The discovery and commercial exploitation of the gas and oil findings by the Cyprus must be

modeled in a manner that will be economically, socially, and politically progressive for the
nation. According to Disch, Rasmussen, Bye, Haarstad, & Reite (2013) the establishment of the
OfD (Oil for Development) was an initiative towards such an objective. Norway has established
clear structures and good policies that can be emulated by a number of countries in safeguarding
their petroleum sectors management capacity.

The establishment of the Oil for Development program was an initiative that aimed at reducing
conflict in the allocation and use of resources generated from oil revenues. In contrast countries
like Nigeria, Angola, Sudan and DR Congo have been adversely affected by the exploitation of
minerals in their countries due to corruption, poor resource management and lack of political
goodwill to safeguard the interests of the citizenry (Switzer, 2000). The oil element is permeating
many of the conflicts in Africa and South American countries due to poor government structures
that lack accountability to the people. This propels corruption to high levels that are
economically and socially destructive to the economic growth of some of the oil producing
countries (Disch et al., 2013; Karl, n.d.; Switzer, 2000).

The influence of multinational corporations in destabilizing the political stability of a country

can only be overcome when the institutional capacity of a country are strengthened (Disch et al.,
2013). For example there is a need for Cyprus to build local the local capacity and will in the
general population and institutions in countering the adverse effects of oil drilling on the
environment. The most profound issue that leads to poor governance in many countries is
corruption and mismanagement of resources, which results to conflicts such as the Sudanese
Civil War that erupted due to oil exploitation differences between Sudan and South Sudan
(Switzer, 2000). This problems also affect countries like the DR Congo where political
instability is a function of poorly structured institutions and governance practices that do not help
this achieve a positive dividend (“Conflict Minerals and the Democratic Republic of Congo,”
2010)

International politics has been a culprit in the oil curse woes of some of the oil producing
countries. Cyprus is strategically located and throughout her history external forces have had a
big influence on her political and socio-cultural life. From this Leigh & Vukovic (2011) state that
“shipping routes for oil and competition for control of chokepoints make European powers,
Turkey and others very involved with that Island Country.” The significance of this is that its
geostrategic location attracts the attention of external powers which may jeopardize her stability
despite the oil find. The presence of international organizations, such as NATO (North Atlantic
Treaty Organization, NAM (Non-Alignment Movement), and the United Nations in the country
attest to the importance of the country geopolitically in the region. With the discovery of oil, then
a delicate balance must be struck to avoid imperiling the country in view of international politics
(Bernard, 2009).

The country therefore must adopt strategies, policies and structures that will safeguard her
geopolitical advantage and internally ensure the revenue from oil resources do not become a
source of conflict. This will require investing in education, which aids in achieving peaceful
conflict resolution on the potential instability that may arise out of the oil curse (Johnston, 2011).

Following the Norwegian Model, the Cypriot government can structure its petroleum
management into three distinct parts which form part of effective management of oil revenue.
This separation of policy, commercial and regulatory functions is essential in attaining efficiency
in management of revenues (Thurber, Hults, & Heller, 2011). Furthermore Cyprus must come up
with a scheme that provides checks and balances which is an essential pillar in the provision of
stability and resilience against socio-political and economic shocks. From the research done by
Thurber et al. (2011) countries that have employed the Norwegian model such as Brazil and
Norway are strong performers, and currently Mexico is making a serious attempt to follow the
Norwegian model in oil administration. This therefore follows that at this stage of development
oil exploration, Cyprus must develop clear institutions to deal with the policy, regulatory and
commercial functions of the oil industry.

Such a progress will require development of human resource to deal with the various aspects of
the industry. They should not be limited to the technical aspects of the industry only. This is
because from the example of the Oil for Development program of Norway, human resources
must be developed in almost all areas that touch on the society. A country with a good financial
system, health, education, industry and social enterprises must ensure that the revenue generated
from the oil serves the society in the most appropriate way. For that to occur, that society must
have the right mix of skilled and/or specialized human resource pool to advance its progress.
Combining this human resource capital with aspects such as setting up of National Wealth Funds
will go a long way in safeguarding the interests of the nation.

The revenue from oil can be invested in strong sovereign funds. A sovereign fund consists of
social security, pension funds among others that are in a sense national savings of a nation.
Savings provide a reserve pool of resources that can be harnessed to increase the productivity of
nation not only in the oil sector but diversifying into other areas of the economy. Cyprus should
learn from other oil producing nations that have not diversified their oil stream revenues to other
areas.

Hartzok (2004) notes that Norway invests some of its oil revenues in foreign stocks and bonds,
while at the same time taking advantage of her oil to create an economy in which a progressive
tax structure is maintained, revenue from oil profits are re-invested back into the economy. This
kind of approach is useful in the cushioning future stock markets. It helps avoid massive layoffs
and ensures employment opportunities are protected. With the Cypriot economy on the
doldrums, such a move will protect the future economy of the Island nation.

In as much as the oil reserves will last for a long time, Cyprus must learn from the Norwegian
experience, where the country has extracted 30% of its known reserves and extraction of the rest
may not be commercially viable with the current technology. In this case the earlier investment
of oil revenues in education, social welfare and Petroleum Fund is being realized in a situation in
which the oil extraction is facing a potential steep decline (Hartzok, 2004). The alternative
investment from in funds helps secure some form of economic security for the nation especially
with the knowledge that a time will come when the reserve stocks that can be extracted viably in
commercial terms will be depleted to below economic levels.

References

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from http://www.gloria-center.org/2011/12/a-geopolitics-of-cyprus/
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Disch, A., Rasmussen, F. O., Bye, V., Haarstad, J., & Reite, T. (2013). Facing the Resource

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