New Turkish-Cypriot Leader Fuels Cyprus Reunification Optimism

A whiff of reunification is wafting over Cyprus.

The election late last month of independent candidate Mustafa Akinci as the president of the self-declared Turkish Republic of Northern Cyprus may speed up efforts to reunify the divided Mediterranean island and boost economic growth for both communities. Cyprus has been divided along ethnic lines since 1974, when Turkey invaded the northern third of the island in response to a coup by supporters of union with Greece.

The two parts are now led by advocates of reunification -- Akinci and Cyprus President Nicos Anastasiades were both born in the central-southern Limassol district while the nation was still under British rule. And while any reunification will mean winning over Greek Cypriots and getting a nod from Turkey, which keeps around 35,000 troops in northern Cyprus and is the only country to recognize a Turkish Cypriot state, the chances have never looked better.

“While Turkey is still a determining player, the combination of Akinci and Anastasiades is probably the most pro-solution duo we’ve ever had,” Tasos Ziziros, head of corporate finance at Cyprus-based engineering contractor Joannou & Paraskevides (Overseas) Ltd. said. “Together, they can agree on a solution, most importantly get voters to pass it and then implement it. If they can’t do it, I don’t see who can.”

Cyprus, which gained its independence from the U.K. in 1960, entered the European Union in 2004, but only the internationally recognized southern part enjoys benefits from the membership.

Unity Dividends

Economic output in a reunified Cyprus could reach 45 billion euros ($50.5 billion) by 2035 compared with about 25 billion euros for the two sides together without a solution, according to Fiona Mullen, director of Nicosia-based Sapienta Economics and co-author of the report “The Cyprus Peace Dividend.”

“A solution to the longstanding Cyprus problem could expand the size of the whole island’s economy by around 20 billion euros over the next 20 years and add on average 2.8 percentage points to real gross domestic product growth every year over that period,” according to her report.

“For Greek Cypriots, the peace dividend would be about 12.5 billion euros and for Turkish Cypriots about 6.5 billion euros,” Mullen said.

The economy would be boosted by an increase in the value of tourism, construction, financial services, trade and transport, while recently found gas deposits in the eastern Mediterranean could be exported to Europe via a pipeline to Turkey, she says.

Resuming Talks

Akinci has shown he’s on board.

“My policy will be focused on reaching a peace settlement,” he said at a victory rally on April 26. “This country cannot tolerate any more wasted time.”

Anastasiades has made similar remarks.

With the selection of Akinci “there are hopes unfolding at last for this homeland to be reunited and for us to actually establish a modern state that will be guided by the principles and values of the EU,” he said April 27. “I look forward to meeting with him.”

Anastasiades and former Turkish-Cypriot leader Dervish Eroglu agreed April 7 to resume reunification talks following the presidential ballot.

Anastasiades had suspended the United Nations-backed talks in October 2014 after Turkey sent a seismic research vessel to an area of Cyprus’s offshore exclusive economic zone, where the country had already licensed companies to drill for oil and gas. Turkey withdrew the ship in March.

‘Real Test’

Espen Barthe Eide, special adviser of the UN Secretary General on Cyprus, will host a dinner on May 11 for the two leaders in the UN-controlled buffer zone that divides Cyprus. It will be their first meeting since Akinci’s election.

Barthe Eide is visiting Cyprus until May 12 “to finalize arrangements for the resumption of full-fledged negotiations.”

Akinci was mayor of the northern part of Nicosia, Europe’s only divided capital city, from 1976 to 1990.

His election is “very significant, but is only one part of the puzzle,” James Ker-Lindsay, senior research fellow at the London School of Economics, said in a telephone interview. “Now is the real test, as the Turkish Cypriots have elected a politician with the best track record in working with Greek Cypriots, so the pressure is on Anastasiades” he said.

Greek Cypriots rejected a UN plan to unify the country in 2004, just before Cyprus’s entry into the EU, while Turkish Cypriots voted in favor. Anastasiades, then leader of the Democratic Rally party, supported the plan.

Friendly Overtures

Anastasiades announced confidence-building measures on April 28 as part “of a need to create a climate of trust that will boost the negotiating procedure.”

These included handing over maps of 28 minefields, giving management of Muslim monuments and religious sites in Cyprus to the Turkish-Cypriot Evkaf Foundation and welcoming efforts to unite soccer leagues from both sides of the island.

Akinci has said he’s positive on the idea of allowing Greek Cypriots to return to the ghost resort of Varosha, the beachfront area of the port city of Famagusta that’s been sealed off since 1974, in exchange for the opening of Turkish-Cypriot sea and air ports to international traffic.

The two leaders were scheduled to meet on May 2. Akinci canceled after being summoned by Ankara to make his first trip outside the TRNC to Turkey.

Turkey’s Stance

Turkey pays around $1 billion a year for northern Cyprus, President Recep Tayyip Erdogan said April 27. He criticized Akinci for saying northern Cyprus wants to be seen as a “brother country” to Turkey rather than having a “mother country” and “baby country” relationship.

“Recent remarks from Erdogan show that things aren’t going to be easy for Akinci and that Turkey will try to secure its strategic interest in Cyprus,” said Theodore Panayotou, Director of the Cyprus International Institute of Management.

“Anastasiades will be able to persuade Greek Cypriots to vote yes this time as the conditions are completely different. People have suffered from a dysfunctional state and the majority wants a new state,” he said in a telephone interview.

Elected president in 2013, Anastasiades, immediately after coming to office, had to oversee negotiations for a 10 billion-euro bailout from the International Monetary Fund and Cyprus’s European partners with terms including the imposition of a levy on depositors.

Economic Boost

The restructuring in 2012 of Greece’s 200 billion euros of privately held debt hit Cypriot lenders, which were big holders of Greek sovereign bonds. The Cypriot economy contracted 5.4 percent in 2013 and shrank 2.3 percent in 2014 to reach 17.5 billion euros, according to the Cyprus Statistical Service.

Reunification may give its economy a much-needed boost.

Meanwhile, the U.S. continues to support the UN-led Cyprus-negotiation process to reunify the island as a bi-zonal and bi-communal federation, Jeff Rathke, acting deputy spokesman at the U.S. department of state said April 27.

“We reiterate our willingness to assist in any way that the parties would find useful,” he said.