Divided Cyprus Banking Crisis Awakens Hopes for Reconciliation

The Greek half of Cyprus has been hard-hit by the banking crisis -- and now hopes are growing in the Turkish north for reconciliation. If the two populations could resolve their dispute, they could likely access large natural gas reserves estimated to be worth hundreds of billions of euros.


By in Gemikonagi

Gemikonagi is one of the less picturesque locales along the Mediterranean. A conveyor belt stretches far out past pebble beaches and over the blue sea, a remnant of the town's past as a lading port for ores. The main drag has a few bunched up döner kebab stands and some slot-machine gambling joints. Until just recently, this backwater in the far western part of the Turkish Republic of Northern Cyprus (TRNC) used to be a popular place for Greek Cypriots who wanted to find cheap eats and gamble away their euro bills on this side of the divided island. That is, of course, until the crisis arrived.

The banking crisis in the southern part of island is now also hitting its northern part -- and hard. For years, thousands of Turkish Cypriots have been commuting to jobs located in the Greek part of the island. But now many of them are forced to fear for their jobs -- in exactly the same way that the casinos in Gemikonagi not have to worry about losing their Greek clientele, which calls the town Karavostasi.

The most prominent structure in Gemikonagi is a soldiers' club. Its red-and-white, ground-to-roof paint job is a testament to the pride of Turkish Cypriots. Inside, over a portrait of Mustafa Kemal Atatürk, the founder of modern Turkey, a caption reads "The homeland comes first." Given the rest of the decorations, one could easily deduce that no one here is truly interested in reconciliation. There are dozens of photographs to keep alive the memories of the historical atrocities between the two ethnic groups that culminated in 1974 with a Greek putsch and the subsequent intervention of the Turkish military. Since then, the third-largest Mediterranean island has been divided. In the north, there is the TRNC, though Turkey is the only country to officially recognize it. In the south lies the Republic of Cyprus, which represents the entire island on the international stage and is also a European Union member state.

But the impression of the deep, old enmity that the pictures in the military club conjure up is also deceptive. In reality, relations between the sections of Cyprus separately occupied by Greeks and Turks are considerably more complex. This is evidenced by the fact that a majority of Gemikonagi residents voted in favor of the island's reunification and the peace plan put forth by then-United Nations Secretary-General Kofi Annan in 2004. But while Turkish Cypriots were hoping that joint EU accession would bring along an economic upswing, their Greek Cypriot neighbors threw a wrench in these plans by responding with a clear "no" to the reunification vote.

'An Important Opportunity'

In 2008, when the Greek part of the island adopted the euro, the Turkish inhabitants of the northern part of the island felt duped. And, of course, this makes their schadenfreude regarding the southern part's current economic woes all the greater. "With the referendum, the Greeks left us out in the cold. They wanted to profit from the euro by themselves," says Efem Okiran, who runs a flower store in Gemikonagi. But now his neighbors can see what good that's done for them -- and where they've ended up. "For 10 years, they made money thanks to the EU," Okiran adds. "And now they're supposed to bleed for 10 years."

Other observers are less gloating. They say the crisis could even have a hand in severing the Gordian knot of the Cyprus conflict. At the moment, the central issue involves the natural gas fields lying off the island that were discovered in 2011 and have been claimed by both sides. Recently, the government in Ankara warned in very strong terms that it wanted to help overcome the financial crisis by selling the rights to the gas deposits claimed by both sides.

Experts suspect that roughly 2,700 billion cubic meters of natural gas lie beneath the waters south of Cyprus. In comparison, Norway, a giant in the natural gas landscape, boasts a possible output of some 7,900 billion cubic meters. The Royal Bank of Scotland (RBS) has put a price tag of more than €600 billion ($790 billion) on Cyprus' untapped gas reserves. However, exploiting this treasure could prove to be exceedingly difficult -- also on account of possible conflicts with other countries in the region. Israel, Lebanon and even Turkey have all staked a claim to these underwater natural gas reserves.

Given these circumstances, chances are that the gas will not be extracted until both parts of the island -- as well as its protective powers, Greece and Turkey -- have reached an agreement over it. Leaders in Turkey hope that the cash-strapped Greek-Cypriots will need the money they could get from extracting the gas so desperately that they will finally join it in hammering out a political solution to the Cyprus conflict that is also agreeable to the Turks.

Turkish President Abdullah Gül has already noted that the financial crisis has presented an "important opportunity" to end the island's division. A step in the right direction, he adds, would be to lift all embargos. Turkey currently forbids airplanes and ships from the Republic of Cyprus from steering toward its airports and ports. On the other side, the EU has imposed an embargo on airplanes and ships from the TRNC.

Turkey's push to end the Cyprus crisis also has economic motivations. The situation on the island, where some 30,000 Turkish soldiers are based, is one of the biggest obstacles on Turkey's path to EU accession.


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