Cyprus: a new bargain on energy
Cyprus is a thankless topic for any diplomat with romantic notions of conflict resolution. Among the frozen conflicts of modern times, Cyprus has been a graveyard for endless rounds of diplomatic initiatives and United Nations-mediated talks for more than half a century. The island has been partitioned between Turkish and Greek zones for most of that time, and is home to one of the oldest UN peacekeeping missions. The Republic of Cyprus, in the south, is a European Union member state, while the Turkish Republic of Northern Cyprus (TRNC) is recognised by no one but Turkey.
Over the past few years, tensions have been rising between Turkey and the Republic of Cyprus – and, accordingly, between Turkey and the EU – about who has the right to assign exploration and drilling permits for the hydrocarbon resources around the island and the contours of its exclusive economic zone (EEZ). This is a convergence of old and new disputes: Cyprus has claimed a sovereign right to take energy decisions on its own, while Turkey, as the guarantor state for Turkish Cypriots, objects to any such activity without an agreement with the TRNC on an “equitable” division of natural resources. The two sides disagree on what is “equitable” and what decision-making process is appropriate according to the island’s 1960 constitution and the UN framework for a Cyprus settlement.
This puts the EU in an awkward position. By accepting Cyprus as a member state in 2004 before a resolution on the island, the EU internalised the conflict as its own. Brussels is determined to show solidarity with a member state and sees Turkish efforts to block drilling as an act of aggression. But, behind the scenes, some European capitals feel they have been taken hostage by the Cypriot position – and recognise that, as an EU member state, Cyprus has little incentive to make the big sacrifices in power-sharing that have long been seen as an integral part of a lasting settlement.
Since the failure of the latest round of Cyprus talks in Switzerland in 2017, the UN has been reluctant to re-enter the labyrinth of Cyprus reunification talks. And for a good reason. This is a frozen conflict par excellence, as the two sides have been living with the geographical partition and separate administrations for 46 years. It is unclear whether they can still make the jump to the idea of a “bizonal, bicommunal federation” with equal citizenship and a rotating presidency, as called for by the UN framework.
It would be difficult and almost pointless for the EU to push for the resumption of the UN settlement talks, given the absence of a strong interest in doing so from the Greek side or the Security Council. Instead, Brussels should focus its energy on brokering a deal between the two sides on how to share the hydrocarbon resources. This is no easy task. The Turkish side wants to be involved in decision-making with energy companies, while the Greek side claims a sovereign right to lead the negotiations – out of suspicion that, by allowing Turkish Cypriots in, it would legitimise the political division of the island. There are disputes between Turkey and Cyprus on the EEZ – and still larger disagreements between them about Turkish claims on maritime rights, following Ankara’s recent agreement with the internationally recognised Libyan government.
But one confidence-building measure Europeans could explore is the creation of a sovereign wealth fund with bicommunal representation that would decide how to spend the proceeds of energy deals, which are widely expected to materialise after 2025. Such a fund could be either administered by the EU on behalf of all Cypriots or by the Republic of Cyprus through a joint committee with the TRNC. The funds could be disbursed to support Cypriots on both sides of the island according to an agreed population ratio (Greek Cypriots are the majority) and be used for projects according to their needs (in areas such as infrastructure, education, and domestic economic stimulus). Such confidence-building measures would also help politically strengthen the position of peaceniks like TRNC president Mustafa Akinci and Greek Cypriot president Nicos Anastasiades – both of whom represent a generation that is still wedded to the one-state solution but are increasingly challenged by younger and more nationalist politicians.
Current debates on these issues circulate around the idea of a new bargain that the EU could strike with Turkey, incorporating eastern Mediterranean issues into a larger deal that covers a wide range of other matters. Cyprus could, therefore, be the cause of a deepening confrontation – but also potentially a catalyst for a broader agreement.