Influx of Russian money fuels building boom in Northern Cyprus sanctions haven
Yeni Iskele grows out of shrubland 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 exists.
Five years ago, this was a village. Now it’s a city bristling with high rises, villas and apartments with names like Caesars and Dream Town.
To see the intensity of the construction goes some way to explain how this city could have been built in such a short period, but not why. Then a cluster of advertisements appear in Russian and Farsi. For in this obscure patch of Northern Cyprus foreigners from sanctioned countries and elsewhere have found a new place to settle, where the restrictions of the Greek-speaking south don’t apply and the embattled Turkish lira goes a lot further.
At the sales office of one luxury complex, Riverside Life, a brochure offers buyers: “A new life in long beach.”
Osman Erdogan, the company’s general manager, said the scale of demand for apartments has surpassed expectations.
“It’s shocked all of us. We weren’t expecting to get this many sales this fast.”
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 north is not recognised by any country other than Turkey, which supports it economically and militarily, but it is not under sanctions. To fly there, however, visitors must go via Turkey.
Ankara has refused to impose sanctions on Moscow over its invasion of Ukraine and provided sanctuary to tens of thousands of Russians fleeing the fallout.
Many of those have now gone to Northern Cyprus as house prices in places like Turkey’s coastal city of Anatalya soar and Cyprus pulls in line with the EU to impose sanctions on Russia.
Closer to the Middle East than Europe, the south has long been a haven for Russian, Arab and Israeli investors looking to park their money – often of dubious provenance.
Loose regulation, low taxes and good weather had made it an ideal bolthole. And following Cyprus’s financial crisis in 2013 and the launch of its Golden Passport scheme, a veritable backdoor into Europe. The investment-for-citizenship programme turbocharged the property market and set off a building boom in areas like Limassol.
There, the trappings of a wealthy life offshore are plain to see.
Huge villas owned by Russian and Middle East buyers, fronted by big heavy doors and rigged with cameras cut into the cliffs. In the marina, luxury yachts sit in rows, sparkling in the sun.
“It’s the Dubai of Cyprus,” said one woman.
As my taxi driver, Andreas, turned into the wealthy neighbourhood 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 cancelled 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 regulations. Cyprus has also followed the rest of the EU in curtailing international payments via Swift to Russia, Belarus and Iran.
The north, however, is less encumbered by scrutiny, while its banks are not part of the international Swift system. Many banks operating in the north are branches of those in Turkey.
Added to its appeal is the use of the Turkish lira, which has lost 500 per cent of its value in the past five years. Around 1.37 million Greek Cypriots crossed over to the north in 2022, many for cheap petrol, medicines and cigarettes.
The north has worked to shed its image as a pariah state with adverts to promote it as a place to holiday or retire.
Though Yeni Iskele is very much the poster city for northern development, nearby Bogaz and Otuken are also on the rise, said Mr Erdogan of Riverside Life, with the plan being for wider expansion.
Locals in the north are relieved at its rise, having long languished economically behind its southern neighbour. But it’s coming at a cost.
Mete Hatay, a senior researcher at the independent PRIO Cyprus Centre, said over the past ten years the north’s population has swelled from 300,000 to 550,000, largely as a result of an influx from Turkey.
The number of Russians stands at around 40,000 and Iranians at 10,000. With Turkish Cypriots now comprising 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 complained about the number of non-Turkish speaking children going to schools without any preparation.”
The majority of Turkish Cypriots, like their Greek counterparts, want reunification. But after UN talks to broker a settlement between the north and south failed in 2017 a feeling of hopelessness has led to a “hit and run” attitude to make money quickly, said Mr Hatay.
It has also led to bolder rhetoric from Ankara and Ersin Tatar, the hardline Turkish Cypriot leader, of creating two separate states.
This summer will mark 50 years since the Turkish invasion of Cyprus.
James Ker-Lindsay, a Cyprus scholar and author, said the more that land is bought and developed, the dream many hold of reunification grows ever more faint.
“Any settlement is going to need some sort of territorial redistribution. It becomes so much more complicated if you have people building and developing on it.”
