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Analysis
Turkey must decide on Cyprus

Turkey must decide on Cyprus

Ankara influence leaves negotiations at impasse

by Chrys Georgiou in Limassol

Mon 20 Feb 2017

Cyprus will be on the world agenda this year. Turkey, as ever, will maintain a considerable influence on any reunification negotiations.

Hopes of reunification increased in November when Nicos Anastasiades, president of the Republic of Cyprus, and Mustafa Akinci, leader of the Turkish-Cypriot community, met in Switzerland to discuss territory adjustments and security issues.

The two leaders came close to a settlement, the closest any had come since the rejection of the United Nations’ Annan Plan. But, as before, observers underestimated the formidable influence of Ankara.

Following the November meeting another, held in Geneva, took place in early January. These discussions began positively, though well-known, long-held divergent positions meant that both sides toned down expectations.

The false optimism on reunification is based on a misconception: that the Turkish-Cypriot side, in the occupied part of the island since the 1974 Turkish invasion, is able to negotiate on its own, without following whatever position Ankara advocates. This is wishful thinking. When Turkey appeared adamant in maintaining its security role in whatever deal was achieved, the January talks reached an impasse.

A setback came when Akinci, the Turkish-Cypriot leader, pulled out from the negotiation procedure last week. Economically, reunification would have an enormous and lasting impact on the island. The occupied part stands to benefit the most. Northern Cyprus is completely dependent on Turkey, the only country to recognise the state, for both subsidies and trade.

With Cyprus developing its strength in financial and computer services, the increase in foreign direct investment would help to improve GDP growth. Tourist arrivals exceeded 3m in 2016, and that number could easily double if Cyprus reunified. The quarter of Varosha, in the UN buffer zone since 1974, in the city of Famagusta on the eastern coast of the island was a top tourism destination prior to the invasion.

The maritime industry is another sector which would benefit significantly. Ships under a Cyprus flag are not allowed to enter Turkish ports. In the case of reunification, this embargo would be lifted, opening huge prospects for shipping. With Cyprus ranking in the top three countries in the European Union and 10th worldwide in terms of size of fleet even under the embargo, the possibilities for growth would be tremendous.

Cyprus, which grew at close to 3% in 2016, will likewise be able to take advantage of heightened opportunities for its professional services sectors. These will be able to provide accounting, banking, legal and fiduciary services to Turkey, the largest and fastest growing regional market, further enhancing their global market share. John Hourican, the chief executive of the Bank of Cyprus, has remarked in the past that ‘the dividend for the banking system for supporting a recovered unification will be substantial’.

Most importantly, the prospects of the nascent oil and gas industry on the island would be even brighter in the case of reunification. Newly-discovered gas deposits in the exclusive economic zone of Cyprus would benefit from a pipeline leading to Turkey and, from there, the EU.

Politically, reunification would improve stability in the region, further raising Cyprus’ standing among its neighbours and setting a precedent on how disputes can be resolved. Reunification would be beneficial for Cyprus’ peers, further extending the EU’s reach in the eastern Mediterranean.

Regardless of how significant the political and economic benefits would be, producing a sustainable solution is the first priority. A reunification deal which goes bad shortly after its signing will be worse than no deal at all, as it would probably sever ties permanently. This is the time for Turkey to determine whether it really wants to negotiate, or leave the talks at a stalemate.

Chrys Georgiou is Head of Marketing and Development at Cyprus-based Economic Policy Advisers.

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