Cyprus grapples Israel-Hamas war debris

Tourism sector is most vulnerable to the Middle East crisis

Cyprus’ economy has suffered another setback from the Israel-Hamas conflict just as it appeared to be recovering from the COVID and the Ukraine war.

While hoping for a swift end to atrocities and human suffering in the region, stakeholders in the island’s economy did not hide their concern for the impact on Cyprus.

In 2020, Cyprus saw its economy shut down due to the COVID-19 pandemic, only to be hit a year later by global shockwaves following Russia’s invasion of Ukraine.

The ongoing war in Ukraine has had serious repercussions on the economy, particularly concerning tourist arrivals and inflation.

Moreover, in the past weeks, the military conflict between Israel and Hamas threatens to add to the cost-of-living burden.

In comments to the Financial Mirror, Deputy Minister of Tourism Costas Koumis said that while concentrating on offering humanitarian relief, authorities are also preparing for the fallout from the conflict.

“We hope to see the atrocities come to an end soon, as tourism can only thrive under peace,” said Koumis.

The minister said the sector has already seen its first losses, as the Israeli market is its second largest source of income.

“It is our second largest market, with specific characteristics. Although Israeli tourists spend the least days on the island (4.3 per capita), they bring in more income and fill in periods of slower traffic from other countries due to the proximity of the neighbouring country,” said Koumis.

He added that the loss of the Israeli market comes less than two years after Cyprus saw the last tourists from Russia arrive before the war in Ukraine.

Russia had been the second biggest source of tourists, providing Cyprus with some 800,00 visitors a year.

In September, tourist arrivals from Israel increased 11.7% to 57,088 compared to the same month last year.

For the year to September, there was a 17.9% increase to 3,136,145 arrivals from 2,540,554 in 2022.

Director General of the Cyprus Hotel Association, Philokypros Roussounides, told the Financial Mirror that losses are expected, although it is too soon to conclude the conflict’s impact.

“Although the conflict broke out towards the end of this year’s main tourist season, it is expected to take its toll on bookings for next year,” said Roussounides.

He explained that many holidaymakers start booking their getaways for the summer season towards the end of the year.

“It is not only the market from Israel that we are concerned about.

“The war and atrocities also have a damning effect on potential travellers’ psych,” he added.

Business interest

Concerns are also rising among businesses, even though there are no reports of Cypriot companies in Israel.

However, many businesses in Cyprus have Israeli interests, although the exact number is unclear.

The toll on these businesses remains unknown, with duration of the conflict determining the magnitude of potential impacts.

However, the business world is more concerned over the toll the conflict will have in the long run, as they fear a repeat of the energy crisis and an inflation hike following the war in Ukraine.

Talking to the Financial Mirror, Michalis Antoniou, the Director General of the Cyprus Employers and Industrialists Federation (OEB), expressed his organisation’s concerns.

“The crisis in the neighbouring country has created uncertainty, and should the military conflicts escalate, there will be economic repercussions.

“There are also fears of indirect effects on businesses, as was the case with the war in Ukraine, which led to an energy crisis and high inflation.

“Cyprus could potentially serve as a safe destination for relocating Israeli businesses.

“While it is too early to assess the situation, if the war prolongs, Israeli workers and entrepreneurs may seek refuge in Cyprus”.

Antoniou revealed that OEB is studying the issue in relation to the employment status of these workers, as they are third-country nationals.

A similar status to that applied to workers from Ukraine may be considered.

As for trade relations between Cyprus and Israel, there doesn’t seem to be a significant concern.

In 2022, total imports from Israel to Cyprus were EUR 829.5 million, and exports were EUR 102.8 million.

According to Statistical Service data, imports of mineral fuels from Israel reached EUR 776.4 million last year.

They were followed by imports of electrical equipment at EUR 11.5 million and aircraft equipment at EUR 5.49 million.

Furthermore, imports of plastic products were EUR 5.2 million, and paper products were EUR 3.5 million.

Out of the total exports of Cypriot products to Israel of EUR 102.8 million, the majority were fishery products (EUR 28.7 million), followed by exports of electrical equipment (EUR 26.4 million).

This was followed by salt exports at EUR 8 million, plastic products (EUR 5.6 million), and pharmaceutical products (EUR 3.7 million).

Energy expert Costis Stambolis, the President of the Energy Institute of Southeastern Europe, told the Financial Mirror about the negative effects of the long-term plans to interconnect Israeli gas with Turkey.

He said the onus is for an LNG plant in Cyprus, which has been delayed.

“The current situation underscores the necessity of such a solution.

“This geopolitical aspect is highly advantageous for us because the situation in Israel can change rapidly”.

“The Tamar gas field, which supplies Israel’s industrial sector, recently halted production and operations for three days.

“Thus, Cyprus’s capacity to host liquefied gas facilities is quite relevant now.

“Thanks to their strategic location, existing infrastructure, and expertise, Greece and Cyprus can serve as a reliable source of energy supply for Israel and the broader region”.

Cyprus’ importance recognised at Cairo Summit

The invitation of Cyprus to the Emergency International Summit on Gaza to be held in Cairo on Saturday is proof of the recognition of the role it can play in the region, said President Nikos Christodoulides.

President Christodoulides said: “I consider the fact that Cyprus was chosen among the countries to be invited to such an important Summit alone demonstrates the recognition of the role - whatever role, I do not want to exaggerate - the Republic of Cyprus can play.”

He said it was a country that “maintains excellent relations with all neighbouring countries while being a member state of the EU”.

“This is what I conveyed at the recent European Council, the role we can play beyond the humanitarian aspect”.

The President underlined that for the first time, there are so many requests from countries to repatriate their citizens using Cyprus,

“But, more importantly, the primary concern at this moment is how to address this crisis.

“A crisis that, if it expands, if it continues, you understand, will have negative consequences for all of us”.

The summit in Cairo will “discuss developments and the future of the Palestinian cause and the peace process”.

Air strikes have killed at least 3,000 people in the Gaza Strip in a relentless aerial campaign launched by Israel in retaliation for a Hamas attack on October 7 that killed 1,400 people. Mostly, civilians died on both sides.

Historically a key mediator between Hamas and Israel, Egypt has been pushing diplomatic efforts, urging “restraint” and a return to the political process.

Heads of state and government have been invited to the summit, namely from Jordan, Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Bahrain, Oman, Iraq, Turkey, Algeria, Tunisia, Morocco, and the leaders of Greece, France, Germany, Spain, Italy, Cyprus, Norway, the USA, Russia, China and the UN Secretary-General.