Greek Prime Minister Alexis Tsipras has announced consultations between Cyprus, Greece and Egypt on maritime borders in the Eastern Mediterranean, crucial to regional oil and gas exploration rights.
Cyprus, Egypt and Greece have come closer in recent months, having held their first trilateral summit in Cairo in November 2014. At the summit, which focused on combating terrorism and energy extraction, leaders of Cyprus and Greece pledged to act as “ambassadors” of Egypt to the EU. Egyptian President Sisi described the summit as a “new phase of trilateral cooperation”.
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Under the previous Morsi-led government, Egypt announced in March 2013 that it would no longer respect its maritime borders with Cyprus and canceled a 2003 agreement with Cyprus defining Egypt’s Exclusive Economic Zone (EEZ) under the United Nations Convention on the Laws of the Sea. The Sisi government signed an agreement with Cyprus to restore its previous EEZ in December 2013, which gained presidential approval in September 2014.
The issue is particularly crucial to Egypt due to its drive to reduce subsidies. Natural gas subsidies were slashed in mid-2014, sending commercial prices up by 30-75 percent. As present low oil and gas prices can’t last forever, Egypt is making the most of this opportunity to secure a reliable supply. The Sisi government strategy on the issue appears clear; avoid Morsi-style brinksmanship over boundaries and reach a pragmatic solution to the issue. Cypriot and Egyptian ministries have recently signed a memorandum of understanding on natural gas facilitation, which is expected to lay the ground to facilitate further development of the Aphrodite gas field, a 100-billion cubic metre reservoir held by Noble Energy and the Delek Group.
Conspicuous by its absence from the meetings, Turkey remains the elephant in the room. The biggest challenge for relations between the trio and Turkey remains as ever the issue of northern Cyprus, which has been under Turkish occupation since 1974. As a result, Turkey does not recognise agreements made by the Greek majority EU-member Cyprus. A more recent factor has been the vocal support of Turkish AKP President Erdogan for jailed former Egyptian President Morsi. Considering the upcoming 7 June 2015 Turkish general election, the trio would be wise to avoid direct confrontation with Turkey to keep the AKP from involving gas exploration in nationalist populism aimed at the domestic audience.
As Israeli regulatory uncertainty surrounds development of the Leviathan gas field, resources of the Aphrodite field may be mobilised to meet Egyptian demand. Such exploration requires a lot of work on the ground to make the project commercially viable. As it stands, cooperation between the trio is strong enough to lay the groundwork to secure Egypt’s natural gas supply.
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