The analysis paper examines the state of the Turkish Cypriot economy and more specifically the effects of the Russian invasion of Ukraine. It explains that, although there have been some positive effects on the Turkish Cypriot economy since the war in Ukraine, these are geographically limited and focus on the real estate, construction and tourism sectors. At the same time, however, there are also serious negative effects from the war due to the increased inflation that was caused, mainly with the rise in energy, fuel and food prices that affects the majority of the Turkish Cypriot community. This creates major problems for Turkish Cypriot households and causes a loss of competitiveness for Turkish Cypriot industries, magnifying fiscal imbalances.

Since the financial system in the occupied territories is connected to the Turkish financial system, the financial institutions did not make any further decisions regarding sanctions targeting Russia or individuals who had relations with the Russian state. As a result there have been increased capital flows from Russia, particularly in the construction sector. After the start of the war, there were increased arrivals of people from Russia to the occupied territories. Out of 1,634,560 arrivals at Tymbus / Erkan airport in 2022, the number of arrivals from Russia was 32,442 (compared to 5,500 in 2021) while, at the same time, from Ukraine was 8,410 (compared to 3,054 in 2021).

Dr. Alexander Apostolides

Senior Research Fellow