VZCZCXRO5107
PP RUEHAG RUEHDF RUEHIK RUEHLZ RUEHROV
DE RUEHNC #0224/01 0981234
ZNR UUUUU ZZH
P 071234Z APR 08
FM AMEMBASSY NICOSIA
TO RUEHC/SECSTATE WASHDC PRIORITY 8695
INFO RUEHRC/DEPT OF AGRICULTURE WASHINGTON DC 0049
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEHBS/USEU BRUSSELS
RUCNMEM/EU MEMBER STATES COLLECTIVE

UNCLAS SECTION 01 OF 03 NICOSIA 000224 
 
SIPDIS 
 
SENSITIVE 
 
AGRICULTURE FOR FAS 
 
BRUSSELS FOR FCS AND FAS 
 
ATHENS FOR FCS AND FAS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EAGR ECON ETRD SENV CY
SUBJECT: CYPRUS: WATER SUPPLY APPROACHING CRITICAL 
 
REF: 07 NICOSIA 910 
 
(U) This cable is sensitive but unclassified.  Please protect 
accordingly. 
 
¶1.  (SBU) Summary.  Cyprus is in for a long, hot, and, worst of all, 
very dry summer.  On March 24, the GOC announced emergency measures 
to deal with a dwindling water supply.  A shortfall of around 16.7 
million tons of water over the next year is expected to be made up 
through a combination of measures involving strict rationing of 
water (30 percent cuts, for now), conservation, increased capacity 
for desalination, and importing water from Greece via tankers. 
Analysts expect Cyprus' GDP to take a 0.2 percent hit this year due 
to the continuing drought, but it could be worse than that.  End 
Summary. 
 
¶2.  (SBU) A combination of mismanagement of available groundwater 
over previous years, steadily-declining annual rainfalls for more 
than a decade, large increases in overall water usage, and a general 
lack of foresight by past governments have created Cyprus's current 
nightmare-sized problem with water.  Salt water intrusion into 
existing groundwater is a common problem all around Cyprus yet 
depletion of the already severely-strained water table continues at 
the rate of 23 million tons annually.  While this is a huge 
reduction from the 42 million tons/annum depletion rate of a few 
decades ago, Cyprus's water table now holds only about one billion 
tons, compared to three billion 40 years ago. 
 
Ration What We Have 
------------------- 
 
¶3.  (SBU) Cyprus uses about 66.7 million tons of water per year. 
Currently, the country has barely 50 million tons available (from 
dams, desalination plants and wells), meaning that Cyprus is facing 
a 16.7 million ton water deficit over the coming year.  Limassol is 
facing the worst problem, with a daily consumption of 40,000 tons, 
at a time when Kourris dam (Limassol's main source of water supply) 
holds just six million tons (about 4 percent of its capacity).  In 
other words, the Kourris dam will be tapped out completely (assuming 
all the water in it is usable) in less than 150 days. 
 
¶5.  (SBU) On April 2, Post Econ Officer and Econ Specialist met with 
Christodoulos Artemis, Director, GOC Water Development Department 
(WDD) for an update on the water situation.  Artemis, who will be 
retiring around November 2008, was quite somber about the outlook, 
as he walked us through the GOC's action plan.  One of the principal 
tools to be used will be severe water rationing.  During a meeting 
of the Ministerial Council, Chaired by President Christofias on 
March 24, the GOC decided to cut the supply of water to all 
municipalities by 30 percent.  For Nicosia residents, this means 
having running water from the city supply for only eight hours every 
48 hours.  However, most buildings in Cyprus, whether residential or 
commercial, have large water tanks to deal with contingencies like 
these, and the demand for additional fiberglass storage tanks has 
been such that, according to Artemis, there are no more available on 
the local market. 
 
Strained Water System Needs Straining 
-------------------------------------- 
 
¶6. (SBU) The last time Cyprus instituted such severe rationing was 
ten years ago.  Since then, many residential and other buildings 
have been constructed all over the island.  These are typically at 
the end of water lines and often on high ground to take advantage of 
views.  The result in the current situation is that they are the 
last to get water when the lines are turned back on and the first to 
lose it again.  Additionally, because rationing was thought to be a 
thing of the past, many of these newer homes do not have water 
storage tanks although swimming pools have become increasingly 
common. 
 
¶7. (SBU) Turning water mains on and off is bad for every system due 
to the pressure changes and stirring of sediment.  Many of Nicosia's 
pipes are more than 50 years old and leaky in the best of times. 
The rationing system is causing even more loss through leakage 
(including breaks in the main pipes) and due to the sediment that is 
stirred up from the process, some consumers are getting 
sediment-filled water when the lines are turned back on. 
 
No Pricing Penalty For Wastage 
------------------------------- 
 
 
NICOSIA 00000224  002 OF 003 
 
 
¶8.  (SBU) Water rationing is intended to encourage conservation and 
wiser water usage in general.  According to Artemis, if everyone 
conserved water, there would be no need for rationing.  He noted 
that current water pricing policies give the wrong market signals, 
with water in general being under-priced relative to its cost to 
produce and scarcity and with no real cost-saving for conservation 
or penalties for over-use.  This is because any change in water 
pricing must be agreed by parliament - a tough political task even 
in the middle of a drought. 
 
Who Deserves Water More? 
------------------------ 
 
¶9.  (SBU) Only public hospitals have the GOC's permission for an 
uninterrupted supply of water, although other special-interest 
groups, including hoteliers and industrialists are raising a storm 
of protest, demanding similar privileges, otherwise threatening to 
curtail operations and fire staff.  Hoteliers back up their demand 
noting that tourism is the backbone of the economy, contributing 20 
percent of GDP.  Similarly, industrialists argue that many 
industries (including alcoholic and non-alcoholic beverage 
manufacturers, dairies, etc.) use water as one of their main inputs. 
 President of the Cyprus Chamber of Commerce and Industry, Manthos 
Mavrommatis, told us that "inevitably" the economy would be hit by 
water rationing.  Finance Minister Charilaos Stavrakis recently said 
that, according to preliminary, unofficial estimates, water 
rationing might cost the economic growth rate 0.2 percentage points 
in 2008, i.e. from an estimated 3.8 percent to 3.6 percent. 
Comment: If tourists begin to suspect that local hotels may suffer 
water shortages during the upcoming summer, we believe the impact on 
GDP could be greater than 0.2 percent.  So far, bookings for the 
summer season have been very strong.  End comment. 
 
What's In The Works 
------------------- 
 
¶10.  (SBU) In addition to water rationing and conservation, the 
Ministerial Council has approved plans to boost existing 
desalination capacity by 50,000 tons daily, as follows: 
 
-- increase the capacity of the Dhekelia desalination plant by 50 
percent, boosting production by 20,000 tons per day as of June 
2008; 
 
-- increase the capacity of the Larnaca desalination plant by 20 
percent, boosting production by another 10,000 tons per day as of 
November 2008; and 
 
-- commissioning a pre-fabricated desalination plant at Pyrgos/Moni, 
near Limassol to produce 20,000 tons of water per day, starting in 
October 2008.  This tender has already been awarded to a 
U.K.-Israeli consortium.  (According to the Israeli company's 
-Nirosoft- website, it has never constructed a plant of this 
capacity before; the UK company, SubSea Infrastructure, appears to 
be a start-up with no previous record.)  Water produced from this 
facility will pass through the Limassol water treatment plant, 
before being fed to Limassol.  This facility will be built on a 
Build, Operate, and Remove (BOR) basis; the consortium is required 
to dismantle and remove the project after three years, since the GOC 
is planning to have a permanent desalination plant for Limassol 
operational by 2010. 
 
¶11.  (SBU) The Ministerial Council also authorized on March 24 the 
emergency importation via tankers of up to 8 million tons of water 
from Greece.  This expensive but necessary undertaking will add 
another 50,000 tons of water per day to Cyprus' existing balance 
over a period of six months.  The project will require construction 
of terminal stations both on the receiving end (in Yermasoyia, near 
Limassol) and on the departing end (in Elefsina, near Athens).  The 
GOC's normal tendering procedure will be by-passed, as this project 
is treated as urgent.  Two companies have already expressed 
interest, and one of them (Cypriot shipping company Ocean Tankers) 
has pledged that it can have the water here in two months, provided 
the land infrastructure is ready.  Given that it will take up to 
five months to construct the land terminals, the GOC expects to have 
the project on line by August 2008.  Some analysts also doubt that 
Greece, a country with its own chronic droughts that experienced 
devastating fires last year, will be willing to ship water to Cyprus 
if there are any signs of its own shortages. 
 
¶12.  (SBU) All together, the above infrastructure projects are 
designed to produce an extra 100,000 tons of water per day, meeting 
 
NICOSIA 00000224  003 OF 003 
 
 
the 16.7 million tons deficit mentioned above. The cost of the 
anticipated infrastructure development, increased energy usage, and 
higher operating costs will apparently be borne by the GOC.  We have 
found no estimates of what this cost will be, although Artemis noted 
that the tanker option especially would be "extremely expensive." 
If GDP is more seriously affected by the drought, government 
revenues will fall even as the cost of water provision skyrockets. 
 
¶13.  (SBU) Comment: The WDD has been arguing in favor of water 
restrictions (albeit, not publicly) for several months now.  With 
its eyes fixed on the February Presidential elections, the previous 
administration disregarded such calls.  Now, the new administration 
is scrambling to put in place measures that will be both hugely 
expensive and unlikely to come on-line until this autumn at the 
earliest; after the season of peak demand for water has passed.  In 
any case, according to the WDD, no additional water will be supplied 
from existing resources until new sources come on-line.  With water 
demand in summer so much greater than now (due to the heat and the 
influx of tourists) the water that is now available 8 hours out of 
48 may be available for even less time.  The worst-case scenario 
(not on the table at this point) calls for the GOC declaring a 
national emergency to enforce further water rationing and more 
strict enforcement of usage limits.  The political costs of 
something like that would be enormous so the government would only 
use it as an absolute last resort.  The economic costs to tourism 
and industry would be significant.  This, apparently, would still be 
preferable to pricing water to reflect its true costs or in limiting 
water to farmers (who contribute 2 percent to GDP but consume 85 
percent of water.)  As one observer noted, "it makes no sense for a 
desert island to export water in the form of potatoes and oranges." 
End Comment. 
 
SCHLICHER