Greek Business File, January-February-March 2020, No 124
Interview by GBF
Dr. Theodoros Tsakiris, Associate Professor for Energy Policy & Geopolitics, University of Nicosia presents his views on the East Med pipeline prospects.
Greece, Cyprus, Israel with their IGA (Intergovernmental Agreement) signed in Athens, in early January sealed their political agreement for the East Med pipeline. Do you consider that this agreement will be able to ease the ‘troubled waters’ in Eastern Mediterranean?
This agreement is a geopolitical attestation that the countries who signed it do not accept Turkey’s self-appointed role as the region’s arbitrary policeman. It stabilizes the region in the sense that it consolidates an entente, which has been taking shape since 2010 and the Turkish-Israeli clash over the Mavi Marmara incident. Geopolitically speaking, this quadrilateral entente, since one needs to include Egypt, does not actively turn against Turkey, but it balances out its most expansionist tendencies, such as, its claims to have an EEZ (Exclusive Economic Zone) with a country with which it has no maritime borders.
This counter-balancing effect is indeed stabilizing for the Eastern Mediterranean since Israel, Cyprus, Egypt and Greece have founded their cooperation on their mutual respect for international law, including the UNCLOS (United Nations Convention for the Law of the Sea) of 1982. The fact that this quadrilateral entente –although not yet a formal alliance – attracts the interest and thematic participation of other international powers such as the USA and France which is illustrative of its stabilizing role.
From a strategic point of view, the EMGP (East Med Gas Pipeline) would represent a practical disproval of Turkey’s Mavi Vatan Doctrine that claims the northern half of the entire Mediterranean Sea as part of the Continental Shelf and occasionally of its EEZ. This is how the Zappeion IGA has been interpreted by the public opinion in all three signatory countries and particularly in Greece.
Other energy projects such as the EuroAsia Electricity Cable Interconnector (between Crete, Cyprus and Israel) as well the continued exploration activities of Cyprus and Greece in their respective maritime zones, irrespective of Turkish threats and provocations, are practical manifestations of the fact that Turkey’s aspired hegemony will not be imposed on the states whose rights it is aiming to neutralize. There is always room for Turkey to join in this new regional security architecture, as long as it behaves according to international law and refrains from using its gunboat diplomacy.
Italy and Egypt
Two friendly counties, Egypt and Italy with shared common interests in the East Med project, still hesitate to fully participate in it. Which are the reasons?
We need to differentiate between the two. Italy is party to the East Med IGA and has been since the beginning of negotiation in 2017. Italy has negotiated the content of the IGA and has supported the efforts of Greece and Cyprus to include the EMGP project as an EU PCI (Project of Common Interest) that allowed for the financing of 50% the pipeline’s FEED (Front End Engineering & Design) budget via an EU grant. If Italy were against the project, it had no reason to lobby for its inclusion in the PCI list. The project will mature in each country at its own pace. The most challenging component is not in Italy or between Italy and Greece.
We need to keep this in mind and respect a country’s internal processes and sensitivities. As far as Egypt is concerned, I believe that the EMGP would be complementary to its strategy of emerging as the principal transit gas hub for Eastern Mediterranean after the capacity of both of its existing LNG terminals is fully booked. Egypt has a pipeline connection to Jordan and Israel. It has two world class LNG export terminals but the EMGP would offer it a unique advantage: a direct link to the center of the world’s largest integrated gas market. Such a direct link to the EU would consolidate Egypt’s role as the principal gas transit hub of the region.
The East Med construction is already considered as one of the most expensive projects. Do you consider that the estimated 10 billion cm/year of the gas will be worth the overall cost of the project construction?
It is important to ask compared to which alternative is the EMGP more expensive; Is the EMGP less expensive vis-a-vis Egypt’s existing LNG facilities? No, it is not and it should not be compared to them because it does compete against them. EMGP should be compared to other exporting options that would need to be constructed from scratch. The publicly available results of the pre-FEED study carried out by the project developers, which was completed in 2017, indicated that the cost of the pipeline system to Italy, that is the EMGP and the IGI (Interconnector Greece-Italy) is estimated at 6,6 billion dollars.
This is considerably lower compared to a new two-train LNG export terminal of 10 billion cubic meters(bcm)/year or a Turkish pipeline system that would move gas to and through Turkey via a new pipeline to Central Europe. Moreover, under the current geopolitical conditions, any Turkish pipeline option is a geopolitical non- starter.
European Investment Bank decision
Recently, the EIB’s board agreed on November 14th 2019 a new energy lending policy, ending the financing by the EU Bank of unabated fossil fuel projects, including gas, from the end of 2021. Do you consider this decision a major setback to the financing of East Med?
A setback perhaps. A major setback not necessarily. Moreover, the EIB decision you are referring to is not final, especially for projects that have were included by the European Commission in the final PCI (Project of Common Interest) List of October 2019.
The policy will be reviewed in 2021/2022 and by that time, I hope that the EMGP will have matured to the point of being considered eligible for EIB financing. EIB financing is not a make or break precondition for the materialization of the project and would not make EMGP bankable in and of itself.
European Union and CO2 emissions