Author:Martin, Josh

Cyprus is positioning itself to play a key role in the economy of a more peaceful Middle East, while reaffirming its European roots in a successful bid for membership of the European Community. Tacitly ceding banking and finance to the Lebanese and others, the Cypriots plan to consolidate their role as the eastern Mediterranean's logical transshipment hub.

Cyprus is poised to reap the benefits of three separate, delicate negotiations. Their outcome will affect the country's domestic political and economic structures, as well as its overseas presence both in Europe and in the Middle East. Above all, the outcome of all three will affect trade, which is the lifeblood of the Cypriot economy.

Last year, Cypriot imports and exports were more than 50 per cent of the island nation's GNP, with $1.4 billion in exports, and $4 billion in imports. The lopsided negative balance of trade omits substantial earnings from financial, insurance and shipping services provided by Cypriot companies, both on the island and overseas.

Given the country's trade dependence, the Cypriot government under President Glafcos Clerides has been most publicly concerned with negotiations for membership of the European Union. But domestic security and economic prosperity may ultimately be more dependent on two other sets of negotiations: bilateral, talks between the Cypriot Republic and the Turkish Republic of Northern Cyprus, and the Middle East peace process.

Progress has been made in all three sets of negotiations, but there have been maddening delays. For example, although Cyprus had hoped to join the European Union by 2002, bureaucratic and political delays have pushed back membership, which is now expected in 2004. Bilateral talks between Greek and Turkish Cypriot leaders, scheduled to resume in New York at the beginning of the new year, have been marked by distrust on both sides, often exacerbated by the animosity of the two outside powers most directly concerned: Greece and Turkey.

And then there is the Middle East peace process, which will directly affect both shipping and tourism, on which the Cypriot economy depends. With a good working relationship established between Israeli Prime Minister Ehud Barak and Palestinian President Yasser Arafat, expectations and optimism are rising.

Ironically, throughout the 1970s and 1980s, Cyprus, itself divided following the Turkish invasion of 1974, profited by making itself a safe haven for money and moveable property from the...

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