Could Turkey Make Northern Cyprus Its 82nd Province?

Negotiations to end the decades-long partition of the critically-located Mediterranean island of Cyprus are set to enter a new and theoretically critical stage this week in Geneva. There have been many ‘final stages’ since the island was divided between Turks and Greeks following the intervention of the Turkish military in 1974. But there are great hopes, at least by international negotiators, that this ‘final stage’ just might work.

Much has happened since 1974, including the internationally recognized Republic of Cyprus – the Greek part of the island – joining the European Union. The northern, Turkish part of the island, remains internationally isolated, recognized only by Turkey. The Turkish part of the island survives on hundreds of millions of dollars of subsidies from Turkey. The Greek part of the island has recovered from its financial meltdown and is buoyed by the promise of natural gas in its territorial waters.

Will the island re-unite or be split completely?

The rough outline of the Plan A solution to the island has been well known for decades. It would involve the Turks giving up some land, compensation for people on both sides who lost property, keeping some sort of local autonomy for the Turks, and ending years of economic and political isolation by joining the southern part of the island in the EU.  Sounds logical – to the outsider. But the deep, underlying distrust and dislike between the two communities have always been major barriers to this settlement.

Furthermore, there is the very sticky issue of ‘guarantors’ – those three countries of Greece, the UK, and Turkey who were supposed to ‘guarantee’ the stability of the island. This guarantor system failed spectacularly in 1974 when the Turkish army landed to protect the Turkish minority – and in the process left several thousand troops on the island who remain to this day. If there is a settlement what happens to this guarantor system? Will the Turkish troops leave the island? Will the Turks accept the security of the European Union instead of the security of their own troops?

Will they actually leave the island?

            However, beyond all these island-based issues there is a real elephant in the room that could scuttle all hopes of a deal. That elephant is the political maneuvering in Turkey to change the governing system of the country to give President Tayyip Erdoğan unfettered, unchallenged, unchecked power. Turkey's prime minister and parliament would be reduced to feeble rubber stamps with this change.

            In order to get the votes he needs in parliament to pass the constitutional changes Erdoğan needs the support of the Nationalist Party – a party who not only hates the Kurds but loathes the very idea of a settlement on Cyprus that includes the reduction or complete withdrawal of Turkish troops from the island. Even with the support of the Nationalist Party the issue is a near run thing. Several members of the Nationalist Party have balked at supporting changes reducing parliament to an afterthought. And there are even reports, nothing more, of ruling party AKP members who don’t like the idea of an all-powerful president.

            Assuming the bill passes parliament, there will be a national referendum to approve or reject the change to a presidential system. While Turkish polls are unreliable at best, a leading poll shows support for the referendum falling short of the required 50% + 1. Failure at the referendum stage would be a disaster for Erdoğan by puncturing his aura of invincibility and denying him the power he so blatantly wants. This he cannot allow.

            Thus, the elephant in the room of the Cyprus negotiations. Erdoğan could easily whip up nationalist sentiment in Turkey (not hard to do) by stonewalling any change in Cyprus. The brilliant Turkish journalist Metin Munir – now reporting from the safety of Cyprus because no paper in Turkey has the nerve to publish his work – says there is a Plan B being actively discussed in Ankara. That plan is simply to annex the breakaway Turkish Republic of Northern Cyprus making it Turkey’s 82^nd province if negotiations fail. Such a move may bring international condemnation, but would be immensely popular among the nationalist Turks.

He would sell himself as the great savior of our valiant Cypriot brothers and win the referendum in a landslide. Any opposition would be drowned in cries of national traitors, tools of foreign powers seeking to destroy Turkey. Such a campaign would be ugly but effective.

            International condemnation of such a move would have no impact whatsoever. It would only strengthen the deeply ingrained feeling that a Turk has no friends but a Turk. Erdoğan would loudly point out that the world did nothing to stop Russia’s annexation of Crimea. Therefore, why should he even listen to any criticism? The European Union would howl and scream. But so what? Turkish/EU relations were already at a dead-end. How much worse could they get? Greece would complain bitterly. But Greece is in no position to do very much. What would the United States do? That’s a very good question. No one has a clue at this point about Trump’s foreign policy which so far has been limited to 140-character tweets. Besides, right now most Turks think that America is behind every problem that Turkey is facing. Russia? Who knows? Putin is currently manipulating Erdoğan brilliantly. But will that manipulation extend to allowing dismemberment of Cyprus?

            Threatening Turkey with harsh economic sanctions won’t work. The Turkish people will gladly suffer mere economic hardship to preserve what they see as national honor. And furthermore, Putin will simply move into any vacuum created by Western isolation of Turkey.

            Any possible settlement on Cyprus is going to have to pay as much attention to political fine tuning in Ankara as it does to developments on the island itself.

Time To Come Up With A New Idea On Cyprus

Cyprus is one of those issues that illustrates clearly the difficulties facing any well-meaning envoy trying to solve the long standing political/social problems in the Eastern Mediterranean and Middle East.

The envoy starts off by making one fatal assumption -- that either side actually wants any sort of a reasonable solution.That, in the immortal words of Sportin’ Life in Gershwin’s Porgy and Bess, Ain’t Necessarily So. The key word here is reasonable, i.e. any solution that involves that dreaded concept of compromise. Neither side sees any need to budge. All parties to these conflicts are absolutely convinced of the ‘self-evident’ religious or political righteousness of their cause and the ‘obvious’ perfidy and heresy of their opponents. Sunni, Shiite, Palestinian, Israeli, Turkish Cypriot, Greek Cypriot. It makes no difference.

They will swear they want a solution and are perfectly happy to bury the hatchet – as long as that hatchet is buried deep in the head of their opponent. A compromise is where one or two of their opponents is left gasping for air in a ditch by the side of the road.

Cyprus has seen a great deal of conflict in its long history, and the latest chapter started in 1974 when Turkey landed troops and occupied most of the northern part of the island. The Turks maintain they were protecting the beleaguered Turkish minority against marauding Greek Cypriot gangs. The Greek Cypriots maintain this intervention was an invasion, pure and simple. You can be excused for thinking this sounds ominously like the current stand-off between Russia and the Ukraine. And there we stand, 40 years later. The Turkish troops are still there. And the island is still divided between the Turkish Republic of Northern Cyprus – recognized only by Turkey – and the internationally-recognized Republic of Cyprus in the south. It must be somewhat galling to the Turks that a hold-over from the Middle Ages -- The Sovereign Military Hospitaller Order of St. John of Jerusalem of Rhodes and Malta – that does not have one square meter of territory has diplomatic missions in more than 100 countries while Northern Cyprus has just one.

There was one abortive attempt at a settlement in 2004 with the much-criticized Annan Plan that the Turkish Cypriots overwhelmingly approved and the Greek Cypriots overwhelmingly rejected. Now that Cyprus, at least the Greek controlled part of Cyprus, is in the European Union, it has very little, if any, incentive to compromise on any point. And the Turkish Cypriots will accept nothing that treats them as a minority in a Greek Cypriot controlled island. However, the native Turkish Cypriots even now don’t have that bad a deal. Among other things, they can get Cypriot passports and are thus de facto members of the EU, something their cousins on the mainland see as a rapidly receding dream.

The United Nations has recently dropped a new envoy, a Norwegian with an impressive CV, into this mix. Good luck to him at squaring the circle. Actually, one of the best ideas I have heard on this issue came from a brilliant Greek friend of mine during a recent lunch in London. His plan was strikingly simple, and therefore most likely doomed at birth.

Under my friend’s plan the Turkish controlled part of the island would become a separate state with the full acquis communautaire of the European Union with full freedom of movement and settlement. In return the Turks would remove their remaining troops from the island. In addition the three guarantor powers – Turkey, Greece, and the United Kingdom – would give up those powers. In theory, a member of the EU does not need any external guarantees. Again, in theory, the Greek and Turkish Cypriots would be free to live and work anywhere on the island.

Britain, always nervous about a solution that changes the legal status of Cyprus and thus calling into question the legality of its bases on the island, would require separate guarantees protecting those bases. In addition, there would have to be agreement on the issues like the exact borders and the compensation for those members of both communities whose property was lost during the military intervention. Here I would anticipate typical EU legerdemain where there is quite a bit of EU money disguised in such a way to persuade the average German taxpayer that he is not footing the bill – again.

Before the Greeks throw up their hands and starting loudly whinging about ‘rewarding’ military intervention they should think carefully about the benefits of this plan. They get rid of the Turkish troops, both sides are governed by EU regulations, the threat of future Turkish intervention is removed, and the island’s moribund economy might start to grow. Furthermore it becomes much easier to develop whatever natural gas lies offshore. Instead of building a hugely expensive liquefied natural gas terminal on Cyprus they could take the easy route with a pipeline to nearby Turkey and then onto Europe.

The Turks should also welcome this. The isolation of northern Cyprus is ended, Turkey no longer has to provide hundreds of millions of dollars it doesn’t have to subsidize the Turkish Cypriots, and a major hurdle in its own EU quest is removed. Essentially it can bow out of the Cyprus quagmire with honour maintained.

Is something this simple in theory likely to happen? Very doubtful. Given all the history and entrenched attitudes I’m afraid the new UN envoy, Espen Barth Eide, will have his hands full getting the two sides to agree to a lunch menu much less a realistic solution. It would be nice, though, for once to see common sense prevail in a part of the world that sees precious little of that valuable commodity.

Time For Change On Cyprus? Maybe, Just Maybe.

Few places better than the island of Cyprus demonstrate the futility, the touchingly naïve earnestness, embodied in the English word ‘should’.  Given the climate, resources, relatively well educated population and rich history the Eastern Mediterranean island should be a shining example of harmony and prosperity. It isn’t.

In addition to the recent, largely self-inflicted, financial collapse the island suffers from a long-standing division between the 800,000 Greek Cypriots in the southern part of the island and the roughly 300,000 Turks who live in the politically and economically isolated northern part of the island. About half of the Turkish population is native Turkish Cypriots while the others are immigrants from Anatolia.

This island 'should' be a paradise

 The Greek part of Cyprus is the internationally recognized and European Union member Republic of Cyprus. The self-proclaimed Turkish Republic of Northern Cyprus is recognized only by Turkey. It survives largely on casinos, tourism and about $600 million in annual subsidies from Turkey. Until recently the Republic of Cyprus enjoyed a much higher income than its northern counterpart. With the collapse of the Cypriot banking bubble this difference has narrowed sharply.

Reasonable people might think that this is the perfect time for the two groups on the island to overcome their past differences, re-unite and build a prosperous island that begins to fulfil its potential. Unfortunately, as is often the case in this part of the world, such people are simultaneously right and wrong. They are right to believe that a unified island would be much stronger than a divided island. They are wrong to think this is going to happen any time soon. Cyprus is very close to the Middle East, and in that part of the world the mere fact that such a move would make sense is absolutely no guarantee that it will happen.

Why not? How much time do you have? The tangled history of Cyprus involves centuries of invasion, co-habitation, the sometimes malevolent influence of religion, colonization, communal strife and, above all, a deeply ingrained sense of grievance and victimhood.

However, there are changes in the wind that, according to one astute observer, could change the narrative, the frozen paradigm of the divided island. Metin Munir, a native of Cyprus and formerly a prominent columnist with the Turkish daily newspaper Milliyet, has long been sceptical of the real chances of reunification. Now, however, there are changes that might, just might, in time help bring the island together.

“The economic difference between the two sides is diminishing. In addition, Turkey  is bringing water to the island from the mainland and will soon be bringing electricity for much less than it costs to generate it on the island. The rapprochement between Turkey and Israel also has the potential to change the situation. If Israel ships its gas through Turkey via a pipeline there could be a great deal of pressure on Cyprus to do the same for its offshore gas, or at least sell its gas to Israel who in turn would use the pipeline to Turkey. The alternative is to build a very expensive LNG plant on Cyprus. It is difficult to see right now who would spend the $7 - $8 billion for such a plant when a much cheaper pipeline alternative (Turkey is only 40 miles away) is available.

Turkey is so close and so far away

“Nothing is going to happen immediately, but the potential for change is emerging. For one thing there is a lot of sympathy on this side of the island for what the Greeks are going through right now. One major obstacle is what the Greeks perceive as Turkey’s belligerent approach to Cyprus. Turkey has to change its tune, and then we will see what happens.”

He has a point. No one can accuse Turkish foreign policy of being subtle. Why use a scalpel when a sledge hammer will do? There is a certain aggressive, chip-on-the-shoulder attitude in the comments of many Turkish politicians that make it difficult to create a win-win rather than an I-win-you-lose situation. A recent example is Turkey’s heavy-handed threats against the Cypriot development of the offshore natural gas deposits without including the Turkish part of the islands.

To be fair to Turkey, the internal timing for any concessions on Cyprus couldn’t be worse. The Turkish government is already in tense negotiations with the Kurds to end decades of conflict. This is prompting outrage on the part of Turkish nationalists who see any move to accommodate the Kurds as a betrayal of the very concept of a Turkish nation. Any concessions on Cyprus would send this outrage off the charts and stir up the old cries of ‘selling out’ their brothers on the island.

The best chance for a settlement on the island was in 2004 when negotiations under the auspices of U.N. Secretary General Kofi Annan produced a plan that was overwhelming approved by the Turkish population on Cyprus. The Greek Cypriots, however, already promised a place in the European Union and prompted by the Archbishop of Cyprus who called the plan ‘the work of the devil’, rejected the plan.

Despite this history, calls for a radical re-think are growing. Former Greek Foreign Minister Dora Bakoyannis recently expressed her support for reconciliation on the island.

“We need a solution in Cyprus. This will also be the answer tocooperating for a solution to the gas exploration,” said Bakoyannis at the 16thEurasian Economic Summit held in Istanbul on Wednesday.

Will these discoveries prompt settlement or strife?

It is too early to tell if the faint signs of reconciliation and common sense will prevail over long-held and possibly no-longer-relevant grievances. But the world, and more particularly Cyprus, has changed dramatically in the last few decades. It may just be time to dust off those under-utilized negotiating skills

Cyprus Badly Misplayed Its Hand

Cyprus has just learned a very old lesson the very hard way – nations don’t have friends, they only have interests. Assuming protection for the last decade from its membership in the European Union, the Euro zone, and close ties to Russian oligarchs Cyprus tried to remake itself as a global financial service center and a significant regional political player. Whatever productive businesses it had were wound down in favor of a service-based economy. Cypriot politicians mistakenly thought their consistent support of Russian stances on issues like Kosovo and Syria would earn them Russian protection when times got hard.  Wrong.

Cyprus just learned a hard lesson

These delusions were brutally punctured when a remorseless European Union led by Germany forced a complete restructuring of the island’s unsustainable banking system in return for helping rescue the country’s battered finances. This restructuring will lead to failed businesses and large losses for many savers, including thousands of Russians who thought Cyprus was a safe place to stash their funds protected by the notoriously incurious Cypriot financial regulators. Essentially, the island’s economy is back to Square One.

Cypriots were ‘shocked, shocked’ that their fellow EU members would do this to them. They were even more shocked when the Russians, demonstrating a bit of real politick, showed they valued their relations with the EU more than their Cypriot ties and refused to help, leaving the island nation well and truly in the lurch.

This plea fell on deaf ears

The Cypriots badly misread their presumed support from the EU. The reality was that many EU countries deeply resented Cypriot membership in the first place and were increasingly annoyed at the lax financial regulation on the island. In 2004 Greece essentially threatened to veto the entire EU expansion project unless Cyprus was included. Greece and Cyprus won the short-term game, but lost longer term support. No one likes being blackmailed. The Germans in particular did not want to accept a country that was divided by the break-away Turkish Republic of Northern Cyprus in the north and the Republic of Cyprus in the south.

The Cypriots did not help their reputation when they overwhelming rejected a plan to unify the island just before they were admitted to the EU. Cyprus further overplayed its hand by consistently blocking any closer relations between the EU, NATO and Turkey. What began as a major victory for Hellenism in 2004 has sadly turned to dust as both Greece and Cyprus, largely through their own doing, are now little more than wards of the humourless northern Europeans.

In a twist that only the gods could arrange, Cyprus’s implosion has coincided with major strides forward by its arch-enemy Turkey. While Cypriots leaders were desperately shuttling between Nicosia, Brussels and Moscow seeking bail out money Turkey not only made a major breakthrough in the peace process with the Kurds but succeeded in amending its torn relations with Israel. At a stroke, the geopolitics of the Middle East changed. Turkey, whose economy is humming along quite nicely, re-established itself as a credible, powerful force in the ever-changing dynamics of the Middle East.

The implications of these developments for Cyprus are mixed at best. Israel now could be much more interested in shipping the gas from its offshore field to Turkey rather than Cyprus. Turkey has long protested that Cyprus should not develop its own gas fields without taking into consideration the Turkish population of the island. Now that Turkey is finally living up to its potential as a regional power more countries and major oil companies could be willing to consider the Turkish position before doing more work on the offshore Cyprus gas fields. Certainly countries like Germany and Russia have many more strategic interests in Turkey than they do in Cyprus. And they most likely would not like to jeopardize those interests for the sake of Cypriot gas.

Cyprus is in a tough neighborhood

There is at least one step Cypriot leaders could take that could restore their credibility and possibly lay the foundation for recovery. They could think the unthinkable and work out a deal to re-unify the island. After nearly 40 years of division following the Turkish military incursion this will by no means be easy. One of the more thankless jobs for any diplomat since 1974 has been to seek peace between the two sides of Cyprus. The best chance came in 2004 when a plan supported by former United Nations General Secretary Kofi Annan was overwhelmingly supported by the Turkish side and just as overwhelmingly rejected by Greek Cypriots after a vigorous ‘No’ campaign led by former president Tassos Papadopoulos.

Such reunification talks would undoubtedly be challenging. Much has changed over the last several years on the island and the two sides no longer have much in common. Cyprus also would be negotiating directly with Ankara rather than with just the Turkish Cypriots. Touchy issues include the presence of the Turkish military that by now has built up a substantial infrastructure on the island, restitution of Greek Cypriot property seized in 1974, the status of the thousands of immigrants from the Turkish mainland that have been settled on the island, and many, many others. But Turkey has reasons of its own for wanting a settlement. Currently it spends about $600 million a year to support the Turkish part of Cyprus, money it can ill afford to spend. It has been unable to get a single country to recognize the Turkish Republic of Northern Cyprus, and its negotiations with the EU have been hindered by Cyprus for several years. Also, the Turkish military is in a much weaker position than it was in 2004. It is no longer in a position to block a settlement and pretty much does whatever Prime Minister Erdoğan says.

The economic and political benefits of a unified island just might push the parties toward the negotiating table. Now that the former Cypriot economic model is broken beyond repair the political leaders might be willing to re-think the unification issue. This would require leadership and statesmanship that so far have been in short supply. But in this case necessity might just the catalyst for welcome change.

Why Now?

Turkey is learning the first lesson of all aspiring premier league countries – ignore international organizations when you don't like their decisions.

The United States simply ignored the United Nations when it failed to win the UN’s support for invading Iraq in 2004. Germany and France simply ignored the Maastricht Treaty when their budget deficits exceeded the rules of the treaty. And now Turkey is ignoring a United Nations’ report that didn’t agree with Turkey’s claims on the Israeli blockade of Gaza.

The United Nations had a commissioned a report on the incident that occurred in June 2010 when a Turkish ship commissioned by a group that some consider a terrorist organization tried to run the blockade and deliver its cargo directly to Gaza. The Israelis intercepted the ship in international waters, boarded it, and wound up killing nine Turks in the ensuing fight. Turkey protested vigorously while Israel said it had every right to maintain the blockade to stop potential weapons smuggling to Hamas-controlled Gaza.

Turkey reacted to the report with all the self-righteous indignation it could muster. They sounded as if Turkey were the only country with a right to self-interest. The prime minister said the report had no basis and that Turkey would reduce its diplomatic ties with Israel to the bare minimum. Other Turkish ministers huffed and puffed and made thinly veiled warnings about increased Turkish naval presence in the Eastern Mediterranean. Just what this already explosive area needs.

The fact that Turkish Prime Minister Tayyip Erdoğan simply does not like Israel or its equally combative Prime Minister Benjamin Netanyahu is already well known. But why the explosion now? After all, the incident in question happened over a year ago. Why is Turkey all of a sudden making all sorts of veiled threats about events in the Eastern Mediterranean? While the death of nine Turkish citizens is indeed lamentable, it is far less than wholesale slaughter of innocents in neighbouring Syria. Syria gets a slap on the wrist while Israel – and Cyprus – get dark warnings of military intervention.

Oil and Gas

One possible explanation could be Turkey’s annoyance at being left out of the promising oil and gas exploration in the waters between Cyprus, Israel and Lebanon. Cyprus intends to explore the famous Block 12 in its southern territorial waters close to where the Israelis have made a major discovery. Turkey has objected vehemently to the Cypriot exploration. Turkish officials say that internationally-recognized and European Union member Cyprus has no right unilaterally to explore for hydrocarbons in its own territorial waters. According to them this exploration would somehow have negative implications for the isolated, economically struggling self-proclaimed Turkish Republic of Northern Cyprus that occupies about one-third of the island and is recognized only by Turkey.

Try as it might Turkey has been unable to get a single other country to join it in recognizing the Turkish part of Cyprus. This must be frustrating, especially as a group like the Sovereign Military Order of Saint John of Jerusalem of Rhodes and of Malta without a square meter of land has diplomatic relations with more than 100 countries.

But beyond the frustration and embarrassment, Turkey is desperate for oil and gas. The country has only negligible hydrocarbon resources and spends upwards of $90 billion/year importing almost every drop of oil and gas its rapidly growing economy needs. It most certainly wants to be included in the promising exploration in the Eastern Med. But this is not going to be easy.

The areas currently being explored are nowhere near Turkish territorial waters, and it is not at all clear what the legal basis would be to object just because the perceived rights of an unrecognized entity like the Turkish Republic of Northern Cyprus would be ignored. This could change if a few other countries would join Turkey in recognizing the Turkish Republic of Northern Cyprus, but for the moment this possibility seems remote.

The smoothest option would be for the troubled island to find a way to re-unite and bring the Turkish north into the international and European Union fold. Unfortunately, reunification seems more remote than ever. The Greeks in the south see no point in bringing in the poorer northern part of the island, and Turkey has shred all pretence of an independent northern Cyprus by imposing harsh conditions for any potential reunification - - regardless of what the native Turkish Cypriots might want.

So far the Republic of Cyprus has ignored Turkish objections to the exploration, and supported by the European Union, Russia, the United States as well as several other countries it is unlikely to stop looking for major oil and gas reserves.
Turkey is becoming much more adventuresome in its foreign policy, but will it risk serious confrontation by using military force to intervene in the oil and gas exploration by another sovereign country? Under previous governments I would definitely say no. But Prime Minister Erdoğan is taking the country in a new, assertive and aggressive direction. It remains to be seen just how far he will push Turkish claims in this region.

Updates

Growth At A High Price

Last month we commented on a Turkish Central Bank study that demonstrated clearly just how much Turkish industrial production depends upon imports and the worrying implications of this for the Current Account Deficit. Data released a few days ago only confirm this trend.

Industrial production in the 4^th quarter increased by an enormous 12%, hinting at GDP growth of more than 8% for the full year 2010. The downside of these glossy numbers is that this growth came at the expense of a rapidly deteriorating Current Account Deficit. The CAD reached $7.5 billion for December alone and amounted to more than $48 billion for the full year, 243% worse than 2009’s CAD of $14 billion. The deficit as a percentage of GDP is getting up into the red zone at an estimated 6.5% for 2010.

While exports increased 10% to $121 billion, imports jumped 32% to $177 billion. The surge in industrial production was also felt in the energy bill that increased to $34 billion from $26 billion the previous year.

All this would not be a concern if the sources of financing this deficit were improving. But they are not. The deficit is being financed by short term portfolio inflows that can reverse course in the click of a computer key leaving the Turkish treasury with a giant hole to fill.

It is all well and good for Turkey to show Chinese-like growth numbers, but unlike the Chinese these numbers come at a very high price. While the Chinese show ever increasing traded surpluses, the Turks pay for their growth with ever increasing trade deficits. In many ways the country is in a growth trap – the faster it grows the deeper the deficit hole becomes.

With elections coming in less than six months there is no chance that the ruling AKP  will act to rein in growth. It has to show these glittering numbers and worry about paying for them later. And this means shoveling even more money into the economy to keep the engine running.

Investors so far have so far reacted warily to the growth of the Current Account Deficit, but have not shown signs of panic – yet. The Turkish Lira has depreciated 12% in the last two months, and the stock market is down 5% so far this year. Interestingly, the Greek stock market is up (it didn’t have much further to decline) 26% this year. The weakness in the Turkish market has thrown a wrench into plans for the National Bank of Greece to raise some much needed money by selling 20% of its Turkish subsidiary Finansbank. Turkish banking stocks are fading, and it is hard to do a deal when the market is going away from you.

Cyprus

The intra-Turkish rhetoric about Cyprus is heating up and ripping away the pretence of the Turkish Republic of Northern Cyprus as an independent country. Turkish Prime Minister Tayyip Erdogan’s angry words in reaction to a Turkish Cypriot demonstration against a Turkey-imposed austerity plan were quickly followed by similar words from the Deputy Prime Minister Cemil Cicek.  In addition the Turkish ambassador to Northern Cyprus was quickly replaced by a bureaucrat from the State Planning Office who designed the austerity program. He told the Turkish Cypriots that Turkey, who props up Northern Cyprus to the tune of $500 million every year, is their IMF and that they should essentially sit down and shut up. Apparently Erdogan thought the ambassador was not being firm enough with the Cypriots, and yanked him home to be replaced by the hard-line bureaucrat who acts more like a colonial governor than a diplomat.

Why is Turkey suddenly taking such a hard line on its yavru (baby) state? Is the Turkish prime minister angry at the failure of his attempt to turn Northern Cyprus into a stronghold of the Turkish ruling party (AKP) by importing thousands of Anatolian Turks and building mosques all over the island? Turkish Cypriots like their version of democracy and their secular way of life, and don’t really like heavy-handed AKP control. The carrot didn’t work, so is Erdogan now trying the stick?

Another  theory is that the Turkish prime minister is trying to prepare the Turkish part of the island for a change in status, one way or another, by the end of this year. Currently the break-away state is recognized only by Turkey. The economy of Turkish Cyprus was never strong to start with, and it is not helped by the trade embargo on the self-proclaimed state. In addition, many Turks are forced to find work in the southern, internationally recognized Republic of Cyprus because there is very little opportunity in the North.

These recent actions could be part of plan to get the Turkish Cypriots ready for the day when they can no longer count on the economic life-line from Turkey and will have to stand on their own in a newly integrated island if the talks succeed. Or, if the talks fail, Turkey will be in a stronger position to push for a change in the isolation of Northern Cyprus. It may never be internationally recognized but the trade embargo could be removed. Some in the European Union are already pushing for an end to the embargo despite the strong objections of the Republic Cyprus. Failure of new talks might just give them the courage to proceed. Northern Cyprus could also be opened to direct international flights from countries other than Turkey. Moves like this might allow the de-facto division of the island to continue in the grey area between international recognition and full integration with the Greek part of Cyprus. Not a real solution, not perfect by any means, but it may just be the best that can be obtained right now.

Cyprus Back On The Agenda -- Again

After gently snoozing at the bottom of the international agenda since the failed UN-sponsored effort at re-unification in 2004 why has the small Eastern Mediterranean island of Cyprus, bitterly divided between the majority Greeks and minority Turks, suddenly started to get more attention? Within the last six months the Republic of Cyprus has received visits from Russian President Dimitri Medvedev and German Chancellor Angela Merkel. French President Nicholas Sarkozy is due to visit soon. This is a lot of attention for an island associated mainly with tourism, low tax rates, and offshore bank accounts.

One answer probably lies deep beneath the eastern Mediterranean Sea in potentially very large gas fields. Cyprus is a member of the European Union and other EU members would be delighted if natural gas was found in EU territorial waters and they could reduce their reliance on Russia.

All this activity has re-focused international attention on the fundamental problem of Cyprus: how to get the Turks and Greeks on the island to co-exist peacefully. The island has been sharply divided since 1974 when the Turkish army invaded to protect its fellow Turks from what it called ethnic cleansing by bands of marauding Greek Cypriot nationalists. As far as the Greeks are concerned it was an invasion pure and simple. The Turkish army succeeded in occupying only the northern third of the island, and thousands of Greeks fled their homes to the safety of the southern side that was internationally recognized as the Republic of Cyprus. The Turks established a micro-state called the Turkish Republic of Northern Cyprus that so far is recognized only by Turkey.

Despite sporadic efforts since 2004 at finding common ground between the Greek and Turkish sides of the island very little has been accomplished. Why would either side want to continue seemingly pointless talks?

The reasons for Turkish support for a Cypriot solution are fairly straightforward. Cyprus is an expensive distraction from the main event of reshaping Turkey itself according to the ruling party’s (AKP) policies. The Turkish part of Cyprus relies on annual hand-outs of $400 - $500 million from Turkey to stay afloat. In addition Turkey has stationed 30,000 troops on the island.

Cyprus also remains a diplomatic albatross around Turkey’s neck at a time when the country is working desperately to raise its international profile. Despite major efforts over the years Turkey has been unable to convince any other country, including its new friends Iran, Sudan and Syria, to recognize the Turkish Republic of Northern Cyprus. Given its recent anti-Israel rhetoric Turkey may be able to convince Hamas in Gaza to recognize the breakaway state. But even that is unlikely.

Cyprus continues to be a major roadblock to Turkey’s already faltering bid to join the European Union. Many EU countries disguise their antipathy to Turkish entry by hiding behind the Cyprus issue. They piously point out that it would be impossible to accept into the EU a country whose military occupies a large part of another EU member. At the very least, resolution of the Cyprus issue would inject a little honesty into the debate about Turkey’s EU entry. In short, Turkey needs to move on from this stalemate.

Turkey has always portrayed itself as the protector, the benefactor of the yavru (baby) state of Turkish Cyprus. Nationalist politicians loudly and frequently declaim about Turkey’s ‘duty, honor and pride’ in supporting its ‘oppressed’ brethren on Cyprus. Alas, this passion is not always reciprocated by the Turkish Cypriots. Recently there was an anti-Turkish demonstration in Northern Cyprus. Turkey wants to impose an austerity program on Turkish Cyprus and has proposed wide ranging pay cuts. The demonstration was against these cuts, but there were also a few banners hoisted telling Turkey to stop interfering in Cypriot affairs.

This ignited the permanently short fuse of Turkish Prime Minister Tayyip Erdogan, who blasted the Turkish Cypriots for daring to criticize the very people who feed them. Needless to say this did not go down well with the Turkish Cypriots. The exchange between Erdogan and the Turkish Cypriots underscores another problem. Cyprus is a fairly sophisticated place, and for years Turkey has been shipping unsophisticated Anatolian villagers to Cyprus in an effort to even the numbers with the Greeks. This mini-culture clash upsets the Turkish Cypriots as much as it does the Greek Cypriots. One wonders what would happen if the Turkish Cypriots decided to do a deal with the Greek Cypriots regardless of what the ‘mother country’ Turkey wants.

Despite holding the upper hand with a strong economy and EU membership, the Greek Cypriots could also benefit from a solution. Cyprus assumes the presidency of the European Union in 2012, and some fear this could turn into a farce if the island is still divided. There are some in the EU who think it was a mistake to accept Cyprus before re-unification, and they could make embarrassing noises during the Cypriot presidency. Second, major oil companies may be reluctant to spend a great deal of money exploring the sea offshore Cyprus unless the political conflict is resolved. Even though Turkey’s legal position seems to be very weak, it could make life difficult for the exploration companies. And more important, Cypriot President Dimitris Christofias is rumored to want a solution, unlike his predecessor the late President Tassos Papadopoulos who did everything he could to make sure the Greek Cypriots rejected the Annan Plan in 2004. There are reports that he is willing to work to change Greek Cypriot public opinion about the benefits of a deal.

Nothing will happen until the Cypriot parliamentary elections this spring and the Turkish national elections expected in June.  If Christofias’ allies do well in the parliamentary elections and Erdogan emerges even stronger in the Turkish elections the chances for a solution improve. The issues are well known and could include removal of the Turkish army, free movement throughout the island, restitution for people whose homes were lost, protection for the Turkish minority, and a plan to re-integrate the Turks into the island’s economy. The Turkish Cypriots get EU membership and better economic prospects. The Greek Cypriots get access to the whole island and an end to the Turkish military threat. They might also get their homes back, or at least financial restitution. Turkey gets a major headache removed. Greece, once a major player in this conflict, is absorbed by its own economic problems and plays a much reduced role in the current Cyprus talks.

All this sounds obvious, but if the potential negotiations are to have any chance at all they will have to avoid being drowned out the wails of anguish from the mega-nationalists in Turkey and the Republic of Cyprus about ‘selling out’. One can only hope the fact that the Turkish Cypriots may actually benefit from being ‘sold out’ will not be obscured in the loud debate.

A Very Tangled Web

No country better illustrates the tangled web of political and economic relations in the Middle East than the Republic of Cyprus. This divided island about 40 miles off the southern coast of Turkey has managed to maintain useful relationships with the Arabs and Israel while simultaneously poking a finger in the eye of its large, implacable foe – Turkey.

The current issue involves the large deposits of natural gas and oil that have been discovered in the waters of the eastern Mediterranean. Rather than create a deadly free-for-all about who owns what Cyprus has negotiated what it calls Exclusive Economic Zones carefully delineating areas of economic interest with Israel, Lebanon, and Egypt. No agreement with Syria has been reached yet, but Syrian president Bashar al-Assad recently paid a two-day visit to Cyprus to discuss areas of economic cooperation. Given Syria’s close ties to Turkey, this visit has to be counted a major success for Cyprus.

The latest economic zone agreement with Israel annoyed the Turks who went so far as to call in the Israeli ambassador to express their displeasure and note that this agreement interferes with efforts to re-unite the island. As Turkish journalist Burak Bekdil notes, the Israeli ambassador could well have asked why similar concerns were not expressed with Lebanese or Egyptian agreements. Semih Idiz noted in another column that the waters of eastern Mediterranean are heating up with the hydro-carbon discoveries.

Turkey also maintains that these agreements infringe upon the rights of the self-proclaimed statelet of the Turkish Republic of Northern Cyprus and make any reunification of the island more difficult. The only problem is that no country other than Turkey recognizes the TRNC. For the rest of the world the Republic of Cyprus is the only legitimate government of the island.

The island of Cyprus has been divided since 1974 when Turkey landed troops and occupied about 30% of the island. In the Turkish version the landing was necessary to protect the Turkish minority from ethnic cleansing by gangs of Greek thugs. In the Greek Cypriot version the Turkish military landing was an invasion pure and simple. The Turks established something called the Turkish Republic of Northern Cyprus that is officially recognized only by its patron Turkey. The Republic of Cyprus, meanwhile, is the internationally recognized government of the island and is a member of the European Union.

There have been half-hearted attempts to re-unite the island, but, given their strong international position and thriving economy, it is hard to see why the Greek Cypriots would be interested in a deal. Turkey, on the other hand, would love to see a settlement for at least two reasons. Its refusal to recognize the Republic of Cyprus as the legitimate government of the island is a major block to its EU pretensions. Second, maintaining the Turkish Republic of Northern Cyprus, costs the Turkish treasury $400 million a year – money that could be better spent in Turkey itself. In addition, Turkey continues to station about 30,000 troops in the northern part of the island. The economic gulf separating the two sides of the island is only widening as the 800,000 Greek Cypriots enjoy a per capita income of $28,000 while the per capita income of the 256,000 Turkish Cypriots is less than half that amount.

The Republic of Cyprus also benefits from its 10% corporate tax rate for onshore and offshore companies. It is interesting to note that the European Union is demanding that Ireland increase its similarly low tax rate, but no one says anything about Cyprus. Banks in the Republic of Cyprus have also made themselves useful to Russians looking for somewhere to keep their piles of cash. The TRNC meanwhile has no international trade (other than with Turkey) to speak of, and relies heavily on casinos that attract the high rollers from Turkey where casinos have been banned for several years because of their connection to organized crime.

Despite Turkey’s push to improve ties with the Arab world, no Arab country has reciprocated by daring to recognize the Turkish part of the island. Even Turkey’s cousins in Azerbaijan and close Moslem brothers in Pakistan have refused recognition. Their ties with the Republic of Cyprus, and by extension Greece and the entire European Union, are too valuable. One small example is that when visiting many Arab countries I often recall commenting on the quality of various products imported from Cyprus. This comment would be greeted with hoots of laughter, and I would be told that the product was actually manufactured in Israel. It would be sent to Cyprus, have the labels switched and then sent to countries that officially boycott goods from Israel.

Among other things these agreements clarify Israel’s right to explore and produce gas and oil from offshore fields. The stakes for Israel are very high as the latest discovery indicates reserves of 16 trillion cubic feet of gas at the Leviathan structure, about twice the amount discovered at the nearby Tamar site. These major discoveries could turn Israel into a gas exporter, and could finally contradict the old joke that Moses led the Jews around the Middle East for 40 years and finally put them on the only piece of land that didn’t have oil. Moses said nothing about offshore riches.

The oil and gas discoveries in the eastern Mediterranean are a potential economic ‘game changer’ for the region, and one can only hope that these new economic zone agreements can avoid turning this positive development into yet another reason for conflict.