Island troubles

By bne IntelliNews May 22, 2012

Justin Vela in Lefkosa -

As the Republic of Cyprus prepares to assume the EU's rotating presidency this summer, the Turkish (and unrecognized) northern part of the island is receiving dollops of aid and unwavering support from Turkey. None of this is helping to unite the divided island, nor further Turkey's own dreams of joining the EU.

Turkey has announced it will suspend political relations with the EU when the Greek half of Cyprus assumes the bloc's rotating presidency on July 1. The move is meant to show support for the Turkish Republic of Northern Cyprus (TRNC), the self-proclaimed state recognised only by Turkey that has suffered international isolation since the island split in 1974. Turkey also aims to provide water supplies to the TRNC and is financing energy exploration.

Turkey's support is crucial to the survival of the TRNC. The main components of its struggling economy are the public sector, tourism and seven private universities that aim to attract foreign students, says Dervis Besimler, president of the Turkish Cypriot investment agency (YAGA), adding that two more universities are expected to be completed soon.

Nearly year-round warm temperatures, clean air, reasonable prices and low rates of crime make it an ideal spot to retire, and a number of foreigners - mainly from the UK - have come to live in the TRNC, for at least part of the year. Besimler says that a northern European country is currently building a retirement community on the island.

However, luring foreigners to an island life is not enough to provide jobs for the population of 290,000 and maintain territorial security. Ankara still donates about $400m-500m every year to the TRNC, directly funding a good chunk of the roughly $3bn economy. Private Turkish associations donate more. And an estimated 35,000 Turkish troops are stationed there.

Not being part of the EU, the TRNC's exports have a difficult time competing in regional markets. It does not help that there are no direct flights except from Turkey. The degree of isolation that the island suffers is such that some citizens hold four passports: that of the TRNC, Turkey, the UK and the Republic of Cyprus.

The island was a colony of the UK until independence in 1960. The island split in 1974, following an attempted coup by Greek Cypriot nationalists backed by Greece and the subsequent Turkish invasion of the north of the island. Greek Cyprus, which joined the EU in May 2004, is recognized internationally as representing the entire island and some Turkish Cypriots cross the so-called Green Line to obtain passports. "When you have too many identities, you don't have none," says Kemal Baykalli, director of international relations and communications at the North Cyprus Chamber of Commerce.

Lone star

Earlier this year, UN Secretary General Ban Ki-moon pushed to find a framework for settlement before the Republic of Cyprus assumed the EU's rotating presidency on July 1, but the talks failed with the two sides unable to agree on core issues.

In a show of support for its Turkish brethren, Turkey has said it will follow through with threats to suspend political cooperation with the EU during Cyprus' six-month term as president. This is a symbolic move, say analysts, because economic cooperation and trade will continue as normal. However, Turkey will not be able to open any new chapters as part of its EU accession process during this time, an effort that largely stalled during the tenure of former French president Nicolas Sarkozy, a man vehemently opposed to Turkey joining the EU. The election of Francois Hollande brings fresh wings to Turkey's accession bid, but it will have to wait until after Cyprus' term as EU president ends.

Several chapters of Turkey's accession process have been frozen because of its refusal to recognise the Greek Cypriot government in Nicosia and open its ports to Greek Cypriot vessels, something Turkey says it will not do until the international isolation of the TRNC is eased. "I believe that Turkey wants to solve the problem. On each and every international platform, Turkey faces this issue," says Baykalli. However, he adds that Turkey wants to see the end of the issue "without giving up the rights of Turkish Cypriots."

Oil on troubled water

In March, a groundbreaking ceremony was held to signal the start of a project that envisions Turkey providing 75m cubic meters (cm) of water per year to the TRNC. The water will be carried to the TRNC from dams currently under construction in Turkey via a 77-kilometre pipeline that will run from the coastal province of Mersin to the TRNC. The cost of the project is expected to be around $600m. With Cyprus experiencing a severe draught and the TRNC aiming to increase its population, the water is desperately needed. Turkish Prime Minister Recep Tayyip Erdogan has personally decreed that the water will begin flowing at 1:00 pm on March 7, 2014. "Erdogan is popular for keeping his word," says Besimler.

Considered feasible, the water project stands to boost the TRNC's productivity. Yet other projects are considered more political than realistic.

In April, in response to Greek Cypriot drilling for natural gas off the south of the island, Turkey's state oil company TPAO began drilling for oil in the TRNC, at a well called "Turkish homeland." Ankara had initially insisted that any energy exploration should wait until a political settlement for island was reached, but Greek Cypriots went ahead with the drilling with only vague promises to share the gas with the north of the island in the future. Though the odds of finding oil are slim, Turkey is financing the $600m venture and has agreed to share any proceeds 50/50 with the TRNC.

Turkey is also searching for energy off the coast of northern Cyprus. However, some of the area where it will look overlaps with where Greek Cypriots are drilling, setting the stage for a potential confrontation. "Such actions as the drilling being carried out by Turkey and the Turkish Cypriot leadership show a lack of willingness on their part to achieve a solution to the Cyprus problem," Cypriot government spokesman Stefanos Stefanou announced, following the start of drilling for oil.

Even so, the hard line taken is proving popular in the northern part of the island. Dr Ahmet Sozen of the Cyprus Policy Centre in the TRNC says that the realpolitik of the region means that Turkey needs to respond strongly to the Greek Cypriot's actions. "The Greek Cypriot side taking this unilateral action without consulting the Turkish Cypriots... these are moves which are not helping to bridge the big gap of trust between the two communities in Cyprus."

Related Articles

Latvia’s Citadele Bank pulls IPO

bne IntelliNews - Latvia's Citadele Bank has postponed its initial public offering (IPO), citing “ongoing unfavourable market conditions”, the bank announced on November 11. The postponement ... more

BOOK REVIEW: “Europe’s Orphan” – how the euro became a scapegoat for policy ills

Kit Gillet in Bucharest - The euro, conceived as part of a grand and unifying vision for Europe, has, over the last few years, become tainted and often even blamed for the calamities that have ... more

Mystery Latvian linked to Scottish shell companies denies role in $1bn Moldova bank fraud

Graham Stack in Berlin - A Latvian financier linked to the mass production of Scottish shell companies has denied to bne IntelliNews any involvement in the $1bn Moldovan bank fraud that has caused ... more

Notice: Undefined index: subject_id in /var/www/html/application/controllers/IndexController.php on line 335