Babylon & Beyond

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MIDDLE EAST: Black gold rush threatens regional stability

October 22, 2010 |  9:56 am

Tugboat oil rig abu dhabi

The race is on for oil in the eastern Mediterranean, with at least four major competitors gunning to win.

But it's far from a friendly competition. Of those four, two are locked in an ongoing state of war and the third refuses to recognize the fourth.

So will Israel, Lebanon, Turkey and Cyprus find a way to work things out?

Not likely, although the possibility of war between Israel and Lebanon is far more likely than an outbreak of violence between Turkey and Cyprus, observers say.

Turkey this week announced its intention to start oil exploration off the northern coast of Cyprus near the breakaway Turkish Cypriot enclave while simultaneously expressing dismay with the Greek Cypriot government's decision to negotiate oil exploration deals with Lebanon.

"Greek Cyprus does not represent the entire island and it cannot strike deals that concern the interests of the whole island," an unnamed Turkish diplomatic source told the Turkish English-language newspaper Hurriyet Daily News. "That's an attitude we have often shared with our Lebanese friends and I think they will take this into consideration."

Oil and gas rights have traditionally been a sticking point between Turkey, Turkish Cypriots and the internationally-recognized Greek Cypriot government in the south. Although Turkey says it disapproves of Cyprus' oil exploration deals, neither Turkey nor Cyprus has resorted to military action, and experts say the current dispute is unlikely to escalate.

The potential oil and gas reserves in question lie beyond the territorial waters of any country. Normally, multiple claims are settled between the competing parties, all of whom have an interest in delineating a border quickly so that drilling can begin.

Once the border is drawn, both countries can give licenses for oil companies to come and drill within their own economic zone. If a reserve extends into the economic zone of multiple countries, another agreement is usually reached whereby a single operator extracts the oil or gas and the profits are split, as multiple drilling sites in the same field can damage the reserve, resulting in less money for everyone.

Unfortunately, when the countries in question don't get along, such agreements are nearly impossible and brute might becomes a factor.

"Either the parties agree or they don't agree, and if they don't agree then no exploration can take place," energy expert Paul Stevens from the British think tank Chatham House told Babylon & Beyond. "If there's a dispute you send out the gunboats."

Israel and Lebanon, both of which have struck separate deals with Greek Cyprus, are enemy states and have both threatened to go to war to protect what they consider their economic rights over oil and gas fields thought to lie off their coasts.

Israel currently has the upper hand: Having already stuck a deal with Cyprus and conducted its preliminary exploration, Israel is now preparing to start extraction. Meanwhile, Lebanon is still sorting out the boundaries of its economic zone with Cyprus and Syria, and it will be years before it has any evidence to back up its claim that Israel's fields extend into Lebanese territory.

"Lebanon can make noises and jump up and down, but in practical terms there is nothing they can do," Stevens said. "The Israelis have the military power and the willingness to use it."

"I think it's extremely unlikely that Turkey and Cyprus will go to war, given that the prospects [for oil] are not brilliant anyway," he continued. "Anything found in that area is going to be relatively small potatoes, but if you're a small country there are obvious advantages."

-- Meris Lutz in Beirut

Photo: A tugboat pulling an offshore oil rig off the coast of Abu Dhabi. The race for oil is now on in the eastern Mediterranean. Credit: Nepenthes via Wikimedia Commons