Inflow of Russian money prompts construction boom in North Cyprus sanctions relief

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Yeni Iskele grows out of bushes like Las Vegas out of the desert. It’s only when you see the tops of the high rises coming into view that you can believe it’s there.

Five years ago, this was a small town. Now it is a big city with high rises, villas and apartments with names like Caesars and Dream Town.

Seeing how intensive the construction was will somehow explain how this city could have been built in such a short time, but not why. Then several ads will appear in Russian and Farsi. Because in this unclear area of ​​Northern Cyprus foreigners from permitted countries and other places have found a new place to settle, where the restrictions of southern Greece do not apply and the Turkish lira that goes much longer.

At the sales office of one luxury resort, Riverside Life, a brochure offers buyers: “New life on a long beach.”

Osman Erdogan, the company’s general manager, said that the volume of demand for apartments has exceeded expectations.

“It’s a shock to all of us. We didn’t expect to get so many sales so quickly.”

Yeni Iskele is very much a poster town for northern development

Yeni Iskele is very much a poster town for northern development – Guardian/eyevine/Kostas Pikoulas

A billboard advertising a new property development

A billboard advertising a new property development – Guardian/eyevine/Kostas Pikoulas

Cyprus is divided, with the north administered by Turkish Cypriots following Turkey’s illegal invasion of the island in 1974, and the south officially known as the Republic of Cyprus.

The province is not recognized by any country except Turkey, which supports it economically and militarily, but it is not under sanctions. To fly there, however, visitors must go through Turkey.

Ankara has refused to impose sanctions on Moscow over its invasion of Ukraine and has given asylum to thousands of Russians who fled the fall.

Many of these have now gone to Northern Cyprus as house prices in places like the Turkish coastal city of Anatalya and Cyprus are pulling in with the EU to impose sanctions. Russia.

Closer to the Middle East than Europe, the south has long been home to Russian, Arab and Israeli investors looking to park their money – often of dubious origin.

Loose regulation, low taxes and good weather made it a real hole. And after the Cyprus financial crisis in 2013 and the launch of their Golden Passport scheme, a real back door to Europe. The investment-for-citizenship program boosted the property market and started a construction boom in areas like Limassol.

There, the amount of rich marine life is clear to see.

Large villas owned by Russian and Middle Eastern buyers, with large heavy front doors and covered with cameras cut into the cliffs. In the marina, luxury yachts sit in rows, glistening in the sun.

“It’s the Dubai of Cyprus,” said one woman.

As my taxi driver, Andreas, turned into the affluent community of Germasogeia and up a hill that overlooks a Russian Orthodox church, he pointed out that many of the apartments look empty.

“It’s all black money,” he said.

In 2020 Cyprus suspended the Golden Passport scheme after journalists exposed its potential for abuse.

Its central bank said authorities have closed tens of thousands of shell companies and suspicious bank accounts in recent years and tightened anti-money laundering rules. Cyprus has also followed the rest of the EU in reducing international payments through Swift to Russia, Belarus and Iran.

The north, however, is not so much under scrutiny, even though its banks are not part of the international Swift system. Many banks operating in the countryside are branches of those in Turkey.

Adding to his appeal is the use of the Turkish lira, which has lost 500 percent of its value in the past five years. An estimated 1.37 million Greek Cypriots headed north in 2022, many for cheap petrol, medicines and cigarettes.

Russian supermarket in Limassol in southern Cyprus

A Russian supermarket in Limassol in southern Cyprus, which has long been home to Russian, Arab and Israeli investors looking to park their money – Guardian / eyevine / Kostas Pikoulas

Cyprus

Loose regulation, low taxes and a good climate have made Cyprus a financial hotspot – Guardian/eyevine/Kostas Pikoulas

The north has been working to shed its image as a pariah state with advertisements to promote it as a holiday or retirement destination.

Although Yeni Iskele is very much a poster town for northern development, nearby Bogaz and Otuken are also growing, said Mr. Erdogan of Riverside Life, with the plan for wider expansion.

The locals in the north are relieved when it rises, because they have been far behind their southern neighbor economically. But it comes at a cost.

Mete Hatay, senior researcher at the independent PRIO Cyprus Center, said over the past decade the population of the north has increased from 300,000 to 550,000, largely due to the influx of in from Turkey.

The number of Russians is around 40,000 and Iranians at 10,000. With Turkish Cypriots now making up just a third of the population, they feel like “strangers in their own country”, he said.

“Before there was just a small British community here. Now you have a lot of Russians, Ukrainians, Iranians, central Asians,” Mr. Hatay said.

“The teachers’ union has been complaining about the number of children who don’t speak Turkish who are going to schools without any preparation.”

Most Turkish Cypriots, like their Greek counterparts, want reunification. But after talks with the UN on brokering a North-South settlement failed in 2017 a sense of desperation has led to a “hit and run” attitude to make a quick buck, said Mr Hatay.

It has also led to bolder rhetoric from Ankara and Ersin Tatar, the hardline leader of Turkish Cyprus, about creating two separate states.

This summer marks 50 years since the Turkish invasion of Cyprus.

James Ker-Lindsay, a scholar and author from Cyprus, said that the more land is bought and developed, the dream of reunification that many have is getting weaker.

“Any settlement requires some form of territorial redistribution. It becomes much more complicated if you have people building on it and developing on it.”

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