Like most disputes between nations, the recent impasse between Turkey on the one hand, and Cyprus and Greece (which means the EU) on the other, is both simple and complicated.
The simple explanation is natural resources, like most conflicts.
Turkey is trying to extract oil and gas from disputed maritime territory. But why is it disputed, what does that mean for a potential resolution, and the potential impact on the markets? That’s quite a bit more complicated.
The Eternal Rhyming of History
Without getting into a history lesson, Turkey and Cyprus have been technically at war since the 1970s.
Turkey has occupied the northern third of the island since 1974. Turkey also claims the corresponding maritime rights around its third, which Cyprus refutes.
The current issue started in the spring of 2019. Turkey began exploring for oil in the seas that both Cyprus and Turkey claim.
Cyprus is a member of the EU, which brought the block into conflict, supporting their member.
Turkey refused to back down, and the EU imposed sanctions.
The next escalation of the saga was about a month ago when Turkey expanded its exploration efforts, this time into territory disputed with Greece.
This is a country Turkey has been on the brink of war with several times in recent history.
Turkey has sent navy ships to escort their drilling vessels, while Greece has sent theirs to shadow what it claims are unlawful military incursions.
So Where Are We Now?
The piece of the ocean under dispute is a vast rectangle in the Eastern Mediterranian. It is broadly encompassed between Cyprus and Crete, and from there to the Turkish coast.
Recent studies show there are at least 900B cubic meters of gas, with some estimates going as high as 3.5T. Evidently, there is a lot of money at stake, besides national pride.
Cyprus has been pressuring the EU to take a stronger stance against what it sees as illegal incursions of a foreign power into its economic exclusion zone.
Turkey claims the area as part of its continental shelf, which by international law, gives them exclusive rights to the resources. Greece makes the exact same claim.
The EU and NATO
The EU issued sanctions initially, but bureaucrats in Brussels have shown reluctance to initiate another round after Turkey ignored them last year. This led to Cyprus vetoing sanctions against Belarus in order to pressure its partners.
Additionally, both Greece and Turkey are members of NATO. This increases the tensions within the block that are already stressed after Turkey became increasingly amicable with Russia.
In the latest developments, the parties have agreed to continue talks over the dispute with German mediation, downgrading rhetoric.
However, this isn’t the first time that discussions like this have taken place.
The markets have reacted with equanimity so far, as tensions between Greece and Turkey are a regular occurrence.
Should the talks break down in the coming days, however, the renewed uncertainty could support the price of oil and weigh on the euro.