By Constantine Levoyannis and Mathieu Labrèche

BRUSSELS–New energy findings in the eastern Mediterranean – in the form of oil and natural gas – have ratcheted up tensions in a region already mired in instability. Although these supposedly vast hydrocarbon deposits are minor relative to the proven resources in the Persian Gulf and Caspian regions, their discovery is spurring a major geopolitical realignment in the region and beyond. Sabre-rattling has already begun as neighbouring countries stake their claims in order to achieve the energy independence, sustained economic growth and job creation that comes from energy production and access to lucrative export markets.

A cascade of exploration in the region began in late 2010 when Israel claimed major natural gas fields — Tamar and Leviathan — in its Exclusive Economic Zone (EEZ). The findings, it was reported, would sustain the energy-poor country for decades and might even turn Israel into a gas supplier to Europe. But Israel’s exploration and exploitation plans sparked fresh diplomatic rows with its neighbours, particularly Lebanon, over the validity of offshore claims and continental shelf delimitation since it is not party to the United Nations Convention on the Law of the Sea (UNCLOS). Despite these heated rows, other countries in the region are still undeterred from conducting mineral exploration — most notably Cyprus, which is exploring the seabed in its southeast EEZ, where vast natural gas fields are believed to exist adjacent to Israel’s proven resources a mere 50km away. (A state’s EEZ extends 200 nautical miles, or 370 km, out from its coastal baseline. An exception to this rule occurs when two or more state EEZs overlap and coastal baselines are less than 400 nautical miles, or 740 km, apart.)

In September 2011, the U.S.-based company Noble Energy Inc. began exploratory drilling in Cyprus’ Block 12 offshore concession to confirm gas reserves resembling those it had previously found at Leviathan (which Israel claims). The exploration revealed considerable hydrocarbon deposits, becoming a game-changer for Cyprus that also has wider implications in Europe in terms of energy security, the diversification of supply and the continuing dependence on Russian gas. Potential hydrocarbon exploration around Cyprus, however, is causing a major rift with Turkey — an EU candidate, a NATO member and an important regional actor with an increasingly assertive foreign policy. The unresolved status of Cyprus may continue to complicate the escalating dispute over access to mineral deposits and future energy revenues. And regional geopolitics are only growing more complex: Greece is also keen on exploring its EEZ south of Crete to generate crucial revenues in their globally scrutinized struggle against sovereign debt and widespread unemployment.

The prospect of astonishing mineral wealth is clearly stirring dormant, ancient conflicts and shaping new alliances in Europe’s Mediterranean near abroad. Cyprus sees itself playing an integral role in a new regional energy triangle involving Greece and Israel. Meanwhile, the balance of power is tilting as Turkey carves out a niche as a dominant regional player. These developments are not without geopolitical consequences as they generate new challenges for the players’ transatlantic partners.

The Geopolitics of Energy in the Eastern Mediterranean

The 2010 U.S. Geological Survey estimated Cyprus’s Block 12 concession holds more than 10 trillion cubic feet (tcf) of recoverable natural gas, with the entire Levant Basin containing nearly 122 tcf. That makes it one of the world’s richest deposits, albeit in one of the most politically intractable geographic areas. The discovery of hydrocarbons in Cyprus’ EEZ would be a boon for a country that is dependent on energy imports. And after a devastating explosion last summer that knocked out the island’s largest power station, Cyprus desperately needs the energy.

For Cyprus, offshore oil and gas exploration is the boldest step the country has taken since joining the EU in 2004. The country claims it’s exercising its sovereign right by drilling in its EEZ, and that it is fully adhering to UNCLOS. Cyprus considers mineral exploration as a self-evident right, and has asked that Turkey respect international law. This position is supported by the U.S., Russia and Israel. The EU supports Cyprus in principle, but only if it is in line with EU energy policy and legislation.

Turkey, on the other hand, views Cyprus’s offshore drilling as a provocative and unilateral act that sabotages UN-brokered peace talks aimed at re-unifying the island. It argues Cyprus is experimenting with adventurist policies by exploring disputed waters and excluding Turkish Cypriots from negotiations with Noble Energy and Delek Energy, its Israeli partner. The Turkish leadership also claims the Cypriot government has no intention of equally sharing gas revenues with Turkish Cypriots — although Greek Cypriot President Dimitris Christophias stated otherwise at a UN General Assembly meeting last September. Turkey has responded with so-called “appropriate measures” by deploying its navy and air force in areas surrounding the drilling site, as well as delimiting its continental shelf jointly with what they call the Turkish Republic of Northern Cyprus (TRNC) to begin retaliatory exploration off the south coast of Cyprus.

The clash over offshore exploration is a microcosm of the larger Cyprus problem and the zero-sum mentality that plagues it. Opposing positions are rooted in a respective willingness to develop an indigenous energy resource base. Consequently, the tectonic plates of geopolitics are shifting and diplomacy is changing. A realignment of regional powers is taking place in order to contain Turkey. Israel, Greece and Cyprus have designed a mutual-interest alliance to exploit resources in their adjacent EEZs, secure offshore energy infrastructure and, eventually, jointly export energy to Europe or Asia. Recognizing that Israel would want to export its energy to European markets through Greece, they launched defence talks, culminating in a mutual defence pact in September 2011. Although the terms of the Israeli-Greek defence pact were not made public, it likely includes the protection of Cyprus, which signed and ratified an economic agreement with Israel in December 2010.

Hoping to capitalize on an energy revenue windfall, Cyprus and Israel jointly delimited their EEZs and established rights to explore natural resources in their adjacent seabeds. A similar deal between Cyprus and Greece is reportedly shaping up to protect their national and economic interests. However, the underlying fear for Greek leaders is that Turkey would consider an EEZ declaration as casus belli. Nevertheless, co-operation and co-ordination in adjoining zones is strategically and politically important for Cyprus, Greece and Israel to stem Turkey’s assertive behaviour and expansionist policies. As the Turkish government sharpens its rhetoric and applies more pressure, it is gradually endangering Turkey’s reputation among U.S. and EU policy makers as a rational state actor.

Transatlantic Perspective: Energy Diversity in Europe

The U.S. backs exploration and exploitation of offshore deposits in Cyprus. The EU supports Cyprus’ intentions in principle, while also seeking to appease Turkey. They both maintain that the island’s internationally recognized government has a sovereign right to exploit its resources, but also call on Cyprus and Turkey to show calm and restraint. Both sides of the Atlantic agree that drilling in Cyprus’ EEZ should not jeopardize ongoing re-unification efforts at the UN.

U.S. officials in Nicosia are not willing to interfere in business proceedings between an American company and a sovereign state that has not entered into a bilateral deal with the U.S. government. The State Department recognizes Turkey’s position on the sensitive issue and continues to call for Cypriot parties to reunify the island into a bi-zonal, bi-communal federation. However, it also strongly supports the EU in securing energy supplies through a diversity of sources. Despite fierce Turkish objections and direct appeal, the U.S. supports European allies in achieving greater energy independence and curtailing imports from third countries, such as Russia. Both parties argue Cyprus – as an EU member state – should explore, exploit and export its resources to provide a new, European source of energy. A similar position applies to another transatlantic partner in the region: Greece.

Transatlanticists recognize Greece’s geostrategic location following the Arab Spring revolutions nearby. While noting that Greece and Turkey should continue efforts to normalize their diplomatic relations, potentially vast reserves of hydrocarbons in Greece’s EEZ herald a great opportunity. Scientific evidence suggests that a wealth of oil and natural gas in the sea area south of Crete could generate huge revenues, roughly $437-billion (U.S.), and create 300,000 jobs. American and European leaders agree that Greece has the potential to become a hub for conventional energy with pipelines crossing the country to deliver oil and gas from Israel, Cyprus and Greece to big European markets such as Italy and Germany. Greece’s location, coupled with its historic relations with countries in the region, offers a strategic advantage to strengthen its role as a pillar of stability in Europe’s Mediterranean near abroad. It should play a strategic leadership role to actively work with the EU and the U.S. on optimizing energy security in Europe’s backyard. Moreover, U.S. lasting interest in the region and Israel’s energy security acquire a new dimension after the Arab Springs and evolving relations with Arab nations.

A fragmented southern Europe comes with serious geopolitical challenges for transatlantic partners. A strong and stable south allows the EU – and by extension, the U.S. – to work directly with the emerging political leadership in countries experiencing dramatic social change though popular uprisings. The U.S. greatly benefits from the progressive “Europeanization” of the eastern Mediterranean, and the Mahgreb, in terms of dealing with the region as part of its normal relations with Europe. The U.S. and the EU should gather sufficient political will and institutional capacity to deal with emerging regional challenges. New mineral wealth will only intensify tensions, made evident through deteriorating diplomatic relations in the region following the Israeli-Cypriot continental shelf deal and the Greek-Israeli mutual defence pact. This is further proof that inaction exacerbates challenges. Athens, Nicosia and Ankara should work together to advance development, democratization and security in Europe’s near abroad to safeguard energy interests.

The south and east Mediterranean must not be decoupled from the European mainstream, lest transatlantic engagement in this key geography suffer from systemic risk, and energy security personifies geopolitical risk in the region. The U.S. has an important stake in the EU’s energy security, preferring diversity in Europe’s energy supply. It already backs the current EU policy on the Southern Corridor and Nabucco pipeline projects, preferring these options to the Russian-backed South Stream project. They decrease the likelihood of high penetration by Russia into the European energy market. Reliance on non-nuclear energy only increased with Japan’s nuclear catastrophe, and so it makes sense that the U.S. should support the EU in its efforts to secure oil and gas through its own resources.

EU Energy Security and the Southern Corridor

With Germany’s decision to phase-out nuclear energy by 2022, the EU will inevitably rely on natural gas and oil imports. Therefore, it is worth considering new relationships to facilitate energy transportation from the resource-rich Mediterranean. From a transatlantic perspective, stability and prosperity in the region are two important objectives. There is enormous potential not only for greater energy diversity and security, but also for job creation, competition and economic growth. Various pipeline projects competing in the Southern Corridor can contribute to the illustrious plan for a European super-grid infrastructure, linking north and south through gas pipelines with reverse flow capabilities. This is seen in the corridor’s competing developments, from the EU-backed, 31 billion cubic metres (bcm) per year Nabucco project to the smaller 10 bcm Interconnector-Turkey-Greece-Italy (ITGI) pipeline and the Trans-Adriatic Pipeline (TAP).

Above all, the unanswered question of “where EU borders lie” is an issue that makes energy trade and transport in the Mediterranean unclear. In times of economic turmoil, the EU must ensure that the south does not bifurcate from the European centre. EU High Representative for Foreign and Security Policy Catherine Ashton stresses the importance of finding a solution to new tensions between Cyprus and Turkey over gas exploration. Both parties should focus exclusively on normalizing their relations and ongoing efforts to reunify the island.

While the Cyprus issue remains deadlocked, so too are Turkey’s stalled EU accession negotiations. As the geopolitics of energy become more complex, Ankara perceives Brussels differently in light of Turkey’s growing political-cultural-economic-military influence in the region. The unopened energy chapter in accession talks and the absence of a legal basis for discussions between the EU and Turkey greatly decrease the likelihood of mutually beneficial co-operation in the field of energy. Coupled with Europe’s continuing inability to speak with one voice on foreign policy, the EU’s leverage with Turkey is undermined.

The EU and the U.S. view Turkey as an important transit country, particularly for Nabucco. Turkey sees itself as an energy hub in the making — its geography allows the country to enter agreements with both the EU and Russia, and play a mediator role in Eurasia. Transatlanticists clearly recognise Turkey’s growing influence in the region and the wider Islamic world. The EEZ declaration between Cyprus and Israel, and the potential resurrection of the dormant dispute between Greece and Turkey over the continental shelf, will be yet another test of Turkey’s influence. All things considered, focus should be on enhanced regional energy co-operation.

Mediterranean Energy Consortium: A Catalyst for Peace

The Arab Spring revolutions and the Fukushima catastrophe triggered fluctuations in the global energy market and increased demand for energy worldwide. Now more than ever, energy should be used as a catalyst for peace, regional integration and co-operation.

Energy equality can help generate equality through regional stability. Transatlantic partners are faced with several external challenges, yet their goal is the promotion of a well functioning, open and transparent energy market in Europe. Russia remains the EU’s third largest trading partner and fuels 25 per cent of Europe’s oil and gas consumption. Since the EU-Russia dialogue began in 2000, the EU signed agreements with rim countries – including Azerbaijan, Egypt, Iraq and Belarus. Europe’s natural gas imports are projected to reach 76 per cent by 2020; domestic production will only meet a quarter of gas needs. Change in the Mediterranean offers a great opportunity for energy diversity, open dialogue and the resolution of political differences that have plagued the region for decades.

The south and east Mediterranean is seen as volatile due to uncertainty in oil and natural gas producing states. A regional energy consortium could empower the area, promote good relations between neighbours, achieve interdependence and increase regional stability to attract investment. As it stands, regional actors are not inherently cohesive — they are a collection of states that work together loosely when different areas converge. In an era of intense economic globalization, they must work together to thrive. A consortium could also revitalize efforts to unite the region, such as the Union for the Mediterranean. More localized initiatives have unsuccessfully tried to create synergies between EU states and rim countries, such as Egypt, Turkey, Syria and Lebanon.

A Mediterranean energy consortium could allow Western leaders to put aside the traditional method of having to deal with dictators and oligarchs for energy imports. The U.S. and great European powers – such as Germany, the UK and France – are moving away from dealing with corrupt regimes. EU leaders, together with the support of American counterparts, should encourage consortium countries to involve multiple parties. This method would deter the re-emergence of energy nationalism in the region and would mirror the U.S. position on greater energy diversity in Europe through alternative supply in the Southern Corridor.

The first order of business, though, is the reunification of Cyprus. The resolution of the Cyprus conflict will remove arguably the biggest obstacle to Turkish accession to the EU, restore a sense of territorial integrity for Cypriots, and encourage cultural integration of societies and religions. Indeed, Greece and a reunified Cyprus hold the keys to Europe’s south-eastern borders. They can inspire a new social and cultural harmony within two EU member states that border Turkey – with whom they have been at odds for decades. Combined with the added value of energy security, a regional energy consortium could also provide an ambitious model that the peoples and governments of newly emerging democracies in North Africa and the Middle East can ill afford to ignore.