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By Charlie Charalambous
A decade or so ago, Cyprus had the fanciful notion of becoming an energy-rich state which could buy itself out of trouble and make other countries stand up and take notice – the same way that Saudi oil makes people look the other way.
The hydrocarbons gold-rush hasn’t quite happened for Cyprus, but that hasn’t stopped the government making grand plans and promises about how it will spread the wealth.
Having said that, the government has been rather shy about coming forward with the amount of money it has received from energy companies in license fees to explore and exploit oil and gas offshore Cyprus.
It seems the going rate for a block in the Republic’s Exclusive Economic Zone is roughly 100 mln euros a pop – that’s just for the pleasure of conducting research and sticking a very big drill in the sea bed.
There are eight blocks that have been licensed to major players ExxonMobil, Italy’s Eni and France’s Total and Shell, so a nice fat wad of cash has been collected in the distribution phase, even though Cyprus has yet to start extracting gas on a viable, commercial basis.
So, the government may have received close to half a billion in fees from the energy giants to fish around for hydrocarbon riches in our delineated waters, but the question is, what has it done with the money?
Certainly, it’s gone to plug a few fiscal holes (to use the scientific term) like bailing out a failed bank that was so badly mismanaged a whole new definition of incompetence was added to the dictionary of high finance.
Several billion euros was sunk into the Cyprus Co-op only making it stable enough to be sold off to the asset-strippers at Hellenic Bank who couldn’t believe that Santa Claus actually existed as a disguised civil servant seconded to the Finance Ministry.
Needless to say, whatever the government has made from the energy bonanza so far, it has been well spent or might yet be deployed to save a few pension funds that have suffered from that benevolent disease known as creative accounting.
Like most things in Cyprus, the past doesn’t matter, it’s what happens next that counts.
President Nicos Anastasiades this week invited parliamentary party leaders to the Palace for a chat about the creation of a hydrocarbon wealth fund that would help secure the island’s future for generations to come.
This is hard to believe, but our politicians want to give something back to the people because their pockets can only go so deep.
I’m not sure how a wealth fund works when a country is in charge of it, however, I would just point to a few examples where the state hasn’t actually covered itself in glory when trying to run things that take a modicum of expertise (unlike government).
Cyprus Airways went bankrupt due to nepotism, jobs-for-the-boys and cronyism, ditto for the Co-op Bank, a similar lack of oversight saw Cobalt close, Helios crash and Mari naval base go up in smoke – not to mention the financial crisis.
Oh, and while we are at it, we lost our most famous export trademark – halloumi in the UK.
Anastasiades told party leaders to speed up procedures that would see the creation of a hydrocarbon fund get through parliament after being held up for nearly a year.
Party leaders were all for it, agreeing that energy revenue belonged to future generations, but who will be making the decisions and how safe will that money be?
What guarantees are there that the fund will stay intact and used for good causes, not a convenient borrowing device to get the government out of a tight spot?
The fund is also linked to the sensitivities of the Cyprus Problem, where energy riches is one of many divisive issues.
If the government is to be believed, hydrocarbon revenues belong to all Cypriots and a fund will also provide for Turkish Cypriots in the event of reunification.
With this in mind, there need to be safeguards in place over how the money is used, collected and invested, thus you can bet your bottom dollar that a debate on the fund will have more political strings attached than a symphony orchestra.
As for future generations of Cypriots being able to enjoy the benefits of the hydrocarbons cash-cow, it sounds like one of those fad diets – too good to be true.
Reality check: Cyprus has yet to discover copious amounts of natural gas to make it a regional supplier, while the one find under its belt has yet to be extracted due to haggling over the price. Good luck with that.
