Date: 2001-2005

Politics often trump economics–at least temporarily. In The Hague (Netherlands), Turkish Cypriot leaders rejected the most recent attempt by the international community to settle the Cyprus problem–the state of war between Greek Cypriots and Turkish Cypriots that has prevailed since 1974. Between late 2001 and March 2003, a UN team worked with the two Cypriot sides to devise the Annan Plan, a peace settlement that offered intricate legal solutions for resettling displaced persons and exchanging or paying compensation for dispossessed properties. The Plan also set forth an innovative federal structure for a “United Cyprus Republic” to guarantee political rights.

Resolving the conflict through the Annan Plan would have meant both costs and benefits for the Greek Cypriot and Turkish Cypriot communities, but the economic case, as well as the political case, for peace is compelling. To better define what is at stake, the U.S. government called on Nathan Associates during the final weeks of the UN negotiations to provide an objective view of the economic implications of the Annan Plan.

This assignment built on the firm’s earlier work in Cyprus. In 1999 and 2000 Nathan Associates evaluated the economic prospects for a post-conflict Cyprus, presenting analysis and conclusions to a rare joint meeting of Greek Cypriot and Turkish Cypriot opinion leaders. In support of the Annan Plan, Nathan Associates developed detailed new estimates of the net economic benefits of a Cyprus settlement and reconstruction of the Turkish Cypriot economy. Working directly with the U.N. negotiating team, Nathan Associates Senior Vice President, Roger Manring, helped identify and evaluate key economic governance issues that would affect Cyprus under the settlement.

Our analysis showed that both Greek Cypriots and Turkish Cypriots will gain economically from peace, but that Turkish Cypriots stand to gain the most, including significant financial advantages from entry into the European Union next year with the rest of Cyprus. Leading members of the Turkish Cypriot business community and civil society share this opinion as evidenced by the public protest and political tension that intensified in the period leading up to The Hague negotiations and since.

This mounting public pressure for a better economic future is likely to force politicians in the Turkish Cypriot community to renew the search for peace. In fact, in April the Turkish Cypriot authorities permitted free movement into and out of the Turkish Cypriot part of the island, a freedom suspended since 1974.

The drama of Cyprus is far from over.