How Egypt undercut Turkey by making a deal with Greece
A look at the events across the Mediterranean
Earlier this year on August 17th, 2020 Egypt's parliament approved an agreement to demarcate the maritime borders between Egypt and Greece. This agreement establishes an exclusive economic zone between the two countries and is part of a French-Emirati plan to put pressure on Turkey in the Libyan conflict. It's also a response to the November, 2019 deal between Turkey and Libya's Tripoli government, which established an exclusive economic zone in the Mediterranean Sea. That deal gave both countries the right to claim ocean bed resources, which spiked tensions throughout the Mediterranean region.
Egypt, Cyprus and Greece all criticized the Turkish/Tripoli deal, describing it as a violation of their economic right in an oil-rich sea area. The EU wasn't too thrilled either, calling the deal a breach of international law that threatens the stability in the region.
The Greece/Egypt agreement was sealed days after Turkey announced it would suspend all search activities east of the Mediterranean. That move by Turkey was in response to German chancellor Angela Merkel's stepping in to ease tensions between the neighboring nations and open the window to a new round of negotiations.
On July 22nd, Turkey paused the seismic works of Oruc Reis, a research vessel, after the German chancellor intervened to make room for a diplomatic settlement that would encourage Turkey and Greece to resume talks in late August, and also pave the way for the EU's Josep Borrell to create a way of sharing the revenue from the available hydrocarbon reserves.
Today, the Greek government is heavily influenced by France. As the regional role of Turkey grows, Mitsotakis, Greece's prime minister has turned to France, Israel and the UAE for support.
New Democracy, the Greek ruling party, presented the accord in their media as a historic victory that solves a decades-old problem and reinforces the map of the maritime borders which had already been signed between Athens and Rome.
Even though both Turkey and Greece are NATO countries (which prevents them from going into a military confrontation), Turkey feels obliged to protect its statute, seeing as it's a growing influence in the region, even if that means that it'll be forced to go into a conflict with a neighboring and allied country. In contrast, Greece feels very confident that the French will jump in to protect them if it comes down to a military standoff with Turkey.
As tensions rise, investors will become more and more skeptical about a rise in the EURUSD, fearing a similar impact to the one Greece had on the eurozone when the Greek crisis happened. And with the Turkish Lira continuing to fall day after day, bulls will most probably retreat and clear the floor for bears to drive the European market.
On the other hand,
metals and commodities could experience a spike, which has been known to happen
during previous military clashes between other countries, enticing investors
and driving prices up.