The Cypriot economy

Turkey May Block Use of Natural Gas for Cyprus Bailout

Turkey could challenge any move by Cyprus to speed up offshore natural gas exploration as a way of attracting desperately needed investment to save its teetering economy, senior Turkish officials said Thursday.

CNBC,

21 March, 2013

The European Union has given Cyrpus until Monday to raise the billions of euros it needs to clinch an international bailout or face the collapse of its financial system and likely exit from the euro currency zone.

Cyprus is in talks with Moscow over possible Russian investments. Cypriot Finance Minister Michael Sarris has identified the divided island's offshore gas riches as one area in which Russia could invest.

"This resource belongs to two communities, and the future of this resource can't be subject to the will of southern Cyprus alone. (We) may act against such initiatives if necessary," one of the Turkish officials told Reuters.

"The exclusive use of this resource ... by Southern Cyprus is out of question ... and unacceptable."

Cyprus has been divided between the Greek Cypriot south and Turkish north since a Greek coup d'etat followed by a Turkish army invasion in 1974. Efforts to reunite the island have repeatedly failed, and Turkey is the only nation to recognize the self-declared Turkish Republic of Northern Cyprus.

Cypriot efforts to monetize as yet undeveloped offshore gas fields and position them as a vital source of energy for Europe have raised tensions with Turkey, which demands a joint approach and a share of the revenue.

"We are discussing all legal means. ... We could take the case to the European Union, but we will use all political and legal channels," the official said without elaborating.

Moscow would tighten its grip on European supplies if it invested in natural gas fields in the Mediterranean south of Cyprus as part of a deal to solve the island's financial crisis.

So far, some 200 billion cubic meters of natural gas worth $80 billion at current prices have been discovered in the Aphrodite gas field in Cypriot waters, although the figures still have to be audited.

That would be enough to cover around 40 percent of the European Union's annual gas consumption.

Cyprus hopes to start exporting in 2018, but energy analysts say extracting the gas will prove costly and slow, and Cypriot supplies may run into a global glut, with shale gas plentiful by then in North America, Russia and even Europe