Russian energy gains complicate Cyprus talks for Turkey

Russian energy gains complicate Cyprus talks for Turkey

Coming to terms with Russia’s pivotal role in the Syrian peace process has become a central fixation for Turkey and most other actors in the region. However, with eyes focused on Moscow’s relations with Damascus, many have missed Russia’s strategic advance farther south in the eastern Mediterranean. Moscow’s late 2016 gains have come via two major energy deals concluded with Cairo, agreements that deepen Russo-Egyptian ties in a manner that affect Turkey’s strategic interests and complicate Turkey’s position in the historic Cyprus peace talks now underway in Geneva.

On Dec. 12, 2016, the Italian energy giant Eni agreed to sell a 30 percent stake in the Zohr natural gas field off of Egypt’s coast to Russia’s Rosneft for US$1.575 billion. The largest gas find in the eastern Mediterranean, Egypt’s Zohr field contains 850 billion cubic centimeters of natural gas, more than a third larger than Israel’s Leviathan field. Rosneft will become the second largest stakeholder in Zohr, which is expected to start producing gas by late 2017. Moscow also holds an option to buy an additional 5 percent share in the field.

While most of the gas produced at Zohr is slated for Egypt’s domestic market, natural gas from Zohr or neighboring suppliers such as Israel can now supply Egypt’s dormant liquefied natural gas (LNG) plants, potentially rendering Egypt again into a net natural gas exporter. If Egypt became an LNG supplier to Europe, it would potentially undercut the importance of the Trans-Anatolian Pipeline (TANAP) and undermine Turkey’s ambition to become strategic energy transit corridor for natural gas to reach the EU.

After the Dec. 12 Cairo meeting with Rosneft CEO Igor Sechin, Egyptian President Abdel Fatah el-Sisi’s office highlighted the new level of Russo-Egyptian cooperation, stating, “The president reaffirmed Egypt’s commitment to cooperate with Russian companies in all spheres, including [the] oil and gas sector[s], taking into account the immense experience and potential of Russian companies.”

The gas deal came on the heels of the Nov. 19, 2016, agreement between Cairo and Moscow for Russia’s state-owned nuclear energy company Rosatom to build Egypt’s first nuclear power plant in Dabaa on Egypt’s Mediterranean coast. The Dabaa plant is scheduled for completion in 2022, the same year as Turkey’s long-delayed Akkuyu nuclear power plant. 

The construction of the Dabaa plant means Akkuyu is no longer critical to Moscow as a showcase for its nuclear technology as it races across the Middle East to sign nuclear plant construction contracts with Iran’s Sunni rivals. Moreover, if additional electricity produced by nuclear power reduces Egypt’s need to generate electricity from natural gas for its own electricity demand, then Cairo could export more LNG to Europe starting in 2022, further undermining TANAP.

Russia’s deepening strategic cooperation with Egypt raises Turkey’s stakes in the outcome of the Cyprus unification talks that began in Geneva on Jan. 9 and especially the international conference scheduled for Jan. 12, which will include the guarantor powers – Turkey, Greece, and the United Kingdom – for the first time since 1960.  As the Hürriyet Daily News’ Barçın Yinanç pointed out in a recent column, the historic opportunity to arrive at a settlement could falter on the failure of Ankara and Athens to agree on the issue of guarantees.

In such an instance, the construction of an undersea gas pipeline to Turkey from Israel’s Leviathan field would face a serious setback as the pipeline needs to cross Cyprus’ economic exclusion zone. Although Turkey constitutes Israel’s most commercially viable natural gas market, Russia could seek to incentivize Israel and the government in southern Cyprus, which controls the Aphrodite offshore gas field, to market their natural gas via Egypt.

While Ankara seeks to play a constructive role in the negotiations in Geneva and uphold the rights of Turkish Cypriots, it will have to contend with the possibility that failure to reach an agreement could strengthen Moscow’s hand in the region at Turkey’s expense.

Dr. Micha’el Tanchum is a fellow at the Energy Policies Research Center at Bilkent University in Ankara.