Cyprus stalls on Great Sea Interconnector amid financial disputes and geopolitical tensions

Great Sea Interconnector, a €1.9 billion EU-funded project to connect the power grids of Cyprus, Greece, and Israel via the world’s longest submarine high-voltage direct current (HVDC) cable, has sparked a deepening rift within the Cypriot government, jeopardling fears it could falter despite its critical role in enhancing regional energy security.

The Ministry of Finance, led by Makis Keravnos, has firmly opposed funding, citing fiscal risks, while the Ministry of Energy, under George Papanastasiou, champions the project’s strategic importance, advocating for its continuation with robust safeguards, according to Politis, a partner of EUalive.

This internal deadlock, compounded by Turkey’s fierce geopolitical opposition and unresolved cost-sharing disputes, threatens to derail a flagship EU initiative aimed at ending Cyprus’s energy isolation and fostering a greener, interconnected Eastern Mediterranean.

The Great Sea Interconnector, previously known as the EuroAsia Interconnector, spans 1,240 kilometers – 898 kilometers from Cyprus to Crete, Greece, and 310 kilometers from Cyprus to Israel – with a capacity of 2,000 MW and a completion target of 2030.

Backed by €657 million from the EU’s Connecting Europe Facility (CEF) and €100 million from Cyprus’s Recovery and Resilience Plan, it promises to slash Cyprus’s electricity costs – among the EU’s highest at €0.29 per kWh – by up to 30% by 2030 and reduce reliance on imported heavy fuel oil, which accounts for 92% of energy consumption.

Construction, led by Greece’s Independent Power Transmission Operator (IPTO) and contractors Nexans and Siemens, began in 2023, but progress is stalled by financial and geopolitical hurdles. A cost-benefit study by Exergia and the National Technical University of Athens, presented by IPTO in July 2025, projects €8 billion in social benefits for Cyprus, far exceeding the €1.9 billion cost for the Cyprus-Greece link.

Financial disputes are at the heart of Cyprus’s indecision. IPTO has demanded full cost recovery during implementation, proposing a 67% cost burden for Cypriot consumers and 33% for Greek consumers, a split reflecting Cyprus’s greater benefits as the EU’s last energy-isolated member state.

Greece’s regulatory authority (RAE) approved its 33% share, but Cyprus’s Energy Regulatory Authority (CERA) has resisted, citing insufficient documentation and demanding stricter transparency. A July 2024 interstate agreement caps Cyprus’s contribution at €25 million annually for five years (2025–2030), to be covered by state aid to protect consumers.

However, the Ministry of Finance opposes any subsidy, arguing it would strain Cyprus’s budget, already stressed by a 5.1% GDP deficit in 2024. Keravnos warned the Council of Ministers that funding without clear benefits risks fiscal instability, stating, “Cyprus cannot bear costs for decisions in which it had no role.” CERA’s proposed Tariff Calculation Method Mechanism awaits approval, but the Finance Ministry’s refusal to allocate funds has created a technical impasse, with IPTO suspending €70 million in payments to Nexans due to uncertainties.

Geopolitical tensions exacerbate the deadlock. Turkey opposes the project, viewing it as a challenge to its influence in the Eastern Mediterranean, particularly because it excludes the unrecognized Turkish Republic of Northern Cyprus. In July 2024, Turkish warships disrupted Nexans’ seabed surveys near Karpathos and Kasos, heightening risks. Ankara has pushed for an electricity link to the occupied north, leveraging its “Turkish Cypriot observer status” in the EU, a move Cyprus’s Energy Minister Papanastasiou said is being closely monitored.

Nicosia has delegated diplomatic handling to Greece, but the European Commission’s silence has left the issue unresolved, adding to the project’s fragility. These tensions, coupled with Cyprus’s hesitation to commit to a €100 million shareholding in the project’s special purpose vehicle, established by IPTO in January 2024, cloud its future.

Caption: The foreign ministers of Greece, Giorgos Gerapetritis (R), Cyprus, Constantinos Kombos (C), and Israel, Gideon Sa’ar (L), shake hands during a trilateral meeting of the foreign ministers of Greece, Cyprus, and Israel in Athens, Greece, 13 March 2025. The ministers met to focus on strengthening trilateral cooperation, as well as discussing international and regional developments, especially in the Eastern Mediterranean and Middle East. EPA/YANNIS KOLESIDIS