to change the business plans of oil-exporting countries like Russia, Algeria and Saudi Arabia. The deal is likely to kill demand for hydrocarbons in the coming decades, which means that the Cyprus find too is going to be less significant than initially expected.

With the new focus on green financing, rising interest costs of unsustainable project funding, and declining hydrocarbon demand, the whole debate about the eastern Mediterranean is going to change. It is going to be very hard to turn newly found and tested hydrocarbon resources into bankable projects. Israel’s Leviathan gas field, for example, is still waiting. It is time to look for a new business plan, and I would argue that being shut out of the hydrocarbons game, Turkish Cyprus has already started developing one.

The Green New Deal means that the Cyprus conflict could once again be shrunk to a relatively contained conflict between the Greeks and the Turks. We may no longer need the “Schuman plan for hydrocarbons” I previously wrote about. An EU plan for a “blue growth” strategy in Cyprus may suffice. Why not? The world economy has to go green, as well as a color less talked about: Ocean blue. The sooner we act, the better off we will be in the future.