Aspects of Hydrocarbon Insecurity in the Eastern Mediterranean: Maritime Claims, Access, and Quest for Energy Resources

The Regional Equation in the Eastern Mediterranean and Energy Geopolitics

The New World Order of the 21^st century is characterised by multi-polar international relations involving many state and non-state actors with economic, social, and political interdependency. Local development concerns, structure of economic relations, and proximity of rival states sustain complex multi-party issues. Ceteris Paribus, in an asymmetric region characterized by constant shift of alliances, such as the Middle East, aspiring pre-eminent regional power centers pursue hegemonic goals coercing smaller entities to acquiesce to their policies.²⁶ This enables short-term, issue-based partnerships rather than permanent alliances.

On a global scale, the U.S. administration’s cautious stance towards multilateralism leads to questions about American support for decades of trans-Atlantic economic and defense ties.²⁷ Defense cooperation had been an integral part of this collaboration and underpinned American influence and commitment for seventy years, but the political worldview that liberal internationalism is obsolete undermines support for multilateral bodies, cripples the system that binds the U.S. to its allies, and abates the role of a defense network that could otherwise help to raise the only superpower above its regional rivals in the Middle East.²⁸ In a broader strategic context, the administration in Washington has suggested revising the U.S. emphasis on large multilateral institutions like NATO and the UN, in preference for bilateral, transactional policies.²⁹ As evidenced in official statements on NATO and American contribution to the war in Syria, the U.S. prudently prefers to let allied groups, good or bad, take more ownership and responsibility for burden-sharing in regional security. Therefore, NATO, previously a source of balance and stability in the region, has lost much of its credibility from Turkey’s perspective. In a geopolitical environment characterized by the realpolitik of proxy warfare, it should not come as a surprise that ideas such as liberalism, human rights, and responsibility to protect (R2P) are seconded to survival.

Meanwhile, Russia has assumed the role of a dominant power player and agenda setter³⁰ in its periphery. It has been more than a decade since the president Vladimir Putin stated that the collapse of the U.S.S.R. was the greatest geopolitical catastrophe of the 20^th century. His promise upon rising to presidency was to revive Russia’s status as a great power. Despite economic problems, as it so happens in many cases, “foreign policy presents itself as a glorious terrain for injecting hope to a demoralized population”.³¹ To demonstrate its assertiveness, Russia has seized Crimea, waged proxy warfare in Ukraine, dispatched forces to Syria, strengthened its nuclear arsenal, and squeezed NATO allies on its periphery,³² pumping up patriotism and the president’s popularity at home. To fill the power vacuum, Russia has re-emerged in the Eastern Mediterranean and expanded its political and military clout through opportunities of cooperation and coercion with the aim to tip the balance of power to NATO’s disadvantage. Moscow not only deployed its Mediterranean fleet under the flagship carrier Admiral Kuznetsov, with frequent cruise missile attacks against targets in Syria, but also secured basing rights in South Cyprus to enable pier-side support for the fleet, arranged the first-ever joint naval drills with Egypt, sent ships to make a port call in Alexandria for only the second time since 1992,³³ and gained access to its airspace. It has developed anti-access / area-denial capabilities with advanced electronic warfare assets and submarine activity that has reached Cold War levels,³⁴ surpassing NATO’s standing naval capabilities.

Yet, the U.S. officials calculate that Russia is a reactive, declining power and does not pose a major, long-term threat as would a rising China in the Pacific or would a resurgent, nuclear Iran against Israel. The natural trend of an overstretched, more isolationist and more energy self-sufficient U.S. is to focus limited diplomatic resources more on Asia.³⁵ China’s One Belt One Road (OBOR) initiative, backed by strong leadership, rich currency reserves, and a ring of military outposts, aims to champion globalization, free-trade, and prosperity in vast swaths of the world. Iran, Turkey, Greece, and Russia all take part in the revival of the new Silk Road in various forms with important strategic implications for the U.S. interests in the region.

Overshadowed by great-power politics, relationships between littoral states in the Mediterranean remain difficult, competitive and conflict-prone. Although there are economic, energy, and security interests shared between these countries that necessitate value-creating, constructive maritime negotiations the progression of multilateral talks are easier said than done. Regional geopolitics descended into an uneasy standoff as once again the Cyprus peace process failed to produce an agreement, throwing the prospect of unification into unknown. Unless both sides of the island agree on a workable, just and permanent power-sharing structure with proper security guarantees, attempts for reunification are bound to fail. A mutually enticing opportunity of new gas finds could be thought to provide an incentive to actually bring the parties out of the stalemate, but challenges in exploration, transportation, and security emerged as major obstacles. For one, proven gas reserves in Greek Cypriot blocks do not yet justify a multi-billion-dollar investment proposal to build a pipeline to Europe, despite political rhetoric and perceptual manipulation otherwise. Also, standalone production and storage in an LNG liquefaction facility in South Cyprus would have insufficient capacity to economize on gas volumes in the Levant basin and have lower net returns than a pipeline through Turkey to Europe. Nevertheless, delineation of the course for a gas pipeline from Israel via Cyprus to Turkey depends on consent of both Turkish and Greek Cypriots. Yet, even if Cyprus is re-united, the EEZ delimitation conflict between the island and Turkey remains as a challenge to be resolved.

With the latest bidding round, the Greek Cypriot cabinet approved three offshore exploration blocks in EEZ areas 3, 6-8 and 10-11 for ENI, Total, Exxon and Qatar Petroleum,³⁶ where blocks 6 and 7 overlap with Turkey’s continental shelf. Greek Cypriots, in violation of international law, undertook a unilateral, non-transitory step that risks irreparable prejudice and leads to a permanent physical exploitation without a final agreement on the maritime boundary.³⁷ As the consortium began exploration under the shadow of a French frigate, Turkey ordered its seismic vessel Barbaros Hayreddin Paşa, escorted by a frigate and a fast-attack boat, to conduct hydrocarbon research activity in areas that overlap with those demarcated by the Greek Cypriot government and reportedly discovered gas prospect off the northeast coast of the island.³⁸ When Turkey purchased an off-shore drilling platform, Greek Cypriots have been provocatively preparing to do an additional bid round for the area between Turkey and North Cyprus. Moreover, a Greek Cypriot contracted drilling ship Saipem 12000 that attempted to enter block 3 and start exploration was met by Turkey’s naval escorts for violating Turkish Cypriot EEZ, igniting a new regional crisis that quickly escalated to EU’s top agenda in its ministerial meeting. The next planned exploration in block 10 is reportedly to be overshadowed by the U.S. 6^th Fleet’s presence under the guise of taking up positions against Syria. It has to be said that, despite liberal displays of gunboat diplomacy, no shot has been fired in anger in the Mediterranean over contested offshore jurisdiction, at least not between Turks and Greeks.³⁹

Amidst this tug-of-war over EEZ rights, recent years witnessed another geopolitical event that would further alter regional dynamics; Italian gas company ENI’s discovery of a giant 850 bcm of natural gas reserve in Egypt’s Zohr field 120 miles ashore amounted to largest-to-date in the Mediterranean Sea and added a new dimension to regional energy geopolitics. While this has led to interest in gas investment,⁴⁰ Egypt still depends on Qatari LNG imports to compensate for a domestic production shortfall and is bound by international treaties to keep the waterway open unless the country is formally at war.⁴¹ Approximately one tenth of world’s LNG transits the Suez Canal, and yet, with the Gulf of Aqaba, these are insecure locations for gas transport, pipelines, and terminals. It is all the more crucial that Combined Maritime Forces (CMF) assure the maritime community through overt demonstration of presence in these elevated-risk zones for protection of critical energy infrastructure.

Further complicating matters, due to strained diplomatic ties with Turkey over the Muslim Brotherhood, Egypt angled towards closer interaction, cooperation, and coalition formation with Greece, South Cyprus and Israel to mitigate the perceived power asymmetry. The uniting factor between these parties to develop a position and enhance their partnership on energy security is to create a “common vision”, to increase efforts to mark out maritime zones, and to foster energy cooperation against Turkey’s interests. As the former president Hosnu Mubarak’s son crafted trade deals with Greek Cypriots, so does Sisi with both Greeks and Israelis. On one hand, Egypt agreed to settle arbitration court rulings to compensate Israel for the interruption of exports in 2012; On the other hand, Noble Energy and Delek, which are partners in Leviathan, agreed in early 2018 with Dolphinus to export Israeli gas to the Egyptian market via Jordan,⁴² although whether Egypt has spare gas storage capacity for it is still a question mark.

The proposed East-Med pipeline was the focus of a four-party ministerial meeting in Nicosia on December 5^th, 2017 where an Memorandum of Understanding (MOU) has been signed.⁴³ Pipeline projects would present alternative routes to Europe over conflict-prone energy corridors such as Kirkuk-Ceyhan, North Africa, and Persian Gulf LNG supplies that face risks from regional instability. Yet, the EastMed pipeline initiative, which provisions 10 billion m³ per year stable upside volume, faces market off-take risk and price-risk in project financing even by the optimistic realization timeline of 2025, let alone the enormous engineering challenge to build a deep-water gas transport pipeline over 1500 km of distance and uneven seabed.⁴⁴ The time window is short as alternative suppliers from the U.S. to Africa and Australia place downward price pressure in a low-demand market and undermine profitability of new underwater pipeline projects. Plus, mapping out an intergovernmental agreement to create the necessary political stability and determine maritime jurisdictions within the present security context is a challenge.⁴⁵ To its detriment, LNG’s share increases against long-distance pipelines in global gas trade and is expected to reach 1.15 trillion m³ per year by 2040.⁴⁶

In early 2018, ENI further announced discovery of a promising gas deposit called “Calypso” in block 6, estimated to match “Aphrodite” field’s production capacity in block 12, that together in theory could feed an East-Med pipeline if also joined by Israelis. Nevertheless, unless the new round of exploratory drills reveal significant quantities in block 10, the only feasible way, other than Turkey, to commercially transport extracts from the Greek Cypriot blocks 12 and 6 are through a direct pipeline to Egypt’s LNG plants.⁴⁷ Even this second option has security, market reach and capacity risks. Egypt already plans to export 20 billion m³ on average per year of its own gas during the peak production phase between years 2022-2035⁴⁸ and only so via LNG terminals; it’s not looking to participate in the East-Med project. Also, coalitional arrangements in the EEZ dispute depict deal-making behaviour within a difficult economic and political climate and are inherently voluntary and unstable. Although, the Southern Gas Corridor from Azerbaijan to Europe over Turkey is the most effective option for gas exports,⁴⁹ the export route that receives approval to proceed first, and not necessarily on rational terms, may likely set the pattern for Levant basin’s development.⁵⁰

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