Cyprus

Cyprus

Updated April 1, 2019
Cyprus
The island of Cyprus is located in the Eastern
The U.N. monitors a buffer zone (Green Line) across the
Mediterranean, 65 miles off the southern coast of Turkey.
island between the two sides. Over the past 45 years, the
After gaining independence from Great Britain in 1960,
U.N. has facilitated unsuccessful negotiations to unite the
Cyprus’s success as a politically stable, united republic
two Cypriot communities under a new federal system
began to unravel in 1963, as relations between the Greek
overseeing two constituent states. (For more on the
Cypriot majority and the Turkish Cypriots deteriorated. In
unification negotiations, see CRS Report R41136, Cyprus:
1964, the Turkish Cypriots, objecting to revisions made to
Reunification Proving Elusive.)
the constitution by the majority, withdrew from most
national institutions and began to administer their own
The Republic entered the European Union (EU) on May 1,
affairs. Sporadic, and sometimes intense, intercommunal
2004. Although the entire island of Cyprus is considered
violence prompted the United Nations Security Council to
part of the EU, only Greek Cypriots enjoy the full benefits
order a U.N. peacekeeping force to the island. In 1974, a
of EU membership. The EU’s acquis communautaire, the
coup against the Greek Cypriot government, intended to
union’s rules and procedures, has been suspended in the
unify Cyprus with Greece, led to the deployment of Turkish
area administered by Turkish Cypriots pending a political
military forces to northern Cyprus. Since then, the island
settlement. Turkish Cypriots may enter the South and apply
has been politically and physically divided; the
for EU citizenship and passports. The Republic adopted the
internationally recognized Republic of Cyprus (Republic)
euro as its currency in January 2008; the Turkish lira is the
governs about two-thirds of the island, and the Turkish
official currency of the Turkish Cypriot area, although the
Cypriots administer an area in the northern third of the
euro is accepted.
island. In 1983, the Turkish Cypriots declared their
independence and established the Turkish Republic of
Political Situation
Northern Cyprus (TRNC). The TRNC is recognized only
The Republic is governed by a president and a 56-seat
by Turkey.
unicameral House of Representatives, both elected for five-
year terms. Nicos Anastasiades of the Democratic Rally
Cyprus: Basic Facts
(DISY) Party was elected president of the Republic in
Area: Approximately the size of Connecticut.
February 2013 and reelected in February 2018. After the
2016 parliamentary elections, eight political parties sit in
Political Division: Republic of Cyprus controls the southern
the House; the DISY party is the largest. The next
two-thirds of the island. Turkish Cypriots administer the
presidential elections will take place in 2023 while the
northern one-third of the island.
parliamentary elections will be held in May 2021.
Population: Approximately 1.2 mil ion; some 860,000 Greek
Cypriots and some 351,000 ethnic Turkish Cypriots and
In the north, the Turkish Cypriots administer their own
mainland Turks. Maronites and Armenians represent very
institutions with an elected “president,” “prime minister,”
small minorities.
and “National Assembly,” which exercise joint executive
Capital: Nicosia (for both the Republic of Cyprus and
powers. Mustafa Akinci was elected “president” for a five-
Turkish Cypriots).
year term in April 2015. Parliamentary elections were held
Languages: Greek and English in the Republic of Cyprus and
in January 2018. Although the conservative National Unity
small communities in the North; Turkish and English in the
Party (UBP), which led the previous coalition government,
North.
won the most seats, the new government is led by the
Republican Turkish Party without UBP participation.
Religion: Greek Orthodox in the South and small
communities in the North; secular Islam in the North.
The Greek Cypriots do not recognize the TRNC or the
Gross Domestic Product (GDP): In the Republic, GDP is
elections in the North. They do not refer to Akinci as
$22 bil ion; per capita GDP is $30,000; In North Cyprus, GDP
president, and they refer to the North as the “occupied
is $3.9 bil ion (approx.); per capita GDP is $14,100 (approx.).
area.” Similarly, the Turkish Cypriots do not recognize the
Political Leaders: Republic of Cyprus: President Nicos
Republic and refer to it as “South Cyprus.”
Anastasiades, Foreign Minister Nicos Christodoulides, Energy
Minister Giorgos Lakkotrypis.
The Republic’s foreign policy generally follows that of the
Leaders of Turkish Cypriots: “President” Mustafa Akinci,
EU, although it historically has been tied closely to Greece
“Prime Minister” Tufan Erhurman, “Foreign Minister” Kudret
and its policies. The Republic’s close relations with Russia,
Ozersay.
a major source of tourism, investment, and offshore
banking, has declined somewhat recently. The Republic has
Sources: Economist Intelligence Unit; International Monetary
supported EU sanctions on Russia in reaction to the
Fund.
Ukraine crisis. More recently, relations with Israel and
Egypt, by virtue of a mutual interest in energy exploration
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Cyprus
and development in the Eastern Mediterranean, have
Energy
expanded. Relations with Turkey, Cyprus’s largest regional
The Republic claims an exclusive economic zone (EEZ) off
neighbor, have been tense. Turkey does not recognize the
its southern coast that includes a 200-mile stretch of the
Republic, has opposed the Republic’s energy exploration,
and has been a decisive player in the island’s reunification
Eastern Mediterranean extending southward toward Israel,
Egypt, and Lebanon. In December 2011, Noble Energy, a
negotiations.
Texas-based energy company, announced the discovery of
Turkish Cypriot foreign policy generally mirrors that of
natural gas in Cyprus’s Aphrodite gas field. Many felt at the
Turkey, although the Turkish Cypriots have long sought
time that the discovery would place Cyprus on Europe’s
increased diplomatic and trade relations with other
energy map. In March 2019 ExxonMobil announced that it
countries. An estimated 25,000 Turkish military forces are
had located a new and significant amount of gas. Cyprus,
stationed in the North.
Israel, Greece, and Italy have moved forward on a potential
gas pipeline to Europe. In addition, Cyprus and Egypt have
Economic Conditions
also considered piping future Cypriot/Israeli gas to Egypt’s
liquefied natural gas facilities for possible future export to
The Republic has an open, free-market economy. The
outside markets. A more economical and technically
services sector, including a large tourist industry,
practical gas pipeline across Cyprus to Turkey and into
contributes approximately 75% to the GDP and employs
Europe would depend on an overall solution to the island’s
about 72% of the labor force.
division.
The Greek Cypriot economy traditionally has been linked to
Turkey and the Turkish Cypriots have objected to the gas
the Greek economy. In 2011, during the Eurozone crisis in
exploration and consistently threatened to take action if it
Greece, Cypriot banks ran into liquidity problems as the
continues. In September 2011, Ankara and the Turkish
number of nonperforming loans in both Cyprus and Greece
Cypriots signed an agreement authorizing the Turkish
began to increase. In 2012, representatives of the European
Petroleum Corporation to explore for energy resources in
Commission, European Central Bank, and International
areas off the coast of Cyprus, including parts of the
Monetary Fund (IMF) began work on an assistance
Republic’s EEZ that Turkey claims as part of its EEZ.
program for the Republic that included implementing
Turkish naval vessels have continually conducted
austerity and reform initiatives. The rescue program
operations in the Republic’s EEZ and have harassed other
included a loan of €10 billion to cover maturing debt held
gas-exploration operations, raising tensions between
by foreign institutions and the recapitalization and merger
Ankara and Nicosia and having a negative impact on the
of weakened banks. Cyprus emerged from its financial
settlement negotiations.
crisis and the EU/IMF-backed bailout program in March
2016. According to Eurostat, real GDP grew by about 4.0%
U.S.-Cyprus Relations
in 2018. The Economist Intelligence Unit indicates that
economic growth will hover around 3% in 2019 and
U.S. relations with the Republic, long considered good, are
continue on a healthy pace through 2021.
expanding. Both governments have signed new security and
energy-related initiatives and the U.S., at the urging of
The economy of the Turkish Cypriot-administered area is
some in Congress, is considering eliminating current
dominated by the services sector, including tourism, and
restrictions on arms sales to the Republic.
education, with smaller trade, agriculture, and light
manufacturing sectors. The economy operates on a free-
Relations with the Turkish Cypriots are considered
market basis but remains highly dependent on financial
unofficial but cordial. The United States regards the current
assistance from Turkey, including low-interest loans mostly
division of Cyprus as an issue in need of a solution and has
to Turkish entrepreneurs in support of export-oriented
supported negotiations to achieve a fair and permanent
industrial production and tourism. Economic growth (5% in
settlement. Although offshore banking operations and
2018) has been handicapped by the political isolation of
relations with Russia have raised concerns about money
Turkish Cypriots, the lack of private and public
laundering and Russian influence, the United States has
investments, high freight costs, and skilled-labor shortages.
expressed its satisfaction with the Republic’s anti-money
In 2018, exports amounted to $105 million and imports
laundering policies. The United States also supports the
totaled around $1.7 billion. Turkey remains the Turkish
Republic’s policies toward the prevention of human
Cypriots’ main trading partner, supplying 60% of imports
trafficking.
and absorbing around 40% of exports. A pipeline
The United States has taken the position that the Republic
transporting fresh water from mainland Turkey to north
has the right to explore for natural resources within its EZZ
Cyprus opened in late 2015. An electrical cable from
but that any revenues that may result from the discovery of
Turkey will supply additional electricity to North Cyprus.
natural gas should benefit both the Greek and the Turkish
Direct preferential trade between North Cyprus and EU
Cypriot communities. The United States hopes that tensions
member states is restricted. However, since August 2004,
between Cyprus and Ankara over the energy issue do not
EU rules have allowed goods produced or substantially
pose significant problems in the regional attempt to
transformed in the area administered by Turkish Cypriots to
establish the Eastern Mediterranean as a new energy area.
be sold duty-free to consumers in the Republic and, through
Vincent L. Morelli, Section Research Manager
the Republic, to the rest of the EU. Under these rules, the
EU has become the Turkish Cypriots’ second-largest
IF10749
trading partner.
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Cyprus

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https://crsreports.congress.gov | IF10749 · VERSION 6 · UPDATED