Saturday, October 11, 2014

Cyprus, Turkey Braced For New Fight Over Gas Reserves -- Update | Nasdaq

By Dow Jones Business News, October 10, 2014

By Alkman Granitsas

ATHENS--Renewed tensions between Cyprus and Turkey over potential natural gas deposits in the eastern Mediterranean risks becoming a new bone of contention in the region.

A decision by Ankara earlier this month to send a research vessel and two navy ships into disputed waters south of Cyprus represents the latest flash point in a long-running dispute over who has the rights to exploit the natural resources believed to lie in the seabed. The move comes as Italian energy giant Eni SpA begins test drilling for gas in a bloc southeast of Cyprus awarded to it by the Cypriot government.

In protest, Cyprus President Nicos Anastasiades this week suspended peace talks with the Turkish-controlled north of the island. Further diplomatic moves in Brussels, Washington and at the United Nations--where Turkey is lobbying for a seat on the Security Council--are expected to follow in the weeks ahead.

Turkey condemned the decision to freeze the talks and criticized the Cyprus government's attempt to "unilaterally" exploit the island's natural resources without conferring with the Turkish Cypriot minority. "Its attitude," said Turkey's foreign ministry, "shows that it is not ready for the idea of a settlement based on partnership."

Significantly, Turkey's decision to send the ships into disputed waters has already drawn criticism from the European Union, which includes Cyprus, as well as the U.S.--even as the West tries to forge a common front with Ankara to address the crisis in Syria and the rise of Islamic State extremists.

"The U.S. does recognize Cyprus's right to exploit resources in its exclusive economic zone, but right now Cyprus is not a priority, Syria is the overriding concern," said a Washington-based foreign relations consultant working for the U.S. State Department. "Still, this is a diplomatic headache and complicates U.S. planning in confronting Islamic State."

The U.S. has been trying to enlist Turkey, a member of the North Atlantic Treaty Organization, into an international coalition against the rise of Islamic State in Syria and Iraq.

Ever since a giant gas field was discovered off Israel in 2010--and amid indications of vast hydrocarbon reserves in the area--the countries of the eastern Mediterranean, including Cyprus, Turkey, Israel, Egypt and Greece, have all been jockeying for control of those resources.

More recently, the U.S. has stepped in. In May, Vice President Joe Biden visited Cyprus--the first visit by a U.S. vice president in more than 50 years--in an effort to nudge along the peace talks and declaring that the island, with its gas reserves, could serve as a source of "peace and stability in the Eastern Mediterranean."

The peace talks that began earlier this year were effectively moribund, even before this week's suspension, meaning that Mr. Anastasiades's announcement was largely symbolic. But there is pressure inside the Cypriot government for a stronger response, with one senior Cypriot diplomat saying that if "our friends" don't do anything, "then we will."

One option being mulled, according to Cypriot diplomats, is to close down some of the border crossings between the Greek Cypriot south of the island and the Turkish-controlled north. Cyprus also hopes to raise the issue of Turkish harassment at this month's EU summit in Brussels.

Nicosia will also push to freeze EU accession negotiations with Turkey, and it hopes to stymie Ankara's bid for a rotating seat on the Security Council, say diplomats and analysts.

"This shows that Turkey is not acting as a constructive player in the region," says Constantinos Filis, research director at the Athens-based Institute of International Relations. "And even though any protests will be largely symbolic in nature, there is always the risk that a confrontation between Cyprus and Turkey could spiral out of control."

Michalis Persianis in Nicosia contributed to this article.
Write to Alkman Granitsas at alkman.granitsas@wsj.com

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