NICOSIA, Cyprus – Is a new alignment in the making, bringing together Israel, Cyprus, and Greece? Israeli Foreign Minister Avigdor Lieberman’s talks here earlier this month, following Prime Minister Benjamin Netanyahu’s visit in February, confirmed a meeting of minds on security, energy, and mutually beneficial business deals. Israeli technology will help Cyprus build state-of-the-art desalinization plants, using power generated by gas from offshore gas fields. Cyprus and Israel are working with the same U.S. company, Noble Energy, to bring offshore gas to market. This is now more urgent for Israel, following the disruption of gas supplies from Egypt bringing the likelihood of power cuts this summer.

Some strategists claim that new gas pipelines or electricity cables linking Israel, Cyprus, and Greece would offer Europe greater energy security than existing routes through Russia or the elusive “southern corridor” through Turkey. They envisage gas or electricity from the eastern Mediterranean being transported to Europe via Crete and the Peloponnesus in southern Greece.

Observers here say that Israel and Cyprus share wider interests as the only non-Muslim countries in the Middle East. In this view,Israel, Cyprus, and Greece need to cooperate to prevent instability spreading from North Africa and to counterbalance the new regional sheriff, Turkey. All three countries have their own difficulties with Ankara.

Cyprus and Israel enjoy close relations withRussiaand all three countries have significant Russian minorities. Two Russian companies are expected to bid next month for licenses to explore for hydrocarbons in Cyprus’s exclusive economic zone, and Gazprom is seeking part of the action from Israel’s gas finds. Russia has given Cyprus a €2.5 billion loan to help it cope with the euro crisis. With its companies involved, Moscow would not stand in the way of the new alignment.

Yet today’s political alignments alone may not tell us much about the longer-term geopolitics of the Eastern Mediterranean. Israel’s recent rapprochement with Nicosia and Athens is only a partial substitute for its previous close relations with Turkey. Turkey and Israel share an interest in the restoration of stability to Syria, before sectarian strife spills over to Lebanon and Jordan. If Turkey’s efforts eventually succeed in restraining the violence in Syria, Israel will be one of the main beneficiaries.Turkey’s relations with Iran have sharply deteriorated since Ankara stepped up pressure on its Syrian ally.

Turkey’s military regret the loss of Israeli military technology and the Israeli air force has not found an adequate replacement for Turkish airspace. While Turkey has won popularity in the Arab street from its rift with Israel, some emerging Islamist leaders in North Africa and the Middle East are less taken with Turkey’s secular model. Despite current tensions, too much is at stake to base the supposed new alignment on a permanent split between Israel and Turkey. Israel itself may be reluctant to be drawn into Greece’s simmering disputes with Turkey, or the unresolved Cyprus conflict, and does not share the Orthodox Christian affinities of Greece, Cyprus, and Russia.

Greece faces an uncertain political and economic future. There has been a surge in support for extreme left and right wing parties, ahead of parliamentary elections on May 6. It is far from certain whether the two leading mainstream parties will be in a position to form a grand coalition following the elections. A government beholden to extremist parties may be less inclined to pursue the country’s new alignment with Israel.

Energy links between the eastern Mediterranean andEuroperemain for the moment pipe dreams. It is more than 500 miles across deep waters from Cyprus to Crete and new links would require major investment. For the moment, the Cypriot and Israeli governments still need to determine how much gas will be available for export, and by what means, after satisfying growing domestic demand. Energy companies may well prefer the flexibility of liquefied natural gas to pipelines, enabling them to sell to the highest bidder in Europe or Asia.

Israel, Cyprus, and Greece are right to strengthen cooperation because it could reduce their vulnerability to internal and external shocks. For now, their political, military, and energy cooperation should be taken step by step, aiming to deliver concrete benefits and to bolster confidence and trust. Looking ahead, it is important to realize that this need not be a zero-sum game. Israel and Turkey may in time overcome their differences and there may well be renewed efforts in the future to resolve the problem of the division of Cyprus. The door should remain open to cooperation with other regional players, including Turkey, when political circumstances permit.

Sir Michael Leigh is senior adviser to the German Marshall Fund of the United States and leads a GMF project on energy in the eastern Mediterranean.

EILAT, Israel—Just after midnight last Thursday, a rocket fired from the Sinai Peninsula landed in a building site above the hotel where I was staying in this southern Israeli port and resort on the Red Sea. Eight hundred people anxiously called the emergency services but none were injured. This was not the first time Eilat has been hit by unguided Grad-type Katyusha rockets. In the past, Israel could count on Egyptian intelligence for preventive action or advance warning, but today Sinai is largely beyond the control of Egyptian state authorities. Thursday’s missile attack was probably the work of a local militant group in the pay of a radical Islamist faction.

Since the fall of former President Hosni Mubarak in February last year, the Sinai Peninsula has become a no-man’s-land, prey to arms and drug trafficking. The country’s military and intelligence services seem at best indifferent and at worst complicit in smuggling and terrorist activities there. After last week’s attack on Eilat, the Egyptian army made a show of cracking down on militants in northern Sinai on Saturday. But the next day a militant group blew up a gas pipeline. The Israeli government may be tempted to intervene but is wary of giving pretexts to those in Egypt wishing to renounce the 1979 peace treaty with Israel.

The abortive attack on Eilat is a reminder that the rule of law is far from assured in North Africa and the Middle East following the Arab Spring. In Libya, clan rivalry and the presence of militant groups is an obstacle to the emergence of a national government with effective control of the territory. Countries in the region today range along a continuum from proto-democracies with an Islamist tinge to failed states and repressive dictatorships.

Washington and Brussels seem at a loss as to how to craft an appropriate response and have instinctively fallen back on the policies and vocabulary used after the collapse of communism in Central and Eastern Europe. The countries of North Africa are said to be in “transition.” But a transition to what? There is nothing inevitable about a transition to regimes based on values prevalent in Europe or the United States. The experiences of East Germany after the fall of the Berlin Wall or Czechoslovakia after the Velvet Revolution provide little guidance.

To be sure, the Muslim Brotherhood in Egypt and the governing Ennahda party in Tunisia include canny political actors who are pragmatic and will bend to the interests of their middle-class voters. But the Brotherhood has organic links to Hamas, which is on the EU’s list of terrorist organizations. Its main candidate for president of Egypt, Khairat Al-Shater, who has yet to make much impact on the electorate, has said that “every aspect of life is to be Islamicized.”

Some suggest that the Islamists will soon be replaced by secular and Western-oriented parties because of their economic failures. This is far from certain, however, and economic failure could mean a tilt to the Salafists who garnered more than a quarter of the vote in Egypt’s recent parliamentary election and are especially popular in Sinai. The Muslim Brotherhood and Ennhada should be put to the test. If in practice they clamp down on terrorism, corruption, and organized crime, strengthen the rule of law, eschew clan warfare, permit freedom of expression, support women’s rights, and allow non-governmental organizations to function freely, they deserve European and U.S. support.

Western policies should be designed to nudge them in this direction. The EU in particular aims to provide incentives for concrete steps to strengthen civil society and democracy. But the most convincing incentives, such as easier travel rules for students and better conditions for farm exports, have run into resistance in the midst of Europe’s economic crisis.

Support for political reform in North Africa is necessary but not sufficient. European and U.S. leaders should also focus on the security implications of state failure in Libya, the Sinai, and elsewhere in the region. Without effective law enforcement, these areas are becoming a playground for organized crime and terrorist groups. This creates security risks for neighboring states and can destroy the business climate, bringing losses for Western companies. While the United States has leverage with Egypt’s military, given its $1.3 billion per year in military assistance, the EU’s current security strategy is almost a decade old and urgently needs revision. The risks in North Africa stemming from state failure should, in short, be given higher priority in Europe’s security strategy and in the transatlantic policy dialogue.

Sir Michael Leigh is a senior adviser to the German Marshall Fund of the United States.

KIEV– After reaching an agreement on Russia’s accession to the World Trade Organization on Thursday, European Union leaders are set to meet Ukrainian President Viktor Yanukovich in Kiev today. Although the EU-Ukraine summit should endorse an ambitious new political association and free trade agreement that has been five years in the making, the agreement’s fate is still uncertain on the eve of the meeting. The association agreement would mark a significant shift in Ukraine’s political and economic orientation towards the West. It commits the country to upholding democratic freedoms and the rule of law as well as EU standards in areas such as fair competition and transparent public purchasing. Corruption and red tape meant that Ukraine attracted just 30 foreign investment projects last year, which created only 1,000 jobs. Investment flows improved in 2011, as negotiations with the EU neared completion and related reforms started to take effect. So why is this win-win agreement still in doubt?

A number of EU member states object to concluding the negotiations while Yulia Tymoshenko, Ukraine’s former prime minister and defeated presidential candidate, is languishing in jail on charges related to the ten-year gas supply deal she concluded with Russian Prime Minister Vladimir Putin in January 2009. She now faces additional charges of tax evasion and theft of government property. However, Tymoshenko has told European diplomats that she would not want her imprisonment to stand in the way of a deal from which both sides will benefit.

At the same time, Yanukovych is demanding that a clause be inserted into the new agreement that would give Ukraine the prospect of joining the European Union. This is a pretext for delay. Yanukovych knows full well that the EU, grappling with the euro crisis and still coming to terms with Bulgaria and Romania, cannot presently give Ukraine a membership perspective. At last week’s European Council in Brussels, member states were not even ready to give an unqualified go ahead to Serbia or Montenegro, whose political and economic reforms are far more advanced. Furthermore, in October, Putin invited Ukraine to join his proposed Eurasian Customs Union, with the incentive of a further discount on Russian gas prices;Putin’s proposed union would be incompatible with the EU agreement.

It looks as though the president and his backers prefer to temporize, keeping both Russia and the EU in play, with as few concessions as possible to either. Ukrainian oligarchs are afraid that their freedom of action would be limited by both the Russian and EU agreements. While the Russian proposal would open up Ukraine to competition from far more powerful Russian oligarchs, backed by the Kremlin, the EU agreement would put an end to opaque tendering procedures and the manipulation of tax and customs rules, which today discourage foreign competitors. Ukrainian participation in the putative Eurasian Union is necessary for the body’s credibility, and this gives Kiev some leverage with Moscow.

Although Yanukovich wants to keep Tymoshenko in jail until after the parliamentary elections scheduled for October 2012 — meaning that the EU agreement is unlikely to be signed before then — he also hopes to gain some electoral advantage by wrapping himself in the European flag. If the agreement is not concluded, he can claim this was because the EU refused his membership demands.

In Kiev today, EU leaders should call the Ukrainian president’s bluff. It is not in the EU’s interest for Ukraine to remain a kind of no man’s land, in which the rule of law is up for grabs. The Ukrainian people, too, need “more Europe,” if they are to shake off the political cynicism that has taken hold since the collapse of the Orange Revolution. A better business climate is required to generate jobs in what remains one of Europe’s poorest countries. The conclusion of the negotiations today would start a process that still requires initialing, signature, ratification, implementation, and enforcement. At each stage, the EU can nudge Ukraine toward further reforms as a condition for moving ahead. For now the association agreement should be endorsed without unrealistic preconditions and the EU should continue pressing for

Tymoshenko’s release from prison, pending the conclusion of the various legal procedures underway.

Michael Leigh is senior advisor with the German Marshall Fund of the United States in Brussels.

Image by Alissa Ambrose.

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BRUSSELS – At five in the morning on Friday, a senior EU official commented that the summit outcome could be the first step toward Britain’s leaving the EU. After Prime Minister David Cameron’s veto of a new treaty embracing all 27 member states, aiming to achieve what German Chancellor Angela Merkel calls a “stability union,” the U.K. found itself totally isolated. The willingness of the other 26 member states to embrace the proposed stability union, subject to parliamentary consultations in Sweden, the Czech Republic, and Poland, left the U.K. without any supporters around the Council table. Britain has lost good will and influence in the European Union and may also do so in the world beyond. From a transatlantic perspective, the United States’ “special relationship” with the U.K. today depends more on Britain’s influence within the European Union than upon supposed cultural affinities. This, too, is likely to suffer if the U.K. persists in relegating itself to the sidelines.

Cameron’s goal of obtaining a protocol to the proposed new treaty that would have protected the City of London failed to attract any support. His comment to the press, after the summit, that Britain remains in the single market will be cold comfort to the City. Many observers have pointed out that the survival of the euro depends less on legal obligations to keep down deficits and debt than on the new union taking on real powers for fiscal policy. It is apparent that competence for regulating banks and capital markets will necessarily move toward the eurozone if Merkel’s stability union is to be effective. Under these circumstances, the U.K. will progressively find itself excluded from decision-making on key issues affecting the City of London and the single market.

The early hours of the morning are not necessarily the best time for laying the foundations of a future fiscal union. On reflection, the British government and other member states would do well to consider how to build bridges between the 27 of the EU and the 17 of the eurozone. Ill-tempered comments after a sleepless night should not obscure enduring interests that link the U.K. to other member states, not least Germany and France. The U.K. and Germany, as major trading economies, share an interest in maintaining the open international economic system. They will need to work together in the aftermath of the failed Doha Development Round and in safeguarding the single market. From a wider perspective, France and the United Kingdom remain the only member states with the willingness and capacity to project EU power beyond its borders.

In the short term, Mr. Cameron has preferred to listen to euroskeptical voices in the Conservative Party than to moderate Conservatives, his Liberal Democratic coalition partners, or colleagues in the EU. The present situation looks bleak for the United Kingdom. Yet the U.K.’s vital interest in the single market and the survival of the eurozone will oblige the British government to start building bridges without delay.

Michael Leigh is a Senior Advisor in the German Marshall Fund’s Brussels office.

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BRUSSELS – Radoslaw Sikorski’s Berlin speech shattered any illusion in London that British Prime Minister David Cameron could rally the 10 eurozone “outs” to British positions at the European Union summit on December 9. Sikorski’s federalist vision, commitment to Poland’s joining the euro, and invitation to the United Kingdom to join the eurozone, or at least not stand in the way of others, rules out any possibility of Britain leading a bloc of the outs. The Danish krone already shadows the euro, Sweden does not exclude eventual euro membership, and the euro-skeptical Czechs have an economy deeply interwoven with Germany’s.

This leaves the U.K. isolated on the eve of the summit. Above all, Cameron needs to keep his party behind him. This means somehow delivering on promises to protect the single market and the City of London and to repatriate certain powers, e.g. for labor legislation, from the EU to the U.K. His only bargaining chip for this is British agreement to treaty changes among the 27, as sought by Germany. But what can he reasonably expect in return?

Germany and France are unlikely to renounce a financial transactions tax even if it is adopted only within the eurozone. Blanket guarantees for the City are impractical; a drift in responsibility for financial regulation toward the eurozone, if it emerges from the crisis reinforced, seems unavoidable. A generalized opt-out from the Working Time Directive, which stipulates maximum working hours and obligatory time off for workers throughout the EU, is not necessarily within Merkel’s gift and in itself would hardly warrant Cameron’s acceptance of a whole new treaty. If Britain pushes too hard, Germany and France will go for a eurozone-only treaty, establishing the rules for “economic governance.”

Sikorski’s Berlin speech, building on earlier declarations by Polish finance minister Jacek Rostowski, makes the British government’s task more difficult. Sikorski sets out mainly longer-term federalist goals and does not chart a way out of present dilemmas. Yet Cameron must bring home sufficient concessions to British demands if he is to support a political declaration committing the member states to a new treaty with stricter provisions on budget disciple. Such a declaration seems to be Germany’s condition for agreeing to support wayward eurozone members.  Barely ten days remain to strike a deal that will have enormous implications for the future of Britain and the EU as a whole.

Michael Leigh is a Senior Advisor to the German Marshall Fund and is based in Brussels.

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BRUSSELS—The United States, European Union, United Nations, and NATO may soon be confronted with a new reality in the eastern Mediterranean, one characterized by heightened tensions, possible naval incidents, and the risk of escalation. Competition over what are likely to be enormous oil and gas reserves is a major reason for this new dynamic, but there are other forces also contributing to brinkmanship in the region, including Turkey’s relations with the European Union, domestic political considerations in Ankara, and the deteriorating Turkey-Israel relationship.

In December 2010, Cyprus and Israel signed a maritime border agreement. Turkey opposed the agreement, pending a solution to the Cyprus conflict, and generally contests the application of the principles of the United Nations Convention on the Law of the Sea in delimiting maritime boundaries in the Mediterranean. Ankara claims that the jurisdiction of the “Turkish Republic of Northern Cyprus” has been ignored and that energy resources in Cyprus’ exclusive economic zone should benefit all Cypriots, a point accepted in principle by the leaders of the two communities on the island. But on September 19, exploratory drilling for gas began in the Aphrodite gas field, off Cyprus’s southern coast. This field is adjacent to the larger Leviathan field, which the Texas company Noble Energy discovered last year off the coast of Israel. Overall, the U.S. Geological Survey estimates that the Levant Basin, adjoining Israel, Cyprus, Lebanon, Syria, and Gaza, contains 122 trillion cubic meters of recoverable natural gas, equivalent to 20 billion barrels of oil.

With the start of drilling, Turkish comments have become increasingly harsh. On September 21, Turkey’s Prime Minister Recep Tayyip Erdogan said in New York that “the Greek Cypriot administration and Israel are engaging in oil exploration madness in the Mediterranean,” and proceeded to sign a martime boundary agreement with Turkish Cypriot leader, Dervis Eroglu. On September 23, Turkey was set to react to the start of drilling by sending a Turkish vessel, Piri Reis, accompanied by three frigates, to explore the continental shelf northwest of Cyprus, which includes areas claimed by both Greece and Cyprus. At the same time, the Turkish energy minister announced the blacklisting of companies involved in prospecting on behalf of the Greek Cypriots. The Greek embassy in Ankara has called on Turkey to respect Greece’s sovereign rights.

High stakes in terms of gas and oil reserves only partly explain recent tensions as other factors are also at work. Turkey sees Cyprus as an obstacle to its EU accession process. Cyprus has blocked six negotiating chapters — including the energy chapter, in spite of Turkey’s support for the Nabucco pipeline project — because of Turkey’s refusal to open its ports and airports to Cypriot flag carriers, in line with the protocol extending the EU-Turkey association agreement to new member states. The EU itself has blocked eight chapters for the same reason. “If the [Cyprus] peace negotiations are not conclusive and the EU gives its rotating presidency to southern Cyprus, the real crisis will be between Turkey and the EU,” Turkish Deputy Prime Minister Besir Atalay declared on September 19. “Our relations with the EU will come to a sudden halt.” Turkey’s brinkmanship also reflects domestic political considerations. A tough line on Cyprus mobilizes support across the political spectrum, at a critical time when parliamentary votes are being assembled for a referendum on constitutional amendments establishing a presidential system of government in Turke

Against the background of the Arab Spring and the Palestinian bid for UN recognition, much attention has also focused on the relationship between Turkey and Israel. Since Ankara downgraded its relations with Israel, there have been significant rapprochements between Israel and both Cyprus and Greece. Threats by Turkey to mobilize its navy in support of energy exploration vessels resonate with similar suggestions, later denied, regarding another Gaza flotilla. While the two situations are distinct, they seem to be conflated in the current view from Ankara. Cooperation between Israel and Cyprus, which are both perceived in Ankara as antagonists, must have touched a raw nerve.

The United States, European Union, and United Nations have all expressed concern about risks to security in the eastern Mediterranean. Brinkmanship is ill-advised, particularly given that settlement talks are due in New York in late October. Friction over maritime resources adds to more acute regional tensions. Friends of Turkey and Cyprus need to engage with both parties in order to reduce tensions, focusing attention on progress towards a settlement and, if possible, keeping Turkey’s accession process to the European Union on track.

Michael Leigh is a Senior Adviser with the German Marshall Fund of the United States in Brussels.

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