Is Natural Resource Wealth in Cyprus a Blessing or Curse?
In 2011, Cyprus made a significant discovery—the Aphrodite gas field. This find brought hope for energy independence and potential economic wealth, but also raised concerns about worsening tensions with neighboring Turkey. While Cyprus has now identified five gas fields, none have been fully developed, raising the question: Is natural resource wealth in Cyprus a blessing or a curse?
Early Hopes for Natural Resource Wealth in Cyprus
Initially, the discovery of the Aphrodite gas field sparked optimism. There was hope that these gas reserves could not only help Cyprus achieve energy independence but also generate substantial wealth. However, despite the presence of major energy companies in its offshore waters, natural resource wealth in Cyprus remains largely untapped.
This situation echoes what some economists call the “natural resource curse,” where countries rich in resources like oil or gas struggle with economic development instead of thriving.
What is the Natural Resource Curse?
The natural resource curse refers to the paradox where countries with abundant resources, such as oil and gas, often experience slower economic growth than those with fewer resources. This can be due to fluctuating prices, poor governance, and weak institutions. For example, countries like Nigeria and Venezuela have faced challenges with their natural resource wealth leading to corruption, poor governance, and missed economic opportunities.
On the flip side, countries like Norway and Canada have turned their natural resources into blessings. Strong institutions, good governance, and careful investment have allowed these countries to use their resources to promote sustainable economic growth.
Is Cyprus Facing the ‘Presource Curse’?
Recent studies, including research from World Bank economists, suggest that some countries face problems even before they start extracting their resources. This is known as the “presource curse,” where governments and citizens become overly optimistic about their natural resource wealth, leading to poor decision-making and wasted capital.
For Cyprus, the long delays in developing its gas fields and challenges in creating a clear energy plan suggest that it might be experiencing a presource curse. There has been much enthusiasm, but little action, as several key energy projects have stalled or been delayed.
The Cyprus Gas Challenge
Energy expert Charles Ellinas has highlighted several issues that continue to delay the development of natural resource wealth in Cyprus. Among these are the slow progress in developing the Aphrodite gas field, unresolved energy infrastructure projects, and an outdated power supply system. These delays are linked to the government’s inability to establish a comprehensive energy plan and effective institutions to manage the country’s resources.
Additionally, Cyprus has weak institutions that struggle to make clear, long-term decisions on how best to manage its natural resource wealth. The country faces challenges in balancing its reliance on fossil fuels with its push for renewable energy, as well as upgrading its electricity grid to support new energy sources.
Corruption and Governance Issues
A key challenge to turning natural resource wealth in Cyprus into a blessing is the issue of governance. The government often bows to political and special interest pressures, leading to poor decisions that benefit a few rather than the entire country. Corruption and inefficiency in managing natural resources have been major stumbling blocks in Cyprus’s efforts to leverage its gas discoveries.
Improving governance and strengthening institutions are crucial steps to ensure that natural resource wealth in Cyprus benefits the broader population and not just a select few. Implementing transparent processes and creating independent bodies to oversee large projects could help prevent the mismanagement of resources.
The Turkey Factor: A Major Obstacle
One of the most significant issues Cyprus faces in developing its gas fields is its relationship with Turkey. Tensions between the two countries have complicated efforts to fully exploit natural resource wealth in Cyprus. Turkey disputes Cyprus’s claim to certain offshore gas fields, and the lack of cooperation between Greek and Turkish Cypriots further hinders progress.
Turkish Cypriot leader Ersin Tatar recently stated that the Greek Cypriots are unwilling to share the island’s resources, a situation that would improve in a two-state solution. Until relations with Turkey improve, it is unlikely that Cyprus will be able to fully capitalize on its natural resource wealth.
Turning Natural Resource Wealth into a Blessing
For Cyprus to turn its natural resource wealth into a blessing rather than a curse, several key steps must be taken. First, there needs to be a clear, long-term energy strategy that balances fossil fuels with renewable energy. This plan must include upgrading energy infrastructure, such as expanding the electricity grid and completing gas import projects.
Second, governance needs to improve. Cyprus must work to eliminate corruption and ensure that decisions regarding natural resource wealth are made transparently and for the benefit of all citizens. Creating independent bodies to oversee large projects and making the judiciary more effective could be critical steps.
Finally, improving relations with Turkey could unlock the full potential of natural resource wealth in Cyprus. Cooperation on energy projects would benefit both sides and help resolve the long-standing disputes that have stalled development.
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