by SUAT DELGEN
Once celebrated as a prime sanctuary for foreign investments in the Mediterranean, Turkish Cyprus has come under fire for allowing Israeli entities to purchase large swathes of property on the strategically significant island.
Following Russia’s invasion of Ukraine on 24 February 2022 and subsequent US/EU sanctions imposed on Russian individuals, wealth, and commerce, a notable shift occurred in the financial dynamics of the island of Cyprus.
Assets owned by Russian oligarchs began moving from banks in the internationally recognized Republic of Cyprus (southern Cyprus) to those in the Turkish Republic of Northern Cyprus (TRNC), a state recognized only by Turkiye and not subjected to the same sanctions.
This influx of Russian capital contributed significantly to a resurgence in Northern Cyprus’ construction industry. The sector’s expansion, particularly evident in the transformation of Yeni Iskele from a quaint village to a thriving urban center adorned with skyscrapers and luxury residences within five years, has been remarkable.
This boom has not been without controversy. The sale of newly constructed properties, some of which are on erstwhile agricultural lands, to Israeli nationals has sparked debate in both Turkiye and the TRNC.
Another ‘Israel’
Allegations have surfaced, claiming a significant proportion – if not most of these foreign investors – are of Jewish/Israeli origin.
The claims have gained momentum in the wake of Israel’s military actions in Gaza post-7 October, leading to speculation and concern about TRNC’s potential geopolitical shift, with some even questioning if it could become a “new Israel or a part of the existing one.”
In a bid to demonstrate its commitment to enforcing international sanctions and maintaining its reputation as a credible financial hub, the Republic of Cyprus has taken decisive action to prevent potential violations.
The Cypriot government has closed 120,000 suspicious bank accounts and more than 40,000 shell companies belonging to Russian nationals and entities while imposing additional sanctions on local individuals and organizations suspected of facilitating the circumvention of restrictions imposed on Russian oligarchs.
These measures have been met with both praise and criticism. Some argue that they are necessary to ensure compliance with international law, while others claim that they unfairly target the Russian community and harm the Cypriot economy.
Northern Cyprus fights back
To bolster its efforts and investigate potential breaches more effectively, the Cypriot government has sought assistance from Washington. In response, a team of 24 highly specialized FBI agents – experts in uncovering sanctions violations and money laundering schemes – has been dispatched to the island.
Hailing from the US Treasury’s Financial Crimes Enforcement Network (FinCEN), these agents will work closely with local authorities to analyze bank transactions, question lawyers and accountants suspected of aiding sanctioned individuals, and gather evidence of potential wrongdoing.
The loose regulations, low taxes, and the use of the devalued Turkish lira have made Northern Cyprus an attractive destination for Russians, Iranians, and other foreigners looking to invest their money. The population in the north has nearly doubled in the past decade, with Turkish Cypriots now comprising just a third of the population. This demographic shift has raised concerns among locals, who have come to feel like strangers in their own country.
The increase in the number of home sales and lands to foreigners, particularly those of Jewish origin, has become a cause for concern in Northern Cyprus. In response to a Turkish media campaign alleging that thousands of Israeli and Jewish people were buying properties in the region, the TRNC will restrict property sales to foreigners.
The campaign was fueled by a series of social media posts published by Sabahattin Ismail, a journalist and former adviser to the TRNC’s ex-president Rauf Denktas. Since the start of Israel’s attacks on Gaza six months ago, Ismail has shared sale records and company registries, claiming that thousands of Jewish people from Israel and European countries have purchased housing and land in TRNC under various nationalities.
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