Eric Margolis Untangles the Geopolitics of Cyprus

I am very pleased to bring to International Man readers the perspective of Eric Margolis, a geopolitical expert with a keen knowledge of history.

Eric is an award-winning international affairs writer and columnist. As a war correspondent, he has covered conflicts in Angola, Namibia, South Africa, Mozambique, the Sinai, Afghanistan, Kashmir, India, Pakistan, El Salvador, and Nicaragua. He is also author of American Raj: Liberation or Domination?

Eric is a board member of the Ron Paul Institute for Peace and Prosperity, a think tank dedicated to an issue Ron Paul has been passionately advocated for decades: a non-interventionist foreign policy.

I recently had the chance to speak with Eric about Cyprus. Eric helps to untangle the web of geopolitical interests in Cyprus to reveal its historical value and current potential. You'll find our fascinating discussion below.

Until next time,

Nick Giambruno, Senior Editor
InternationalMan.com


Nick Giambruno: Eric, I've been listening to your interviews and reading your material for a long time and I thought, "Who better to untangle this geopolitical mess in Cyprus than Eric Margolis?"

Eric Margolis: Well, thank you. But I'm not sure even one of the Greek gods could untangle the mess there, but I will try.

Nick Giambruno: So first, why don't you give us an overview on the geopolitical significance of Cyprus and why so many ancient and modern civilizations have sought to control it?

Eric Margolis: With Cyprus it is all about "location, location, and location," as they say in the real estate business. It is extremely strategic because it dominates the eastern Mediterranean, the trade routes, maritime, and also air routes to and from the Levant. So if you take the eastern quadrant of the Mediterranean, Cyprus is the Gibraltar of that area.

Nick Giambruno: So who are the major players today, and what are their interests?

Eric Margolis: There's Greek Cyprus and the Turkish Republic of Northern Cyprus. The Greeks predominate in the population. Turks are a minority which split decades ago into a separate political entity in the north, which they proclaimed after the Greeks tried to stage a coup d'état which would have brought an all-Greek government and then united with mainland Greece. This provoked the Turks to invade Cyprus, which is very close to the Turkish coast; tens of thousands of Turkish troops remain there today. The north is the least useful part of Cyprus, and no one recognizes the Turkish Republic of Northern Cyprus except for Turkey. It's sort of an orphan.

And the EU made a very bad mistake, just a terrible mistake with Cyprus. They admitted it as a member country while it was a divided island without imposing a settlement between the Greek and Turkish Cypriots, the result being that the EU has now ingested the perennial Cyprus problem that has been going on for as long as anybody can remember. It's also a slap in the face to the Turks, because while the EU has been giving the cold shoulder to Turkey, it fell over itself to rush to accept the Greek-dominated portion of Cyprus.

Nick Giambruno: In addition to the Turks and the Greeks, you also have Russians, Israelis, and then there are also two British military bases in the southern part of Cyprus.

Eric Margolis: Yes. Britain still controls two airbases, which are very important. Cyprus used to be a British colony, and when the Brits left, they left behind their military bases. These bases are, first of all, very close to the Middle East. So if the West ever wants to intervene in the Middle East, it could use the Cypriot bases for quick flight time to the region. Second, the British maintain a very large monitoring post there. The GCHQ, which is the British version of the NSA, maintains facilities there. I'm sure the NSA monitors all of what happens across the Middle East from these bases. So the British are very influential in Cyprus.

The Russians have in the last decade or so poured into Cyprus because it was "a sunny place for shady people," to quote Somerset Maugham. It was an ideal locale for Russians to launder money, so it became a huge financial center. The banks there catered to Russians, and it built up a big financial bubble there based on hot Russian money. The Russians, from a strategic point of view, were also interested in Cyprus because they have their eye on the Middle East. Not far away from Cyprus, probably 20 minutes flying time, is the Russian naval base in Tartus in Syria.

Then there are the Israelis. Israel's Mossad has long used Cyprus as a base of operations, and Israel has assumed an ever-more important or influential role over Greek affairs due to Greece's financial collapse. The Israelis have come in and are helping to shore up the Greek and the Cypriot economies with loans and investments, seeing the importance of Cyprus as a strategic asset. Now, the discovery of gas and maybe oil in the Mediterranean south of Cyprus—that's between Cyprus and the Israeli/Palestinian coast—is a bonanza for Israel. Israel could turn into a net energy exporter instead of a hard-pressed energy importer, but it raises major issues. First of all, these waters are international waters, who really owns them is a question that has not yet been resolved. Is it Cyprus? Is it Israel? Is it the Palestinian state? The Turks are grumbling, saying "Wait a minute, we own it too!" So we have all the makings of a really nice big crisis, and the Turks and the Israelis have been sending military forces to zoom around there. It's a little bit like the Chinese over the Senkaku Islands.

Nick Giambruno: Let's take a step back and talk about the 1974 Turkish invasion of Cyprus. Off the top of my head, this is the only instance where I can recall two NATO members were actually engaged in combat against each other, those members being Turkey and Greece. Can you talk a little about this conflict?

Eric Margolis: Certainly. The Turks claimed that they were intervening to protect the Turkish minority in Cyprus. Some of the Greek Cypriots would have liked to expel them and make Cyprus purely Greek. For Turkey, this is a very important issue. At the time Turkey's army was running the Turkish government, and it was very upset by the Greek presence in Cyprus. They made it clear that they were going to crush the Greeks if they didn't come to some agreement. Ever since, the UN has been struggling to craft a settlement between the Greeks and the Turks on Cyprus. The Turks have been much more accommodating, but the extremist Greeks on the far right—the sort of Hellenic nationalists—have managed to thwart every agreement that was made. I remember, I even had the Turkish Cypriot leader, Rauf Denktash, over in my office telling me how they were trying to get a deal put together. But these militant Greeks have stymied every deal and so the case remains today. The EU has unsuccessfully tried to bury the hatchet. It is really amazing that such a small country can so frustrate the outside world. So for the Turks, Cyprus is a matter of national honor. Cyprus is very vulnerable to a Turkish military attack, if it comes to that.

Nick Giambruno: Do you think the island will ever be reunited? What are the chances for that, and what are some signs that peace talks may actually be moving forward this time?

Eric Margolis: I'm not particularly optimistic at this moment. Unfortunately, the discovery of oil and gas offshore has made people even more stubborn. "We're not going to share it with those Turks," say the Greeks; and the Turks say, "It's ours, and we'll steamroll over the Greeks if they get in the way." These are the attitudes. I think greed is going to make it harder. And the Israelis, who are increasingly influential there, are now at "scimitars drawn" with the Turks. The Israelis used to be in cahoots with the Turkish generals, but since the generals have been kicked out of power by the Erdogan government, the Israelis are now really hostile with the Turks, and the two of them look like they could be headed for a head-on confrontation over these underwater energy deposits. So I hope I'm wrong, but there's not too much compromise in the air. Though I think one day the Greeks and the Turks will finally work out some kind of deal.

In one of my books, I wrote that the biggest miracle that I ever saw was crossing the Rhine at the town of Reichstadt, where countless French and German soldiers died fighting over this border. And today, there is just one little sign that says "you are now crossing the border." You can barely see it. So I think that will eventually happen in Cyprus.

Nick Giambruno: Have you ever been to the Turkish Republic of Northern Cyprus? If so, please talk about the economic disparity between the North and the South.

Eric Margolis: Yes, I have been to the North. The Greeks are world masters at scraping a living out of nothing. The French, when they ruled Chad, divided Chad into "Chad utile," that is "useful," and "Chad inutile," which is "useless Chad"—which is most of it. It's the same thing with Cyprus. The North is less fertile than the South. It has very little industry, because all the industry was run by the Greeks, who left after the Turkish invasion. The Turkish Cypriots were primarily farmers. The most important seaports and airports are in the south. So the North is kind of a bleak and forgotten backwater, but it still has some available land, whereas the south is relatively congested. The South at least gets the tourist business. The North doesn't get very much.

Nick Giambruno: If there ever is some sort of accommodation, do you think that economic disparity will narrow?

Eric Margolis: It would take generations for the Greeks to impart their commercial ethos to the Turks. However, Turkey has had a renaissance of commerce and business. This was caused when the monopoly on business in Turkey which was run under an oligarchy connected to the military was broken. It released a tidal wave of industry and commerce which has boosted Turkey into the modern era. Some of this Turkish entrepreneurial spirit would come into Cyprus. The Turkish government is trying to encourage that now, but people are reluctant to invest in Northern Cyprus so long as it remains isolated.

Nick Giambruno: Doug Casey and I were in Cyprus a few months ago, looking at stocks on their stock market, which are dirt cheap, as we detailed in a new report called Crisis Investing in Cyprus. Over the intermediate and long term, do you think Cyprus will rise again from this economic crisis due to the geopolitical factors that has made it attractive for thousands of years and this discovery of the offshore gas?

Eric Margolis: I think it will; it certainly has the potential. Cyprus has an attractive future. For bold investors, it's the place now, because the banks have been beaten down. Some of them are lucky to be alive. Real estate is down. You know, there's no more beachfront left on the Mediterranean except for Albania and maybe Libya.

(Editor's Note: You can find more info on Crisis Investing in Cyprus here.)

Nick Giambruno: One final question. I lived in Beirut for two and a half years and follow events in the Middle East very closely. At International Man, we've covered the deterioration of ties between the US and Saudi Arabia, and its implications for the petrodollar system (see more here) and by extension the dollar's status as the premier reserve currency. Do you have any comments on the shifting geopolitical sands in the region?

Eric Margolis: The ground is certainly trembling in Saudi Arabia, because it is involved in a major succession struggle right now. The longtime splits within the royal family of five to seven thousand princes are widening now. The whole leadership is geriatric beyond belief. The King will probably die very soon. So behind the scenes, everybody is jostling for power, like between Prince Bandar and Prince Turki, bitter opponents. But it is very hard to see what's going on behind the curtains.

This very unusual, very public anger at the US recently is caused partially, I think, by this succession struggle. Also, the Saudis are suddenly feeling frightened that their gravy train may be derailed. I think Saudi Arabia is long overdue for some kind of revolution. And, you know, in the old days, the government of Iraq under the British, King Faisal, wouldn't give excess ammunition to their army, and for very good reason, because when they did, the army overthrew the government and hanged the King. It's the same thing in Saudi Arabia. They have a lot of mercenaries who they have brought in to protect them. But even so, they are feeling very vulnerable, and their bitter feud with Iran is going to intensify.

Nick Giambruno: Eric, thank you for your time and insight.

Eric Margolis: My pleasure, cheers.

(Editor's Note: You can find out more about Eric at www.EricMargolis.com.)

Nick Giambruno

Nick is Doug Casey’s globetrotting companion and is the Senior Editor of Casey Research’s International Man. He writes about economics, offshore banking, second passports, value investing in crisis markets, geopolitics, and surviving a financial collapse, among other topics. He is a CFA charterholder. In short, Nick’s work helps people make the most of their personal freedom and financial opportunity around the world. To get his free video crash course, click here.

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