The Great Sea Interconnector saga continues

We have been asking the president to take a clear position on GSI. He took it. He confirmed the government’s full support at his meeting with Greece’s prime minister Mitsotakis in New York on September 23. This was followed by the two energy ministers who agreed actions to take the project forward.

But that was without the agreement or support of Cyprus’ Finance Minister, Makis Keravnos, who this week returned repeating his mantra that “the project is not viable”, ignoring presidential undertakings.

Nevertheless, the two governments maintain their strong support. This was reconfirmed on Thursday at a productive teleconference between the European energy commissioner Dan Jorgensen, Cyprus’ Energy Minister George Papanastasiou and his Greek counterpart, Stavros Papastavrou. Such consensus is critical to GSI’s success.

In the following I examine the project’s techno-economic feasibility, the geopolitical challenges and their impact on the project timetable and completion.

The project’s techno-economic feasibility is clear

The contentious studies referenced by Keravnos to justify his non-viability claim are by US consulting firm ‘Charles River Associates’ (CRA) and by the US law firm ‘Curtis, Mallet-Prevost, Colt & Mosle LLP’ (CMPCM), as well as an assessment by the European Investment Bank (EIB). So, let’s look at what they say.

CRA claims that, under current terms, it is unclear whether GSI will “ultimately decrease electricity costs for Cypriot consumers”, that evaluation of how reliability of Cyprus’ electricity system would be improved is “lacking” and that there is no assessment of how a Cyprus-Israel connection would affect GSI’s commercial outcomes.

CRA suggested that “Cyprus might achieve comparable or better results by investing in local energy storage rather than in GSI.” Also, that “large-scale battery systems could offer flexibility, enhance renewable energy use and improve security of supply at a lower cost than GSI.”

But that is like comparing apples and oranges. The purpose of GSI is to transmit electricity between countries, while batteries store energy for short durations, typically 2-4 hours. GSI would provide long-term security of supply and reliability, enable renewable integration through export/import balancing and reduce the need for standby generation, while batteries provide local flexibility.

Critically, the GSI would act as ‘infinite-duration storage’ through European market access and allow the import of cheaper green electricity that would help lower prices in Cyprus, something that batteries cannot do. 

Cyprus needs both the GSI and battery-storage, one is not a direct substitute of the other – they are complementary, serving different roles. GSI enables cheaper power imports, and also exports, while battery-storage optimises usage of local renewables and stabilises frequency.

CMPCM produced a legal due-diligence report based on the initial draft “concession agreement” issued by Greece’s independent transmission system operator Admie. CMPCM’s main claims are that the legal framework is underdeveloped and/or insufficient in several respects and that, under these terms, Cyprus’ role/participation in share capital might expose it to risks.

But the draft concession agreement was issued to serve as a framework, establishing the general structure of the project and it is not the final, legally binding document. In fact, it cannot be finalised until all key parties, investors, regulators and the European Commission, have provided input and negotiated detailed terms, which will certainly be very different than in the current draft. It will be finalised only after due-diligence negotiations with prospective shareholders. In fact, CMPCM admitted that and requested the “final signed version of the agreement”, which for obvious reasons, does not yet exist.

Earlier this week, EIB denied that the GSI is not viable and was rejected for funding. It said that it must first receive a formal request from the relevant authorities before it evaluates the project for funding. Without such a request, it will not begin its due-diligence.

During her recent visit to Cyprus, EIB president Nadia Calvino confirmed support for the GSI. She said the project must be aligned with the energy plans of both Cyprus and Greece, fit into the countries’ strategic energy policy frameworks and be formally approved at the EU level. Given the GSI’s strong support by Greece, Cyprus and the EU, this is ‘a given’.

Clearly, the claim that the project is not viable is based on incomplete and preliminary information. GSI’s problem is not techno-economic, but geopolitical.

The challenge remains geopolitical

Turkey has made it clear that it opposes energy infrastructure in the East Med that bypasses it, relying on its illegal ‘Maritime Memorandum’ with Libya – that cuts across the East Med ignoring Greek islands including Crete – to support its claims and has applied pressure through naval coercion.

The Turkey-Libya maritime claims also affect Greek exploration for hydrocarbons south-west of Crete. If Greece backs-off on GSI it makes its position on such exploration weak, leaving Greece with no option but to confront this challenge.

Both the EU and the US support GSI, and consider it as consistent with their strategic interests, but their willingness to confront Turkish obstruction directly over it is proving to be limited. However, Israel’s participation could significantly change the political weight of US and EU support.

Its participation would “make GSI part of the broader US-backed East Med stability architecture, which includes energy, digital and security links.” Israel confirmed its strong interest to join the project, but that probably has to wait until the situation in Gaza becomes clearer.

Greek Foreign Minister Gerapetritis and Prime Minister Mitsotakis have stated repeatedly that the Turkish threat is manageable and that the GSI route survey will recommence at the right time. At this stage, these statements are measured and deliberately non-confrontational, signaling that Greece will not be deterred by Turkey.

Greece is using the time to frame the GSI as a European project, as evidenced by the increased involvement of Jorgensen, to ensure that any future Turkish threat is treated as a challenge to the EU itself, not just Greece.

As part of this process, earlier this week Mitsotakis said “Greece seeks understanding with all our neighbours, guided by legality and especially the Law of the Seas.” He invited the key coastal states to a joint meeting, where “we can jointly examine everything that concerns us,” with potential US involvement.

Greece and Cyprus, have also made it clear to the EU that they will not agree to Turkey’s participation in the SAFE programme, while the country threatens their interests.

But such measures take time to negotiate and put into place and the end-result is not certain. GSI is a project with a fixed timetable. Even if an extension is granted, the cable route surveys will need to be completed by the end of 2026. To achieve this, surveys must be resumed within H1-2026.

GSI is technically and economically feasible, but politically constrained. Given time criticality, I put its chances of completion at two-thirds. It needs geopolitical clarity.