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Tensions in East Mediterranean Could Impact the Tanker Market

With Turkey escalating tensions in the Eastern Mediterranean and Greece responding accordingly, it seems that this spat is bound to continue and could potentially have an impact in tanker trade in the region, especially if EU imposes sanctions towards Turkey, as has been suggested in the past few days.

In its latest weekly report, shipbroker Gibson said that “its been simmering for a while, but the spat between Turkey, Greece and Cyprus, seems to be escalating. How has this situation come about? Turkey sent a drill ship to the Mediterranean in May 2019 where it carried out seismic surveys and exploratory drilling off the north coast of Cyprus, leading the island nation to condemn the actions as illegal. In response, the EU reduced pre-accession financial assistance to the country for 2020 by €145.8 million and halted highlevel bilateral talks. Despite this, Turkey has said that the EU actions ‘will in no way affect Turkey’s determination to continue its hydrocarbon activities in the Eastern Mediterranean.’ To prove the point, Turkey deployed further drill ships to the region this year along with naval escorts”.

Source: Gibson Shipbrokers

“So, what is this dispute about? There has been increased interest in exploration in the eastern Mediterranean over the last decade, with large oil and gas finds off Israel and Cyprus. Cyprus is already home to as much as 550 Bcm of gas resources following the Aphrodite, Calypso and Glaucus discoveries recently. So, the right to explore, develop and extract the potential oil and gas finds within the Cypriot borders could provide incentives to both parties, should significant reserves be found. Cyprus and the EU consider the north of the island to be part of the Republic of Cyprus and the waters surrounding it to be part of the Exclusive Economic Zone (EEZ), which means EU nations have the exclusive right to fish, drill and carry out other economic activities. But Turkey recognises Northern Cyprus as independent, with its own EEZ, Ankara says it is within its rights to drill there. Also, Turkey does not recognise awards granted to French and Italian companies by Cyprus for hydrocarbon exploration because they say a portion of the awards fall within Turkey’s continental shelf”, Gibson said.

“So what next? The EU has suggested that sanctions against Turkey were not ‘in principle’ on the table. Turkey it seems will continue its actions in the disputed zone and has announced that it will start drilling activities in Greece’s EEZ. For the EU to press for sanctions on Turkey, or even relevant services or individuals, will require unanimity among the EU member states in order to enforce sanctions and it’s not clear yet whether there is appetite by members to agree such actions”.

According to Gibson, “sanctions on Turkey will no doubt have some impact on the country, but in terms of impact on the tanker space, this is more difficult to assess. Significant volumes of crude are imported via pipeline from the Middle East, and to a declining extent, Russia. However, the AIS data shows that with the start-up of the STAR refinery in Aliaga, Turkey is also a product exporter to the Mediterranean markets, while at the same time the majority of imports stem from European refinery output, with Greece, Italy, Spain, the Netherlands and Belgium all providing significant volumes. Whatever the outcome of this situation, it is clear that both crude and product flows could be impacted”.
Nikos Roussanoglou, Hellenic Shipping News Worldwide

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