The New Mediterranean Oil and Gas Bonanza

Part II: Rising energy tensions in the Aegean—Greece, Turkey, Cyprus, Syria

By F. William Engdahl, author of A Century of War: Anglo-American Oil Politics and the New World Order with permission

The discovery in late 2010 of the huge natural gas bonanza off Israel’s Mediterranean shores triggered other neighboring countries to look more closely at their own waters. The results revealed that the entire eastern Mediterranean is swimming in huge untapped oil and gas reserves. That discovery is having enormous political, geopolitical as well and economic consequences. It may have potential military consequences too.

Preliminary exploration has confirmed similarly impressive reserves of gas and oil in the waters off Greece, Turkey, Cyprus and potentially, Syria.

Greek ‘energy Sirtaki’

Not surprisingly, amid its disastrous financial crisis the Greek government began serious exploration for oil and gas. Since then the country has been in a curious kind of a dance with the IMF and EU governments, a kind of “energy Sirtaki” over who will control and ultimately benefit from the huge resource discoveries there.

In December 2010, as it seemed the Greek crisis might still be resolved without the by-now huge bailouts or privatizations, Greece’s Energy Ministry formed a special group of experts to research the prospects for oil and gas in Greek waters. Greece’s Energean Oil & Gas began increased investment into drilling in the offshore waters after a successful smaller oil discovery in 2009. Major geological surveys were made. Preliminary estimates now are that total offshore oil in Greek waters exceeds 22 billion barrels in the Ionian Sea off western Greece and some 4 billion barrels in the northern Aegean Sea.[i]

The southern Aegean Sea and Cretan Sea are yet to be explored, so the numbers could be significantly higher. An earlier Greek National Council for Energy Policy report stated that “Greece is one of the least explored countries in Europe regarding hydrocarbon (oil and gas-w.e.) potentials.”[ii] According to one Greek analyst, Aristotle Vassilakis, “surveys are already done that have measured the amount of natural gas estimate it to reach some nine trillion dollars.” [iii]

Even if only a fraction of that is available, it would transform the finances of Greece and the entire region.

Tulane University oil expert David Hynes told an audience in Athens recently that Greece could potentially solve its entire public debt crisis through the development of its new-found gas and oil. He conservatively estimates that exploitation of the reserves already discovered could bring the country more than €302 billion over 25 years. The Greek government instead has just been forced to agree to huge government layoffs, wage cuts and pension cuts to get access to a second EU and IMF loan that will only drive the country deeper into an economic decline. [i]

Notably, the IMF and EU governments, among them Germany, demand instead that Greece sell off its valuable ports and public companies, among them of course, Greek state oil companies, to reduce state debt. Under the best of conditions, the asset selloffs would bring the country perhaps €50 billion.[ii] Plans call for the Greek state-owned natural gas company, DEPA, to privatize 65% of its shares to reduce debt.[iii] Buyers would likely come from outside the country, as few Greek companies are in a position in the crisis to take it.

One significant problem, aside from the fact the IMF demands Greece sell off its public oil interests, is the fact that Greece has not declared a deeper exclusive economic zone like most other countries that drill for oil. There was seen little need until now. An Exclusive Economic Zone (EEZ) gives a state special mineral rights in its declared waters under the Third United Nations Convention on the Law of the Sea (UNCLOS), which came into force in November 1994. Under UNCLOS III, a nation can claim an EEZ of 200 nautical miles from its coastline.[iv]

Turkey has previously stated it would consider it an act of war if Greece drilled further into the Aegean. [v] Until now that did not seem to have serious economic consequences, as no oil or gas reserves were known. Now it’s an entirely different ballgame.

Evangelos Kouloumbis, former Greek Industry Minister recently stated that Greece could cover “50% of its needs with the oil to be found in offshore fields in the Aegean Sea, and the only obstacle to that is the Turkish opposition for an eventual Greek exploitation.”[vi]

Hillary dances the Sirtaki too…

In July 2011 Washington joined the Greek energy Sirtaki. Secretary of State Hillary Clinton flew to Athens with energy on her mind. That was clear by the fact she brought with her her Special Envoy for Eurasian Energy, Richard Morningstar. Morningstar was the husband of Bill Clinton’s Special Advisor to the President on Caspian Basin Energy Diplomacy, and one of the Washington strategic operatives in the geopolitical battles to dismember the Soviet Union and surround a chaos-ridden Russia with hostile pro-NATO former states of the USSR. Morningstar, along with his controversial aide, Matthew Bryza, have been the key Washington architects of Washington’s geopolitically-motivated oil and gas pipeline projects that would isolate Russia and its Gazprom gas resources from the EU.

Bryza is an open opponent of Russian Gazprom’s South Stream gas pipeline that would transit the eastern Mediterranean states.[vii] Clearly the Obama Administration is not at all neutral about the new Greek oil and gas discoveries. Three days after Hillary left Athens the Greek government proposed the creation of a new government agency to run tenders for oil and gas surveys and ultimate drilling bids.

Morningstar is the US specialist in economic warfare against Russian energy diplomacy. He was instrumental in backing the controversial B-T-C oil pipeline from Baku through Tbilisi in Georgia across to the Turkish Mediterranean port of Ceyhan, a costly enterprise designed solely to bypass Russian oil pipeline transit. He has openly proposed that Greece and Turkey drop all historic differences over Cyprus, over numerous other historic issues and agree to jointly pool all their oil and gas reserves in the Aegean Sea. He also has told the Greek government it should forget cooperation with Moscow on the South Stream and Bourgas-Alexandroupolis gas pipeline projects. [viii]

According to a report from Greek political analyst Aristotle Vassilakis published in July 2011, Washington’s motive for pushing Greece to join forces with Turkey on oil and gas is to force a formula to divide resulting oil and gas revenues. According to his report, Washington proposes that Greece get 20% of revenues, Turkey another 20% and the US-backed Noble Energy Company of Houston Texas, the company successfully drilling in the Israeli and Greek offshore waters, would get the lion’s share of 60%.[ix]

Secretary of State Hillary Clinton’s husband, Bill, is a Washington lobbyist for Noble Energy. ^[1]

And some Cyprus complications…

As if these geopolitical complications were not enough, Noble Energy has also discovered huge volumes of gas off the waters of the Republic of Cyprus. In December 2011 Noble announced a successful well offshore Cyprus in a field estimated to hold at least 7 trillion cubic feet of natural gas. Noble’s CEO, Charles Davidson remarked to the press, “This latest discovery in Cyprus further highlights the quality and significance of this world-class basin.” [2]

Cyprus is a complicated piece of real estate. In the 1970s as declassified US Government documents recently revealed, then-US Secretary of State Henry Kissinger actively encouraged and facilitated arms to the Turkish regime of Kissinger’s former Harvard student and then-Prime Minister Bulent Ecevit, to stage a military invasion of Cyprus in 1974, in effect partitioning the island between an ethnically Turkish north and an ethnically Greek Republic of Cyprus in the south, a division which remains. The Kissinger strategy, backed by the British was believed intended to create a pretext for a permanent US and British military listening post in the eastern Mediterranean during the Cold War.[3]

Today the ethnically Greek south, where Noble has discovered large gas deposits, is a member of the EU. Its President, Demetris Christofias, is the only national leader in the European Union who is a communist. He is also a close friend of Israel, and of Russia. In addition, he is a major critic of American foreign policy, as well as of Turkey.[4]

Now Israel is planning to build an underwater gas pipeline from the Israeli Levantine fields across Cyprus waters onto the Greek mainland where it would be sold on the EU market. The Cyprus and Israel governments have mutually agreed on the delimitation of their respective economic zones, leaving Turkey in the cold. Turkey openly threatened Cyprus for signing the agreement with Noble Energy. That led to a Russian statement that it would not tolerate Turkish threats against Cyprus, further complicating Turkish-Russian relations. ^[5]

Turkish-Israeli relations, once quite friendly, have become increasingly strained in recent years under Erdogan’s foreign policies. Ankara has expressed concern about Israel’s recent ties with its historic antagonists, Greece and the Greek side of Cyprus. Turkey’s ally the Turkish Republic of Northern Cyprus, fears it could miss out on its fair share of the gas after Israel and Nicosia signed an agreement to divide the 250 kilometers of sea that separate them.[6]

It becomes evident, especially when we glance at a map of the eastern Mediterranean, that the oil and gas prospective bonanza there is a rapidly unfolding conflict zone of tectonic magnitude involving strategic US, Russian, EU, Israeli Turkish, Syrian and Lebanese interests.

Endnotes:

[1] Hugh Naylor, Vast gas fields found off Israel’s shores cause trouble at home and abroad, January 24, 2011, accessed in http://www.thenational.ae/news/world/middle-east/vast-gas-fields-found-off-israels-shores-cause-trouble-at-home-and-abroad#full.

[2] Noble Energy Press Release, Significant Natural Gas Discovery Offshore Republic of Cyprus, December 28, 2011, accessed in http://www.maritime-executive.com/article/significant-natural-gas-discovery-offshore-republic-of-cyprus.

[3] Larisa Alexandrovna and Muriel Kane, New documents link Kissinger to two 1970s coups, June 26, 2007, accessed in http://rawstory.com/news/2007/Intelligence_officers_confirm_Kissinger_role_in_0626.html.

[4] Yilan, Cyprus conflict defies ready solution, May 30, 2011, accessed in http://turkeymacedonia.wordpress.com/2011/05/30/cyprus-conflict-defies-ready-solution/.

[5] Stephen Blank, Turkey and Cyprus Gas: More Troubles Ahead in 2012, Turkey Analyst, vol. 5 no. 1, 9 January 2011, accessed in http://www.silkroadstudies.org/new/inside/turkey/2012/120109B.html.

[6] Hugh Naylor, op. cit.

[i] Chris Blake, Drilling for oil in the Aegean nay help ease Greece’s debt crisis, July 7, 2011, accessed in https://www.hellenext.org/reinventing-greece/2011/07/drilling-for-oil-in-the-aegean-may-help-ease-greeces-debt-crisis/

[ii] Ibid.

[iii] John Daly, Greece Considering Plugging Aegean Islands into Turkish Energy Grid, 22 November 2011, accessed in http://www.businessinsider.com/greece-considering-plugging-aegean-islands-into-turkish-energy-grid-2011-11.

[iv] United Nations, United Nations Convention on the Law of the Sea of 10 December 1982: PART VI: CONTINENTAL SHELF, Article76, Definition of the continental shelf, accessed in http://www.un.org/depts/los/convention_agreements/texts/unclos/part6.htm.

[v] Chris Blake, op. cit.

[vi] Ioannis Michaletos, op. cit.

[vii] Hellas Frappe, op. cit.

[viii] Ibid.

[ix] Ibid.

[i] Ioannis Michaletos, Greek Companies Step Up Offshore Oil Exploration—Large Reserves Possible, December 8, 2010, accessed in http://www.balkanalysis.com/greece/2010/12/08/greek-companies-step-up-offshore-oil-exploration-large-reserves-possible/.

[ii] Ibid.

[iii] Hellas Frappe, Hillary came to Greece to seal oil exploration deals!, July 21, 2011, accessed in http://hellasfrappe.blogspot.com/2011/07/special-report-hillary-came-to-greece.html.

F. William Engdahl

Frederick William Engdahl (born August 9, 1944) is an American writer, economics researcher, historian, and freelance journalist.

He is the author of the best-selling book on oil and geopolitics, A Century of War: Anglo-American Oil Politics and the New World Order. It has been published as well in French, German, Chinese, Russian, Czech, Korean, Turkish, Croatian, Slovenian, and Arabic. In 2010 he published Gods of Money: Wall Street and the Death of the American Century, completing his trilogy on the power of oil, food, and money control.

Mr. Engdahl is one of the more widely discussed analysts of current political and economic developments, and his provocative articles and analyses have appeared in numerous newspapers and magazines and well-known international websites. In addition to discussing oil geopolitics and energy issues, he has written on issues of agriculture, GATT, WTO, IMF, energy, politics, and economics for more than 30 years, beginning the first oil shock and world grain crisis in the early 1970s. His book, ‘Seeds of Destruction: The Hidden Agenda of Genetic Manipulation has been translated into eight languages. A new book, Full Spectrum Dominance: Totalitarian Democracy in the New World Order describes the American military power projection in terms of geopolitical strategy. He won a ‘Project Censored Award’ for Top Censored Stories for 2007-08.

Mr. Engdahl has lectured in economics at the Rhein-Main University in Germany and is a Visiting Professor in Economics at Beijing University of Chemical Technology.

After a degree in politics from Princeton University (USA), and graduate study in comparative economics at the University of Stockholm, he worked as an independent economist and research journalist in New York and later in Europe, covering subjects including the politics of energy policy in the USA and worldwide; GATT Uruguay Round trade talks, EU food policies, the grain trade monopoly, IMF policy, Third World debt issues, hedge funds, and the Asia crisis.

Engdahl contributes regularly to a number of international publications on economics and political affairs including Asia Times, FinancialSense.com, 321.gold.com, The Real News, Russia Today TV, Asia Inc., GlobalResearch.com, Japan’s Nihon Keizai Shimbun, Foresight magazine. He has been a frequent contributor to the New York Grant’sInvestor.com, European Banker and Business Banker International and Freitag and ZeitFragen in Germany, Globus in Croatia. He has been interviewed on various geopolitical topics on numerous international TV and radio programs including Al Jazeera, CCTV and Sina.com (China), CCTV (China) Korea Broadcasting System (KBS), and RT Russian TV. He is a Research Associate of Michel Chossudovsky’s well-respected Centre for Research on Globalization in Montreal, Canada, and a member of the editorial board of Eurasia magazine.

Mr. Engdahl has been a featured speaker at numerous international conferences on geopolitical, GMO, economic, and energy subjects. Among them is the Ministry of Science and Technology Conference on Alternative Energy, Beijing; London Centre for Energy Policy Studies of Hon. Sheikh Zaki Yamani; Turkish-Eurasian Business Council of Istanbul, Global Investors’ Forum (GIF) Montreaux Switzerland; Bank Negara Indonesia; the Russian Institute of Strategic Studies; the Chinese Ministry of Science and Technology (MOST), Croatian Chamber of Commerce and Economics.

He currently lives in Germany and, in addition to teaching and writing regularly on issues of international political economy and geopolitics, food security, economics, energy, and international affairs, is active as a consulting political risk economist for major European banks and private investors.  A sample of his writings is available at Oil Geopolitics.net