THE troika has apparently agreed to all of the government’s main positions on the natural gas issue, it emerged last night only hours after commerce minister Neoclis Sylikiotis had said huge differences remained between the government and foreign lenders on the management of the island’s future gas proceeds.

The AKEL administration was insisting that only a fraction of the gas proceeds go toward paying off the debt, with the rest going into a special investment fund and a part used for energy infrastructures. These demands were accepted, CyBC reported last night.

The dispute over the gas proceeds was said to be a deal breaker for an overall state bailout.

Speaking to CyBC radio earlier yesterday, Sylikiotis protested that the foreign lenders wanted all future gas proceeds to be subject to fiscal regulations and monitoring.

This amounted to ceding national sovereignty, he added.

Sylikiotis repeatedly declined to reveal the troika’s precise proposal on natural gas. But pressed on the subject, he said generally that the key dispute revolved around the troika’s insistence to have a say in the management of gas revenues.

This included how the cash would be spent on infrastructures, he said, hinting that the troika was overstepping its boundaries.

“If tomorrow the troika tells us that the government’s stake in LNG infrastructures should be only 10 per cent, should we accept it?” said Sylikiotis.

He reiterated the government’s position that the state must retain a leading role in all infrastructures.

Responding to a hypothetical question, the minister said that should Cyprus not meet its obligations under a possible loan memorandum, the troika might then ask the government of the day to pour an even greater percentage of gas proceeds into paying off the national debt.

“From the outset, gas revenues would be subject to fiscal regulations,” he said.

He went on to claim that the troika’s proposal submitted to the government contains no reference to an investment fund for future generations.

In short, the government’s take was that the troika wanted to commit all future gas reserves to the budget so that they could then be diverted to servicing the national debt.

Sylikiotis reiterated also that the government should reserve the right to use the island’s gas reserves as collateral for a loan, but that the loan should be used for infrastructures, not toward paying off the national debt.

Using the gas reserves as collateral would be possible, for example, through an Initial Public Offering (IPO) and the issuing of shares by the state hydrocarbons company.

But before this could be done, the reserves would have to be proved so that they could be assigned a definite cash value, commented Constantinos Hadjistassou, an energy researcher with the University of Cyprus.

At the moment, Hadjistassou told the Cyprus Mail, gas reserves in offshore Block 12 are estimates; only once Noble Energy carries out appraisal drilling at the well will the reserves be proved. Follow-up drilling is expected in the first quarter of next year.

Media reports had already suggested that the government was misrepresenting or exaggerating the disagreements over gas. Earlier this week, Phileleleftheros published what it claimed were excerpts of the troika’s proposal.

Citing the document, the paper said the troika advocates the establishment of a special fund to handle the government’s gas revenues.

“In order to ensure transparency, accountability and flexibility, the fund shall rely on a solid legal basis and government structure deriving from internationally recognized practice,” the cited document said.

The troika went on to say that clear regulations must govern cash inflow and outflow, and that these rules must be implemented “as part of Cyprus’ budget, taking into account the development of a hydrocarbons industry as well drops in the public debt.”

Phileleftheros said also that the troika has asked the government to amend existing legislation to incorporate these rules.

Published by: www.cyprus-mail.com