Eastern Mediterranean: Equitable hydrocarbon decisions necessary for a prosperous future

Sasha Toperich, Senior Executive Vice President, Debra Cagan, Distinguished Energy Fellow, Ambassador John Craig, Senior Fellow, Jonathan Roberts, Project Manager and Ariel Schwartz, Research Assistant – Mediterranean Basin, Middle East, and Gulf Initiative; Transatlantic Leadership Network / Washington D.C.

There are 1.7 billion barrels of oil and 3.5 trillion cubic meters of natural gas beneath the Eastern Mediterranean’s seabed, according to the U.S. Geological Survey. Since the discoveries were first made offshore Israel (1999) and Egypt (2000), the newfound reserves have been transformational for the energy outlook in the region. Israel transitioned from import dependence to exporting gas in 2020. Egypt discovered the Zohr gas field in 2015, by far the largest in the region with an estimated 800 billion cubic meters of gas. Off the coast of Cyprus, Exxon Mobil announced the third largest gas discovery in the world at its Glaucus -1 well, approximately 142 to 227 billion cubic meters.

Onlookers hoped that these discoveries would enhance cooperation and promote peace in the region. Unfortunately, with a few notable exceptions, it has instead led to greater animus. At the same time that international oil companies and gas giants (Exxon Mobil, Eni, Total, Kogas, Delek Drilling, Avner Oil, Qatar Petroleum, British Gas, and Chevron) have begun operations in the Eastern Mediterranean, politicians bicker over maritime boundaries and the rights to exclusive economic zones (EEZ) in a never-ending argument of who-owns-what. Without consensus, development prospects become stunted, and regional stability suffers.

A significant part of the problem are ages-old disagreements over geography. In November 2019, Turkey and Libya signed a maritime boundary treaty, establishing an EEZ that enabled them to claim seabed resources. Athens described this agreement as “geographically absurd,” because it simply ignores the presence of several Greek islands. At the same time, Greece and Egypt signed an EEZ agreement that they believe, “effectively nullifies an accord between Turkey and the internationally recognized government in Libya.” Predictably, Turkey rejected the Greece–Egypt delimitation agreement, maintaining that it infringes upon Turkey’s and Libya’s rights in the Eastern Mediterranean.

Turkey’s recent seismic research activities are another point of contention, despite being registered with the UN in 2004. Greece has always disputed these claims because of its approach to maritime boundaries, in which the continental shelf rights to a number of small islands, including the island of Kastellorizo that is just a mile away from the Turkish coast, are designated as Greek, thus superseding the shelf of the Turkish mainland. Islands and islets may have full, limited, or no rights when it comes to maritime boundaries. Greece’s maximalist approach of granting their islands full rights leaves  Turkey, a country with one of the  largest coastlines in the Eastern Mediterranean with virtually no no continental shelf.

Another important maritime dispute involves Cyprus. In February 2003, an EEZ agreement was signed between the Republic of Cyprus (RoC) and Egypt, but not recognized by Northern Cyprus (TRNC). In 2007, the RoC reached a similar agreement with Lebanon, however that deal still remains unratified by Lebanon’s parliament. In 1988, the RoC adopted 22 km (12 miles) of territorial sea, sending the coordinates to the UN in 1993, which were confirmed in 1996.

Turkey does not recognize RoC EEZ agreements with Egypt, Lebanon, and Israel. Ankara’s position is that Cyprus is de facto a divided island, hence the RoC does not represent the TRNC. Turkey also claims that part of its continental shelf in that region partially overlaps with several Cyprus EEZ blocks. Turkish Cypriots consider the island to be co-owned by both Greeks and Turks while Greeks consider Turkish Cypriots to be “occupying authorities” of the island.

The issue of a divided Cyprus represents a major obstacle for the region to embrace cooperation. Plans to resolve the dispute between Greek and Turkish Cypriots have never been accepted by both sides. Viewing the country today, the supposed Presidential Council of “United Republic of Cyprus” would have four Greek and two Turkish Cypriots members, as the latest (5th version) of the UN peace plan proposed.

In 2019, the then-president of Northern Cyprus Mustafa Akinci introduced a proposal for a cooperation mechanism between the TRNC and RoC over hydrocarbon exploration and exploitation, including joint revenue sharing. The proposal was rejected by Greek Cypriot president Nicos Anastasiades, who countered with a proposed 30% share from the energy fund to be established in 2022. In return, Turkey and Turkish Cypriots would compromise with Greek Cypriots on EEZs. That offer was supposedly rejected by Akinci because there would be no formal seat at the table for the TRNC in the management of drilling activities and the energy policies of the island writ large.

Not surprisingly, as with most matters in this region, politics drive the conversation. If all parties are to ever fully benefit from the exploitation of these resources and any future ones, a new pragmatic approach must be implemented. No one is under any illusion that such an agreement will lead to a resolution of the intractable disagreements between Greece and Turkey and among the inhabitants of Cyprus. But regional cooperation on what can result in energy independence and a much more financially stable future, can and should be taken out of this larger context and approached as a practical and commercial endeavor instead of just another part of an overall conflict.

The commercial reality is that while global gas demand through 2025 is projected to rise 1.5% per year on average, this will not be a forever proposition. Decreasing demand, falling prices and a more rapid transition to renewables, much brought on by the devastating economic impact of Covid-19, should help convince the region’s players to understand this window will not stay open forever. They will need to put politics aside in favor of a business-driven mindset if they are going to capitalize on these time-limited opportunities.

There are ample examples to draw from where commercial imperatives have been the primary driver of agreements. The history of the development of Israel’s Leviathan gas field is an important case in point. In December 2019, Israel received the first gas from Leviathan, with exports to follow. Underpinning Leviathan’s success is that Israel had to agree with its private sector partner (then Noble energy, now Chevron which owns 40% of the field) to come to an arrangement with Cyprus using the tenets of the UN Law of the Sea, even though Israel is not a signatory to that UN agreement. The insistence of the private sector that the agreement be a condition for moving forward with Leviathan’s development was a critical factor and made the field a huge commercial success. This is a clear case of the pragmatic succeeding over the all of the other distractions. Other countries should follow suit.

While hydrocarbons have dominated the Eastern Mediterranean conversation thus far, cooperation can also bear future dividends from green energy transition. As EU members, Greece and Cyprus are committed to Brussels’ recently announced 2030 interim and 2050 zero carbon goals. This part of the world is ripe for the development of platform wind, conversion of gas to hydrogen and blue ammonia, and other renewables that will substantially lower the carbon footprint in years to come. It will also enhance energy independence and serve as a source of energy supply for others as well.

However, in deciding where to build such projects, the region will face the same controversies as it does now with hydrocarbons. By taking the initiative and responsibility to resolve the disputes  using all available tools in their disposal, the countries of the Eastern Mediterranean can have a far more prosperous future.

How do we move forward? On the face of it, modern technology should obviate many of the disputes over off shore territory because accuracy down to the smallest of measurements is now possible. Reliance on older maps and millennia-old suppositions is no longer practical and certainly unrealistic. New technology in precision mapping is widely available and the geodesic data that this technology can objectively establish should help clarify many of these disputes. At the very least, the new data can provide the basis for dialogue as opposed to risky confrontation. To substantively contribute to the ongoing international discussion on the Eastern Mediterranean our think-tank has just published a book “Maritime Disputes in the Eastern Mediterranean: The Way Forward” by Dr. Roudi Baroudi addressing precisely this crucial issue when discussing delimitations. The book is distributed by the Brookings Institution Press.

We are under no illusion that getting the various protagonists to accept these new realities will be easy, but if Israel and Lebanon can hold technical discussions on energy and EEZs, without trying to fix everything else, so can the other countries in the Eastern Mediterranean.