Cyprus's Natural Gas Strategy: Geopolitical and Economic Preconditions

Abstract

Abstract:Optimism arose about the discovery of Cypriot and Israeli gas reserves and how they might help resolve the Cyprus question, but the prospective monetization of these reserves has not modified Turkish or Turkish-Cypriot behavior vis-à-vis the Republic of Cyprus, despite Greek-Cypriot hopes. The gas discoveries were not the principal motivation behind the Greek and Greek-Cypriot attempts to establish a trilateral framework of structured cooperation with Israel and Egypt. The export of Cypriot gas to Egyptian liquefied natural gas facilities, however, is the only realistic option available to Nicosia that could also have a positive geopolitical impact on the trilateral framework and help reduce European Union gas dependence on Russia, although the reduction would be quite limited in the short to medium term. The revenues from the monetization of Cypriot gas reserves may be significant for the Cypriot economy, amounting to approximately 2 percent of its gross domestic product, but these direct benefits will materialize gradually over a period of fifteen years and will not be available in time to influence the ongoing talks for the resolution of the Cyprus question.