Winners and Losers
Tectonic changes in the energy map of Europe after the Russian attack on Ukraine by the end of 2022 became apparent. The European Union has not only ceased to depend on Russian oil and gas, but also lobbied for a ceiling in commodity prices, which has dropped the Urals grade quotes to an unprecedented 50% of Brent levels. By banning the use of Russian coal, oil and (from February 5) petroleum products, Europe provoked a redistribution of the market, in which there were losers and winners.
The main loser in 2022 was the European Union itself , which had to spend at least €500 billion on the purchase of energy resources at extremely high prices and on subsidizing national consumers. The Europeans have shown miracles of adaptation to new conditions and confidently coped with Putin's attempt to freeze the Old World. Now, many experts say that next winter will be harder than this one, but this is doubtful – at least oil and gas prices in Europe will almost certainly not repeat last year's records.
As for the winners, here the picture looks more colorful. First of all, we can mention China , which can now single-handedly dictate to Russia the prices for coal and gas from East Siberian deposits; China has also received and continues to receive oil on preferential terms (discounts in recent months have reached $13 per barrel compared to fuel from Saudi Arabia). In the coming years, China has every chance of remaining the largest buyer of Russian energy resources, considering all their types.
India , which bought 33 times more Russian oil in December 2022 than a year earlier and brought supplies from Russia to almost a quarter of its total imports, also became a beneficiary of the Ukrainian conflict: average supply prices throughout the year were at levels of $25-30 / barrel lower than Brent quotes. Moreover, Indian refiners have already begun to produce oil products from Russian oil, preparing for their deliveries to Europe.
Is Turkey a future energy superpower?
However, in my opinion, Turkey has become the most complex beneficiary. It has almost doubled its purchases of Russian oil; became the largest importer of Russian gas by the end of last year and will certainly hold this position this year; the demand for fuel transit through its territory has grown due to Russian-Kazakh frictions around the Caspian Pipeline Consortium; and, finally, the Kremlin, despite the difficult relationship with Ankara, took the risk of proposing to President Erdogan the creation of a gas hub in Thrace for the subsequent transportation of Russian fuel to Europe.
All this is fraught with the transformation of Turkey into a new energy superpower, and not only on a regional scale. President Erdogan, who is trying on the image of the leader of the entire Sunni world, is closely following the changes in the energy situation in the Mediterranean: Turkey has increased its proven gas reserves on the shelves of the Black and Mediterranean Seas to 700 billion cubic meters in recent years. m; the Turks are eyeing deposits in the territorial waters of Greece and Cyprus; they begin to restore diplomatic relations with Israel and Egypt , realizing the probable importance of these countries in the regional gas market (the volume of reserves in the gas fields on the Israeli and Egyptian shelves exceeds 3.2 trillion cubic meters).
Ideally, Erdogan would dream of turning Turkey into a hub not only for Russian, Kazakh and Azerbaijani, but also for Middle Eastern gas and oil, essentially replacing Russia, if not in the energy, then in the European gas market. To do this, the Turkish authorities are taking tough measures: we can recall attempts to drill near Greek Crete and Kastellorizon; the involvement of warships to escort the gas exploration expeditions of ENI and Total from the territorial waters of Cyprus and a number of other incidents that had a wide resonance in Europe.
Erdogan wants to replace Russia in the European gas market
At the same time, the dividends received by Ankara from peaceful mediation in the Russian-Ukrainian conflict, as well as the interest of the main European powers in Turkey's agreement with NATO expansion, ensure (at least for now) a relatively high degree of Western tolerance for Turkish impromptu in the Mediterranean. Until recently, this situation was supported by the position of Cyprus, where the experienced and restrained in his policy, President Nikos Anastasiadis sought to coexist with the Turkish Republic of Northern Cyprus (TRNC) recognized only by Ankara and continue the "peace process" under the auspices of the UN. However, the situation may change significantly in the near future.
Cyprus enters the scene
Turkey's behavior causes understandable irritation of Greece and Greek Cyprus, which cannot but affect the mood of the voters. By the presidential elections, which are scheduled for February 5, the Cypriot society came up divided. Known for his anti-Turkish stance, Nikos Christodoulides, who previously served as Minister of Foreign Affairs in the second government of Anastasiadis, is still in the lead in public opinion polls, but seems to many a “non-systemic” candidate, since the ruling Democratic Union party not only refused to support his candidacy, but also expelled him from their ranks.
Turkey's behavior causes understandable irritation of Greece and Greek Cyprus
As a result, he was nominated by three small parties and is positioning himself as an independent presidential candidate – and a record 14 candidates for the island nation are currently participating in the race. The 2023 campaign, like many previous presidential races, focuses on the problem of the island's division, the stability of its financial system, and excessive (according to many) involvement in the global "offshore economy", but it also has one important feature.
Until recently, Cyprus had little to do with the energy problems and contradictions that connected and divided Europe and the Greater Middle East region. Exploration for gas fields in the area began in the late 2000s; the first major gas-bearing area in the territorial waters of the island (the Aphrodite field) was explored in 2011 and recognized as commercially attractive in 2015. Since then, several more discoveries have been made, as a result of which gas reserves in the jurisdiction of Cyprus are now estimated at 400-600 billion cube m. For comparison, Israel 's figures reach 1 trillion, and Turkey – more than 700 billion cubic meters. m. At the same time, commercial deposits of Cypriot gas are located near the Israeli and Egyptian shelves.
From there, exports to Europe are already established, while a significant part of the waters to the west and north of the island are disputed by Turkey and the TRNC, which causes significant problems. Almost half of the sites considered the most promising have not yet been demarcated.
Immediately after the first discoveries, dozens of companies filed applications for further drilling in the Cypriot territorial waters, and now they are owned by such giants as the French Total, the Anglo-Dutch RoyalDutchShell, the American Chevron (which received the rights to develop after it absorbed the American Noble Energy), Italian ENI, Korean Kogas, Qatar Petroleum and even Israeli Delek Group.
Moreover, projects are underway to connect Israeli and Egyptian fields with underwater gas pipelines to Cyprus and further to Greece to export gas to Europe, and the construction of the Europe-Asia Electricity interconnector funded by the European Commission (EuroAsia Electricity interconnector) between Greece, Cyprus and Israel is already underway . force . Therefore, at stake in the elections in Cyprus this year are not only (and not so much) the unity of the island state, but also the interests of the world's energy majors.
Interests of the world's energy giants are at stake in this year's Cyprus elections
It is hardly worth talking about a real confrontation between the two transit routes – Turkish and Cypriot; to date, the Turkish option has more interest and is potentially loaded with much larger volumes of gas. However, neither President Erdogan nor Christodoulides, if he is elected (although the elections will have a difficult second round), will not fail to exchange accusations of an “energy war” against each other, which will further exacerbate the already difficult situation in the region. (I will add that the president of the TRNC, Ersin Tatar, elected two years ago, also does not look like a “dove” , having already noted himself in challenging the status of Varosha, a previously well-known resort, and now an abandoned suburb of Famagusta, enshrined in agreements under the auspices of the UN.)
Therefore, today in Cyprus, many doubt whether the election of a highly publicized but too eccentric Christodoulides is in the interests of a country in such need of constructive relations with its neighbors. The attitude towards the current leader of the race in Washington and Brussels remains moderately cautious. In Moscow and Ankara, they are even ready to welcome his victory, although in each of the capitals for different reasons: in Russia – in the hope of a possible worsening of relations between Cyprus and the Western powers advocating the continuation of the "peace process", in Turkey – believing that the unpreparedness of Greek Cyprus to compromise increases the Turkish chances for greater international recognition.
It is still too early to say how the elections in Cyprus will end, but one thing is clear: with the breakdown of energy ties between Russia and Europe, the focus of European energy policy will certainly shift south. Negotiations are already underway on gas purchases in Israel and Egypt, and oil refineries in the Persian Gulf countries are increasing their output of petroleum products in anticipation of a European embargo on Russian products that will come into force in early February. The Gulf countries, new players in the Eastern Mediterranean, and Turkey, with Russian, Azerbaijani and Kazakh gas and oil behind it, are Europe's new partners in the big energy game, and the EU enters this game with the need to take into account the political preferences of local voters and the exaltation of the elect. them politicians.