Letter to the President and the bankrupt Cypriot political leadership: Ignoring developments, basic economics and geostrategic forces (Part II)

 According to newspapers Huriet and Zaman, for the first time in the history of Cyprus talks Turkey bypassed the Turkish Cypriots (usually the Turkish negotiation responses in the UN-sponsored bi-communal talks are prepared in the Turkish Foreign Ministry but are always present by the Turkish Cypriot leaders) and communicated directly with President Anastasiades through the US ambassador in Cyprus, John M. Koenig.  Even after Mr. Anastasiades’ announced decision to accept the joint statement, the Turkish Cypriot President stated “The Turkish Cypriots are still acting in accordance with the proposal made during Davutoglu’s visit in December”. “We will evaluate if any offer is submitted to us”.  The big question (that no one asks) is Why? President Anastasiades, your remark that the delay in the acceptance by Mr. Eroglu suggests that the joint statement was presenting difficult dilemmas for both sides (and hence should be balanced and fair) was utterly misleading. The causes of Turkey’s decision to bypass Eroglu (and the delay in his response from the time needed for him to absorb this bypassing) are elsewhere. According to Huriet of 7 February 2014 (same day as the President accepted the joint statement and before Eroglus’s acceptance), under title “Turkey-Israel agree to start works on pipeline project”, Turkey and Israel agreed to develop the Mediterranean Pipeline Project (Medstream) consisting of five pipelines that would carry natural gas, oil, water, electricity and fiberoptics between Israel and Turkey’s Mediterranean coast. Turkish Energy Minister Guler said India is also included. Israeli Minister Ben-Eliezer said Israel is near agreement with Russia to secure supply of additional natural gas for the Medstream project and that Azerbaijan is also interested to ship its oil to eastern markets.  The oil sent through Turkey to Israel will be transferred by Tankers to India, China and South Korea. The Israeli Minister said that the Medstream project included the Mediterranean, the Red Sea, India, China and Taiwan. Water and oil would also be transferred to the Palestine and Jordan. Guler also discussed cooperation on the project with Gazprom’s top executive Alexander Medvedev. Gazprom proposed setting up a firm in Turkey.  According to the Jerusalem Post, a “peace pipeline” connecting the natural resources and infrastructure of Israel, Cyprus and Turkey is inevitable. Such a pipeline would see Israeli and Cypriot natural gas flowing through a single pipeline that crosses through Cyprus and emerges in Turkey’s Ceyhan corridor (see map). Such a pipeline, however, would require passage through Cyprus’s international waters and require the OK of Cyprus.  That requires that likely objections by Greek Cypriot politicians be overcome through a managed solution of the Cyprus problem. The issue of single sovereignty or not should be irrelevant (as I argued in Part I) to Cypriot citizens if new Cyprus is a full member of the EU with EU acquis fully respected. The issue of single sovereignty or a bastardized one (emanating equally from the two equal bi-communal states) makes little difference to Greek or Turkish Cypriot citizens –but may serve as a strategic insurance for Turkey --and through it for Israel, the US, the EU and even Russia) in case you Greek Cypriot politicians continue to blindly insist (for internal political reasons, self-righteousness and insecurities) that Cypriot gas will not go through a pipeline in Turkey, contrary to basic economics and geopolitical convergences.  According to Jerusalem Post, “in late December, Turkey took a major step in altering the naval balance in the eastern Mediterranean by contracting the construction of a multi-purpose amphibious assault ship that can (also) function as an aircraft carrier, potentially providing Turkey an unprecedented measure of sea control in the region”. The heightened threat perception for Israel “will impact the decision whether Israel will export its natural gas to a planned Cypriot LNG terminal with a European export route through Greece, or build a subsea pipeline to Turkey”. Turkish Admiral Bostanoglu stated that Turkey’s maritime threat is “energy-based” and that defending Turkey’s energy interests in the region is the Turkish navy’s “highest priority”.  This aggressive policy is altering the strategic balance in the Eastern Mediterranean and the terms Turkey is able to demand from its neighbors.  It is well recognized in Israel and elsewhere that the most cost-effective export route for Israeli (and Cypriot) gas would be from the Leviathan field to Turkey. Greek Cypriot politicians stand on the way to basic economic and geopolitical forces (and their own people’s interests) through past-focused, myopic and self-centered populist or nationalist policies. They seem trapped in their own past, repeated mistakes and egos. Eventually we will give in to the pressure and power of big forces and basic economics. It is already happening with the Troika memorandum and the current joint statement. Worse will likely follow, unless we wake up and start playing the geostrategic game pro-actively to serve our own interests as well (besides antagonizing big external forces out of short-sightedness, false nationalist rhetoric and ego-centrism).  According to a veteran diplomat who has worked on the Cyprus issue (in Turkish newspaper Zaman): “The US is not interested in the issue of sovereignty in Cyprus. What is important for the US is to manage the problem. Cyprus is not a priority, and honestly I don’t think I will see a solution in my lifetime”. According to the diplomat, “the leaders of the island do not believe the negotiations will bring a solution either, but they are going forward just to please”.  Lenos Trigeorgis holds a PhD (DBA) from Harvard University and is the Bank of Cyprus Chair Professor of Finance at the University of Cyprus and President of the Real Options Group. He has been a Visiting Professor of Finance at the London Business School. He is the author of Real Options (MIT Press, 1996), Strategic Investment (Princeton University Press, 2004) and Competitive Strategy (MIT Press, 2011).