Tuesday, 10 June 2014

Transcript of the Interview with former US Ambassador Matthew Bryza (Published in Turkish in Havadis Newspaper on 11-12 March 2014)

TRANSCRIPT of Interview with former US Ambassador Matthew Bryza
By Esra Aygin
Published in Turkish in Havadis Newspaper on 11-12 March 2014

You are working on a proposal to create a collaboration between Turkey, Israel and Cyprus regarding the Eastern Mediterranean gas and you believe that this collaboration will contribute to the solution of the Cyprus problem. What are the details of this collaboration?
Bryza: The proposal that I’m working on in my capacity as both as a member of the board of TURCAS Petrol but also now as an academic and the head of a think tank and also as a member of the Atlantic Council the goal is to come up with a way in strategic sense to come up with a way to make sure not only that natural gas is produced and is a good investment that earns money and it enhances the economic security of Israel and Cyprus but to make sure that and not only to prevent the gas from aggravating the tensions between the countries because that’s one of the risks happening if we cannot agree rights – as we have seen but the real goal is to take advantage of a great and historic opportunity which is to come up with a collaborative way to satisfy Israel, Cyprus, Turkey and thereby create a new geopolitics in the region. That would change the dynamics of Eastern Mediterranean and the geopolitical map in a very positive ways for these countries, for us for NATO and the EU.

What are the details of your proposal?
Bryza:If you look at the politics of the region and relations of Israel with Arab states and look at the economics and the cost of export what makes sense by far is a pipeline from Israel and really from Cyprus and Israel to Turkey. An Israel to Turkey pipeline either has to cross the continental shelf of Lebanon and Syria which is is politically impossible or Cyprus. And under the law of the sea its not clear whether or not in strictly legal terms Cyprus could block such a pipeline but in practical terms, of course it could. Because the law of the sea is ambiguous about whether not a state could block a pipeline being built across its continental shelf and if you’re an international banker who’s going to have to provide money in this project -its too risky because Cyprus is an EU member state if they sue you take you to court at best your project is going to be delayed.

So the investors will not invest in this project unless the Cyprus Republic gives its consent for the pipeline to pass through its pipeline and go to Turkey?
Bryza: The international banks who’d lend the money definitely have that view definitely.

So back to the project?
Bryza: We’ll build the pipeline first from Israel to Turkey, Cyprus will give permission to cross its continental shelf and then a portion of the revenues from the early sales of that natural gas via the pipeline will be reinvested by Delek and Noble in the Vassilikos LNG terminal so you reduce the financial risk accelerate the financing… First the pipeline then the LNG terminal and so that makes commercial sense. and imagine the geopolitics. Imagine the beautiful breakthrough this creates for Cyprus… This would create a huge momentum to the solution process in Cyprus. That is a beautiful outcome. And its something no negotiation on its own can do. The use of economics to draw a beautiful historic breakthrough. But you cannot do it unless the Cyprus talks move a bit further down the road and allow steps for this cooperation.

Does your company talk with Israeli Turkish Cypriot officials. Can you give me some information?
Bryza: Our team maintains very senior level contacts – as high as you can go very very top in Turkey and in Israel with the PMs team and very top of the FM and Energy Ministry and in Cyprus too. Companies try to remain apolitical and very technical and we say this is the cheapest most effective way here’s the technical feasibility study we are ready to do it.

What is the response that you get?
Bryza: Oh yes. Quite positive from everybody.

Do they see they have an interest in this too?
Bryza: Very much so. I think in the beginning in the Roc – GCs the view was we are just going to build our own LNG terminal… The companies that are developing the Aphrodite field Noble and Delek, they listened to that because they’re guests in the country. They want to make the government happy if it is commercially viable to do that to build the LNG terminal. But I think everyone has realised its not commercially viable yet. It may be later. But not now. Last summer the reserve estimates were revised downward. There simply is not enough estimated reserves – look, not even proven - to justify even 1 production line. There’s not even enough to make even 1 production line of natural gas commercially attractive. And for Vassilikos to make money commercially you need at least 2 production lines. So it’s nowhere near commercially viable.

How about the idea of bringing Israeli gas to Cyprus to make LGN rational?
Bryza:… I think there’s no chance for Israel to say for our first export option of our natural gas the first one were going to export it from another country whether its Cyprus or any other country. No country ever in history has decided that its first or only export road for its natural gas would be an LNG terminal in another country. You want to control that project. You want as much control as possible as government over this critical infrastructure asset. And an LNG terminal as a strategic asset could be vulnerable to all sorts of threats. So I think Israeli officials have made clear that they are not going to use Vassilikos as their first export option. But they have said ‘we want 2 options.’ ‘We want an LNG option and we want a pipeline option.’ And what we are arguing is obviously the most efficient and politically attainable pipeline option is Israel to Turkey and given that Delek and Noble are the main companies developing both Levathian in Israel and Aphrodite in Cyprus, why don’t we do what makes commercial sense and strategic sense which is reach an agreement.

You have high-level contacts in all countries.  What does Cyprus think about such a cooperation before solution?
Bryza: I think in Cyprus the political leaders are realising gradually that they put themselves in a corner by making such grandiose claims about how easy it would be to achieve Vassilikos and what it would do for the economy. Now they think uh oh this is going to be much harder than what we thought. Gradually they are recognising that the cheapest by far the most effective the way to maximise revenue for Cyprus is a pipeline from Cyprus to Turkey. This politics is still being formed on the island. I feel the momentum is moving in this direction.
If you are a Greek Cypriot leader and you are worried about getting out of financial crisis paying your loans to Troika and have enough revenues to stimulate economic growth you want to get the most money you can and the most money you can get is out of a pipeline to Turkey not an LNG without question.

Is Israel telling Cyprus to hurry up?
Bryza: I think so. I am never there in the negotiations but I know there is an unprecedented level of contact between governments of Cyprus and Israel.

Do they have contacts with the Turkish Cypriot side?
Bryza: I don’t think so…

What if there is no improvement in negotiations? Your plan collapses? Is there any other way to realise your plan?
Bryza: There is none. If there’s no positive momentum its never going to be politically feasible for GC leaders to say yes I give permission for pipeline to pass through our territory and go to Turkey. Not possible for Turkish politicians to say that’s great but lets channel some of the revenue to Cyprus’ Vassilikos terminal. It just won’t be possible.

What happens to Eastern Mediterranean gas?
Bryza: Israel probably exports some gas to the Palestinian territories and Jordan and go with Floating LNG. And follow developments in the region.

Will Cyprus be able to build Vassilikos?
Bryza: It would eventually. But it would take much longer and be much more expensive.

What kind of a timeframe are we talking about for Cyprus to get gas revenues in case of your project and in case this fails?
Bryza: As Charles Ellinas put it – head of the Cyprus natural hydrocarbon company – if everything went perfectly now  - new appraisal wells which are being drilled now are successful and they allow the gas reserve estimates to increase and they conduct negotiations with international financiers you could get a final investment decision in the most optimistic scenario in 2018. After that you have to finalise the financial package that takes another couple of years. Then you have to build it and then after that you have got to use initial revenues to repay investors. From his perspective its 10 years before Cyprus’ treasury would see any revenue. 10 years in the perfect scenario. And it never is the perfect scenario. Never.
We plan to have the gas already flowing by 2018. So you could have revenues flowing into Cyprus so six years earlier. These revenues would be a big chunk of money but the breakthrough in geopolitics I am talking about could revolutionise the economy of both communities, economy of Cyprus.

Do you have any figures?
Bryza: I don’t. But we know for sure the economy is going to improve dramatically. There’s is always a multiplier effect once you have the money flowing and if there is a settlement then there will be a huge inflow of capital. I think we cannot even conceive this.

Turkey says it won’t allow Cyprus Republic to develop natural gas without comprehensive solution. Do you think Turkey may use military force?
Bryza: I think Turkey is going to continue to be careful and prudent in the way it expresses its will militarily. It’s a huge liability to for Turkey or any country to use force in that situation. Its not something Turkey would want to do. … But if pushed in a corner it’s shown its willing to use force. I think the calculation in Ankara is that if we just suggest we are going to use force it’s like the Sword of Democles over your head to chop off your head any time.

Did Noble have talks with your company and other Turkish companies? BOTAS? What is being discussed can you give me some information?
Bryza: Of course yes. Noble and Delek are conducting negotiations with a couple of groups - at least 2 groups ours and Zorlu’s about building a pipeline. Botas wont be an investor in the pipeline but they the negotiations are centering around a pricing formula right now. We are negotiating the pricing of the gas and BOTAS has to be part of that. If you’re negotiating a formula of how to price the gas BOTAS has to be involved because it determines the national price.

What is Zorlu’s proposal? Do they foresee a similar route?
Bryza: I am not familiar in detail with Zorlu's proposal.  I know Zorlu is talking about a sub-sea pipeline along a similar route, across the continental shelf of Cyprus from Israel to Turkey. 

There’s a new negotiations process in Cyprus with a huge support from international community. Does natural gas have role?
Bryza: It definitely has a role. I do believe that energy provides a motivating factor. It has helped to enliven discussions and give people a bit more excitement. But at the same time energy is an issue that can divide the parties more deeply when it comes to revenue sharing. But I am sure the people that actually conduct negotiations also realize it creates potential difficulties unless everything is managed in a thoughtful way.

This time sides seem more committed. Why?
Bryza: There are a number of factors. First and foremost the mood of the island has changed for a number of reasons. There’s a natural give and take in any country’s politics whereby if you try something for a while and it fails you change course and the rejectionist approach totally failed. Look where it Cyprus. It left Cyprus with no prospects of a solution with nearly I would argue no viable way to export its natural gas until there’s more investments and more reserves are proven. Yes in the EU but seen as difficult and spoiler. This approach didn’t achieve what it was supposed to achieve And we are left with the island frozen and divided. The arguments of rejectionists on both sides have been exhausted. I really think the majority of Cypriots on either side want a solution. Of course you could argue that the economic crisis in Cyprus has had an impact it makes the people more eager to come up with a solution.

Why would Turkey want a solution?
Bryza: Here the AKP and Foreign Minister Davutoğlu and Prime Minister Erdoğan have made clear that they want to see a breakthrough and if possible a settlement. I think I hope Turkey understand strategically Turkey can play a much more significant role in the Eastern Mediterranean and broader Middle East if this problem is resolved and if Turkey plays a role in resolving it. Then the strategic value of Turkey increases. Second I think Turkey understands on the energy side that the resources available can help Turkey economically by cheaper supply of gas but also establish Turkey as a gateway to Europe for diversified supplies of gas. Three, Turkish professional diplomats have long understood that continuing existence of Cyprus problem makes it impossible for Turkey to work closer with the EU and – not necessarily accession – but also this enduring dispute makes it harder for the EU and NATO to work together militarily so for a small group of real specialists in positions of power there are all sorts of reasons to solve the Cyprus issue. Then there are of course the elections coming up here in Turkey. I think Prime Minister Erdoğan has decided that its good for him and for his party if he and his team are seen as resolving one of the most serious problems that has faced Turkey for so many decades.

Would this be an advantage? This is a national issue for most Turks?
Bryza: So far Turkish populists you mention have not come up with a single alternative view. Probably Prime Minister Erdoğan’s view is accurate in that if he were the one creating a settlement that turkey likes then that is a big plus - comprehensive solution bi-zonal, bi-communal fed in which rights of Turkish Cypriots are not only respected but guaranteed in a way that allows them to coequally determine the future of the island economically and politically. That is a huge victory for a Turkish leader.

The US senior officials also seem very active for solution?
Bryza: US government is very active in encouraging a Cyprus settlement. It always has been but it has increased its activity as reflected in the statement by Kerry and activities of the assistant secretary for European and Eurasian affairs Victoria Nuland.

Yes she came to Cyprus.
Bryza: Yes that’s quite rare.

She had a big role in joint statement?
Bryza: Yes but our Ambassador in Nicosia John Koenig is extremely talented and capable and has been doing the same. All of the groundwork had to be prepared and that has taken a couple of years and ambassador Koenig has done a great job.

So there was a lot of work to get the background prepared?
Bryza: Yes the US Embassy is always trying to bring the sides together along with the British High commissioner who is often the most capable person on the island but the US became more active when it became clear that the both Cypriot side was going to be more active. Especially after Presıdent Anastasiades was elected, because we all know that he was the only Cypriot politician really in support of the Annan Plan. He is very courageous. When I was the mediator I have to say he was by far besides Glafcos Clerides the most active the most energetic and most positive about reaching a settlement. So once he was in power, then the US got more energised. But the Cypriots were the ones to take the lead.

How about Mr. Eroglu? He never really liked the idea of a federation. How are we going to get him move forward? Is that going to be Turkeys role?
Bryza: I think it is. It is a very complex issue. He is elected. Yet Turkey is much more than simply a neighbour in your case. So I hope there is confidence among TCs that Ankara knows what it’s doing and knows what is in everybody’s best interest. And I hope he will be supportive of a settlement. And I would hope that Mr. Eroglu would also understand that his community would also benefit tremendously from what I have described. There right now is much less economic development happening than could happen.

What is US’ benefit in this. Why is it working so hard?
Bryza: Well first of all there is a strong Greek American community that would like to see a comprehensive settlement. That’s the domestic political side. But what really drives it is geopolitics and understanding that NATO is not entirely healthy if two of its members and key to the southern flank Greece and Turkey are not happy with each other. Cyprus is right in the middle of that unhappiness between Greece and Turkey. And on top of that the second factor of geopolitical character is that NATO EU military cooperation is blocked. US would like to see much closer collaboration operationally and strategically between the NATO and the EU. So if you solve Cyprus you get that to happen. Another factor is that the US would very much like turkey move toward the EU and become a member of the EU and as long as the Cyprus dispute is out there, that is not possible. So there are a whole many reasons why the US cares. And of course now there is energy is a new issue and an additional issue.

Are you hopeful of a solution in Cyprus?
Bryza: I am even optimistic. I am not optimistic that in the short term there is going to be a comprehensive solution in the Cyprus problem. I think things will have to happen sequentially. You take a step up one ladder which is the Cyprus settlement issue and then you can take a couple of steps up the energy ladder and then once you’ve moved up you can take a couple of more steps on energy ladder that is going to make people want to take more steps on the Cyprus ladder. Energy and settlement issues will go together in tandem and motivate each other.

Like what?
Bryza: Like it could be the Ankara protocol all those issues Turkey implementing Ankara protocol, which means you get something done in Varosha in Famagusta and you get ports open maybe some sort of certificates of origin for Turkish Cypriot produced goods that EU will recognise. So the Ankara protocol becomes more than just opening ports. It becomes sort of a way to free up Turkish Cypriots economic access to the world. That is a huge breakthrough. It’s not a comprehensive settlement but it’s a breakthrough. And then that changes the mood in a very positive way and then you can conceive of this formula with Cyprus granting permission to cross its continental shelf. So yes you have to do more in Cyprus for the collaboration in energy but you don’t have to go to the fullness of a comprehensive settlement. And I think it’s even dangerous to even think that way. It’s dangerous to incorporate these energy issues formally into solution process and the plan on top of all the difficult things that you already have. I think the issue of potential revenue from energy projects should be kept out of the comprehensive settlement talks and I think you should allow that issue that big pot of money as an incentive. You should keep it aside don’t politicise that issue.

Could an interim agreement that will allow energy collaboration pose the risk that the Cyprus issue is put on hold again because the big powers already have what they want?
Bryza: Not at all. The United States hoped for and supported a comprehensive settlement of the Cyprus question during the entire 23 years I was a diplomat.  This remains the case today. U.S. Government efforts have increased or decreased depending on how much progress the Cypriot parties themselves seemed to be willing to make. If there is an interim Cyprus settlement, let us say, focused on implementation of the Ankara Protocol, then participation at the highest level of the U.S. Government in pursuit of a comprehensive Cyprus settlement will only increase.

There is a very common belief that Cyprus remained divided until now because US wanted it to remain divided and it will be solved now because the US wants? Is this true?
Bryza: It’s ridiculous. In my 23-year diplomatic career I never heard of a single conflict anywhere in the world where the parties don’t think that. Everyone thinks they are the centre of the world. Everyone wants to believe were so important that the US president the most powerful person in the world wakes up every day and thinks about us. And it’s not true. Cyprus is a hassle for US. There is nothing they gained by the division. US wants reunification. The division all it created was another problem for the US.

Do you have a message to Turkish Cypriots?
Bryza: I accepted to join the board of TURCAS also because of the promise of developing this particular project that would create I think great momentum for a comprehensive settlement in the Cyprus problem. that is a huge idea to which I am committed to spend the rest of my career. I totally believe in the need for a solution, the possibility of a settlement happening and this project can help bring everybody to the finish line. So that is what I want to do.

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