Stop Looking for Silver Bullets

By Amb. Patrick M. Theros

Cyprus seems to have convinced itself that it found the silver bullet to keep Turkey at bay and make a lot of money through its alliance with Israel. Now a former USG senior official has thrown cold water on the concept. He recently crowed in a Washington think tank publication that the foundations of the Cypriot national and economic security infrastructure were about to unravel. He predicted that Israel and Turkey would soon reconcile. With the alliance reestablished, their shared interests would kill the idea of a liquefied natural gas (LNG) export terminal in Cyprus exporting both Israeli and Cypriot natural gas. He argued that Israelis agree that a gas pipeline from Israel to Turkey to serve that country’s expending domestic appetite for natural gas and for re-export to Europe to displace Russian gas requires a far smaller investment and has other benefits. Turkey would back Israel’s efforts to stymie Lebanese claims to the same reserves and Israel would remove the security blanket against Turkey’s demand to share in Cypriot gas reserves.

The former senior official may be a little premature but he is right in the long run. The current hostility between the two states continues only because Tayyip Erdogan and Benjamin Netanyahu have big egos and won’t back down. Should either one leave the scene, the official argues, the strategic advantages of an alliance would quickly reassert themselves.

Erdogan provoked the crisis to secure three objectives: (1) undermining the Turkish generals for enabling Israeli persecution of Muslims, (2) burnishing his Muslim credentials domestically, and (3) selling Turkish leadership as the model for modern Islamist-based governance in the Arab world. Erdogan achieved his goal of emasculating the Turkish General Staff. Bread-and-butter issues, not Islamist political piety, gave Erdogan victory in recent elections. Finally, Erdogan’s Arab policy imploded. No Arab State wants the Ottoman Empire back and Egypt’s generals have scapegoated Turkey for backing the recently deposed Muslim Brotherhood Government. In any event, Turkey no longer needs Israel as an enemy.

Netanyahu, in fairness, inherited the crisis and needs a face-saving way out. Israel’s neighborhood is falling apart and it has alienated Europe and the US administration. Netanyahu would reconcile tomorrow had Obama not forced him to publicly apologize to Erdogan for killing Turkish activists during the Gaza flotilla incident and damaging the “tough guy” image he needs to deal with the political thugs in his coalition government. Erdogan’s arrogance will not permit the gracious and generous gesture that would allow Netanyahu to reconcile.

On the other hand, the Obama administration put itself solidly into Cyprus’ corner in this drama. Not only did Obama humiliate Netanyahu with Erdogan and made further reconciliation implausible but his State Department has publicly and forthrightly denounced Turkey’s claim to share in Cypriot gas reserves.

The U.S. action helps Cyprus defend its wealth but still leaves open the question of how best to exploit it. Most industry economists agree that a five billion dollar LNG plant to export the combined production of Israel and Cyprus is less profitable than a pipeline to Turkey but provides strategic independence. Building a terminal to export only Cypriot gas makes no financial sense whatsoever. Our retired official (above) opines that this will force Cyprus to come to terms with Turkey if it hopes to benefit from its newfound gas reserves.

That many Cypriot leaders seem to agree with him displays an alarmingly limited view of Cypriot interests. These gentlemen have locked themselves into exporting gas as the only choice. Exporting gas will earn royalties for the Cypriot Government and high profits for the energy company and the pipeline company. But it will probably create less than 1,000 permanent jobs and will make the Cypriot Government dangerously dependent on a single export commodity. Furthermore, advances in “fracking” and the inevitable entry of US gas exports into the world market will only reduce future revenue. Finally, can Cyprus trust that the Turkish government will honor any pipeline agreements once it has its hands around Cyprus’ economic throat?

Cyprus should stop looking at natural gas as an export commodity. Retaining the gas for the Cypriot domestic market would drive economic growth and create thousands more jobs. Natural gas would guarantee cheap domestic energy prices and provide feedstock for a broad array of down-stream petrochemical products much more valuable than exporting the gas. Modern technology has made it possible to substitute compressed gas for diesel and gasoline engines efficiently. Cyprus can capitalize on the fact that it has a relatively efficient (by Mediterranean standards) regime for business startups and foreign investment. In fact, domestic investment of the gas will probably produce better returns than even the ideal joint Israeli-Cypriot LNG terminal. Given the amount of money sloshing around the world looking for a home, Nicosia could attract serious investment now simply by signaling that it intends to keep the gas at home.

Greeks, Cypriots and otherwise, too often grasp at foreign intervention as a silver bullet to solve our problems. It is time that we solve our own problems.