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   From: "Emre Dogru" <emre.dogru@stratfor.com>
   To: "Analyst List" <analysts@stratfor.com>
   Sent: Friday, September 23, 2011 8:21:22 AM
   Subject: Re: Discussion - Political story of Turkish/Cyprus energy
   competition

   Bayless Parsley wrote:

     On 9/23/11 7:33 AM, Emre Dogru wrote:

       A seismic vessel of Turkish Petroleum Corporation (TPAO) left the
       Turkish port in Izmir and is currently sailing toward Cyprus.
       According to Turkish Energy Minister Taner Yildiz, the vessel conduct
       operate oil and natural gas explorations off northern Cyprus, though
       it may operate in offshore blocs in the south that are claimed by
       Greek Cypriot government in the future. There is no information that
       the vessel is escorted by Turkish warships currently, but Turkey
       announced before that its warships and submarines are already on
       active duty in Eastern Mediterranean, without clarifying their exact
       mission.

     we need to verify this.  have they sent frigates are not. that
     determines wehther we could see this escalate into something more
     serious. where and when did turkey announce they're on 'active duty'?  i
     thought they just said they would deploy so far

       The offshore exploration and drilling dispute between Turkey and Greek
       Cyprus flared up when the American Noble Energy company started its
       operations on Sept. XXX. Noble Energy was granted exploration license
       for Block 12 of Cyprus's exclusive economic zone (a maritime boundary
       that gives a coastal state the right to conduct economic activities up
       to 200 miles) in 2007, which is not recognized by Turkey due to the de
       facto division of the Island. Turkey, as the only country that
       recognizes Turkish Republic of Northern Cyprus, claims that the Greek
       Cypriots do not have the right to exploit island's seabed resources
       unilaterally. Greek Cypriot government, however, is the only official
       representative of the entire island and a member of the European
       Union, even though it does not have authority over the northern part
       of the island. Despite these legal disputes, the Greek Cypriot
       government signed exclusive economic zone delimitation agreements with
       Egypt in 2003 and Lebanon in 2007.

       [INSERT MAP - need to be merged]

       Turkey has long been warning against starting offshore operations but
       its rhetoric failed to persuade the Greek Cypriot government and Noble
       Energy executives. Shortly after Noble Energy started its operations,
       Turkish Prime Minister Tayyip Erdogan and Turkish Cypriot President
       Dervis Eroglu signed a bilateral continental shell agreement to
       legitimize TPAO's exploration activity during their visit to the
       United States on Sept. 21.

       Though it appears as an energy competition between Turkey and Greek
       Cyprus, there are underlying geopolitical factors that allowed the
       Greek Cypriot government to take such steps.

       The tension has already been increasing in eastern Mediterranean since
       the Turkish government announced on Sep. XXX that Turkish warships
       would escort any aid ship that sails toward the Gaza Strip to break
       the Israeli imposed blockade. Turkish move came shortly after a leaked
       newspaper report that said the UN investigation report on the Mavi
       Marmara incident (which left nine Turks death in May 2010) found the
       Israeli action legal. Even though it remains unclear whether Turkey
       would allow another aid ship to sail toward Gaza from its ports to
       make its threat credible, its move nevertheless has indicated that
       Turkey would not rule out any military option to assume its regional
       role as an emerging power.

       The growing tension between Turkey and Israel played into Greek
       Cypriot's hands. The Block 12 (the only licensed part of the exclusive
       economic zone claimed by Greek Cyprus does this mean that Greek Cyprus
       doesn't lay any claim at all to the other blocks? who does? why do
       those blocks even exist/who drew them up, if no one is claiming them?)
       these are the areas that Greek Cyprus says are inside of its exclusive
       economic zone. It may operate there in the future. It's about claiming
       sovereignty. But it only granted exploration license for the Block 12.
       3 and 13, for instance, were excluded in the 1st licensing round. is
       the closest part to Israel's recently discovered gigantic natural gas
       reserves, don't say gigantic - just say what the estimates are
       Leviathan and Tamar, where Noble Energy has been operating since 1998.
       By starting operations in Block 12, Greek Cyprus does not only hope to
       increase the geological possibility to find similar amount of energy
       reserves, but it also takes advantage of the dispute between Turkish
       and Israeli governments. Even though there is no formal exclusive
       economic zone delimitation agreement between the Greek Cyprus and
       Israel (and Israel could complicate Cyprus's plans if it wanted to),
       Cyprus has faced no resistance from Tel-Aviv to start its operations.
       Moreover, Greek Cyprus assumes that the Turkish navy would not take
       the risk of getting close to the Israeli shore to prevent operations
       in the Block 12. Why? It doesn't seem that close to Israel; there
       seems to be a lot of space for Turkish ships to maneuver it's very
       close, actually. and it's very risky given the military threats of the
       turkish gov For the Israeli government, this is a great opportunity to
       show how things could get more difficult for the Turkish government to
       handle if it does not change its policy toward Israel.  need to
       explain how exactly. i dont think the israelis want to escalate things
       with Turkey, they're largely staying out of this issue but are happy
       to see the Turks come under pressure and seeing the limits of Turkey's
       rhetoric exposed in the eastern med. i think that's all u need to say
       on the israeli angle

       Has the Izzie gov't issued any warnings to the Turks about not sending
       ships to deter Greek Cypriot drilling activity? no. they remained
       largely calm. but will double-check this part.

       The fact that Turkish - EU relationship at its nadir helps the Greek
       Cypriot government to push its ambitions as well. No chapter in
       Turkish - EU accession talks has opened since July 2010, and the
       Turkish government already announced that it will suspend all ties
       with the EU when Greek Cyprus assumes EU's rotating presidency in the
       second half of 2012. The issue has been demonstrated by Turkish
       President Abdullah Gul's visit to Germany on Sept. XXX, during which
       German Chancellor Angela Merkel outspokenly said that Germany does not
       want Turkey to become a member of the European Union. Greek Cyprus
       knows that Turkey has very few levers against the EU to convince
       Europe's powerful countries - which are already busy with the European
       sovereign debt crisis - to stop the Greek Cypriots. I would just throw
       away this entire para, or condense it, because i don't see why it
       matters. everyone has known for years that turkey wio  yeah, dont need
       to get into too much detail, but point out that Turkey does'nt need to
       be sensiitive to EU condemnation. link back to our more in depth
       pieces where we discuss how turkye primairly is using hte EU bid now
       for PR purposes but is moving past this out of geopol necessity

       It is not clear yet how long the exploration stages will take and
       whether any reserve would be found that is worth exploiting. STRAFOR's
       Turkish energy sources indicate that Turkey's official policy is to
       wait until Greek Cyprus enters the production stage to take a decisive
       action. A military confrontation is unlikely until then, though naval
       dogfights could take place in highly a restrained manner.  this sounds
       weird, and though they may attempt restraint, there is room for
       miscalculation and error that could escalate the situation. For the
       moment, however, Greek Cyprus tries to take advantage of changing
       geopolitical conditions as much as it can to gain more ground. Turkey,
       for its part, attempts to show that it is able to take steps to defend
       its interests in eastern Mediterranean and other regions if needed,
       since any Turkish weakness in this issue could encourage Greece to
       push its demands in the Aegean Sea, which would force Turkey to
       intervene without any hesitation.  how would Greece push its demands
       in the Aegean?   stay consistent with our last diary on this. Greece
       is distracted financially and so is US (and that's what informed
       turkey's thinking on this,) but Turkey also can't rule out that greece
       won't benefit and use this issue as an attempted distraction while the
       govt is facing so much political heat

       --
       --
       Emre Dogru
       STRATFOR  
       Cell: +90.532.465.7514
       Fixed: +1.512.279.9468  
       emre.dogru@stratfor.com  
       www.stratfor.com

 --
 Emre Dogru

 STRATFOR
 Cell:  +90.532.465.7514
 Fixed: +1.512.279.9468
 emre.dogru@stratfor.com
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