This is Cyprus, an absolutely gorgeous  nation in the Mediterranian filled with  

beautiful little towns a laid-back way of life  and an economy that is supposedly for sale.

That’s right, a fair few of you watching  may have seen headlines that apparently  

Amazon is going to purchase the island nation and  

set up it’s global headquarters there  to have it’s very own little tax haven.

This story was originally published by Saxo  

Bank which is a small European investment  bank with alot of operations in the area.

Now spoiler alert, it’s not going to happen,  but it’s not as crazy as it sounds and one day  

it genuinely could make sense as a sound business  plan. So stick around, partially because I need  

that average watch time so that the youtube  algorithm may bless this video, but mostly  

because this bizarre prediction can tell us a lot  about possibly the weirdest economy in the world.

There is a very good reason that cyprus was  singled out as the most likely country to be  

purchased in the 2020 national yearbook  and that is because of its long history  

of hmmm let’s say being very agreeable to the  whim of institutions with a healthy bankroll.

But of course, the nation is fascinating for  so many more reasons not least of which is that  

half of the country is technically subject to an  illegal occupation of the territory of the EU.

And it gets even weirder than that, if  you were to look at the island of Cyprus  

you would be forgiven for thinking  it is just one little ol country,  

but depending on who you ask it has as  many as 4 different entities claiming  

sovereignty over what is a very beautiful  but otherwise very barren piece of land.

So there is a lot going on here and as always  the best way to make sense of alot of this  

is to look at the economics of the island  to work out what is truely motivating  

all of these powerful institutions  that apparently want to own cyprus.

So What is really driving the economy of Cyprus?

Why are so many people laying claim to it?

How have these tensions come  back to bit them in recent years?

Why would it make the ideal country for some  global megacorporation like amazon to buy?

And of course once we have  made sense of all of that,  

we can go ahead and put Cyprus on the  economics explained national leaderboard.

Intro Add

The story of the Cypriat economy starts as so  many do in 1960 when it claimed it’s independence  

from the British. This independence was  granted so long as cyprus allowed the  

british to retain two naval ports here and  here. The british still fancied themselves  

a naval power at this time, and Cyprus  has a great central location in the med.

While this was a great victory for  the people of the newly formed nation  

it quickly fell into a new form of uneasy tension  

between the two dominant populations on  the island, The Turkish and the Greeks.

An attempt to control these tensions revolved  around introducing a representative senate that  

would be well represented by proportional  politicians from both backgrounds.

This never really worked though and the nation,  

unfortunately, fell into a vicious civil  war 14 years after their independence.  

Turkish troops landed on the nation’s shores  in an attempt to claim the land as their own.

Obviously, this was very unpopular  in the international community  

considering both Greece and  Turkey were members of Nato,  

and this conflict was taking place right  on the doorstep of the soviet union.

Turkey also had the audacity  to carry out this invasion  

with weapons supplied to them by  the US which was a major no no.

Due to this massive international pressure  a ceasefire was eventually called but not  

before turkish forces had occupied 36% of the  nation’s north. Up here in the pointy bit.

This led to many turkish Cypriots been  evicted from their homes in the south  

and likewise with greek cypriats in the  north. To this day the island is still  

divided like this although the area under Turkish  administration is not recognized by basically  

anybody although it still has all of the  same functionality of a regular nation.

This means that the Republic of Cyprus,  you know the one that everybody agrees is  

Cyprus has what is known as de jure  sovereignty over the entire island.

There is an interesting debate  about what makes a nation a nation,  

and if you were to research this topic you  would find that most experts would say it is  

other countries recognising you as a country.  A membership to the UN is also a huge boost.

And you know what, that is all well and good  however the republic of Cyprus has all of this,  

but it still can’t do so much as  commission a public fountain in the north,  

so that really is a strong point against  that particular argument. Your move Wendover.

To make this geopolitical fruit salad all  the more interesting the UN controls a vast  

swath of land between the north and south as a  buffer to avoid further tensions in the region. 

This makes 4 different territory claims  in an island that up until recently hasn’t  

been overly prosperous. Oh and one little side  not amongst all of this is that both the north  

and the south share the same capital city  of Nicosia. So you know, UN buffer zone,  

divided capital city, retained British outposts,  or as I like to call it a real recipe for success.

Now make sure to remember all of this tension  because it will get really important later on,  

but for the most part in this video,  

when we talk about cyprus we will be talking  about the republic of cyprus in the south.

Now even after all of this was said and done and  the dust settled on the island, it wasn’t an easy

Path to prosperity

For the new country.  

Ongoing hostilities and a relatively relaxed  way of life meant that the nation lacked the  

infrastructure to support industries that  were driving growth in the modern world.

Instead, the country relied primarily  on basic agriculture as it had for  

thousands of years. This unrealized potential was  perhaps best typified in its tourist industry.

The country is beautiful, it has miles of  unspoiled beaches, and crystal clear waters  

all bathed in the Mediterranian sun. The  only problem was, nobody could get there.

The country only opened it’s  first commercial airport in 1968,  

and that was in it’s capital city  which was inexplicably as far away  

as physically possible from all of  the beaches the nation had to offer.

So unless your idea of a resort getaway was  a scheduled flight into an ex airforce base  

and then a 2 day drive over cobblestone  roads to a beach shack with no plumbing,  

Cyprus probably wasn’t getting your dollars.

This of course did eventually start  to turn around as the international  

community started to forget the troubles  of the 60’s and 70’s and the government  

rolled out sweeping reforms in an  attempt to modernize the nation.

Now in terms of government  investment into infrastructure  

there are normally some area’s that have  some pretty high returns on investment.

Tourism as mentioned earlier was the first big  one. This won’t work for all nations of course,  

but for those that happen to be blessed with the  type of environment that is commonplace in cyprus…  

well a few roads and some small local  airports opens the nation up quickly to  

those sweet tourist dollars that are looking  for a less crowded place to get sunburnt. 

The same went for agriculture,  which saw a massive increase  

in output after the nation embraced  modern mechanized farming techniques.

It’s a common misconception that all  nations that have experienced a period  

of rapid growth have done so because  they embraced modern manufacturing.  

And yes of course there are many  examples of where this has been the case,  

but heavy industry is incredibly  expensive and competitive to break into.

It’s like starting a business and deciding on a  cafe. I mean sure if it goes well you will do ok,  

but could you possibly think of a more saturated,  cpompetative and uninspired business idea.

Anyway rant aside all of this was to say that  cyprus was much better served by making small  

investments into little industries rather than  massive investments into becoming a manufacturing  

hub, which is a lesson that many other nations  could learn from, because well it worked.

And in fact one of the nation’s  biggest payoffs was the investment  

in harboring a strong business center.

Companies need a few things to set  up operations in a nation. They need  

some profit incentive to be there, they need  confidence the nation won’t devolve into chaos,  

and lax business regulations and  taxes are always helpful too.

Once international businesses were confident  of the continued status quo on the island they  

were more than happy to move in. The first  big additions being shipping companies.

Today Cyprus is home to the  third-largest merchant navy in Europe,  

only falling behind Greece and the united kingdom.

Infact cyprus actually has a shipping  fleet twice as large as the united states.

Now the reason that so many merchants  choose cyprus to do business in was a little  

bit because of it’s central position and a lot to  do with it’s favorable taxation and business laws.

There is something called a flag of convenience  in shipping. Where ships that are by there very  

nature not bound to any particular country in the  world will pick and choose between countries to  

see who will give them the best deals on rules  around how much tax they will need to pay,  

what standards are required on the ship and even  down to who they can employ from what country.

For all of these reasons Panama is actually  technically home to the largest merchant  

fleet in the world but Cyprus is still  a compelling option especially for those  

who do a lot of business in europe and that’s  because of the last piece of the Cyprian puzzle

Membership in the EU

In 2004 Cyprus became a member of the  european union which was fantastic.  

It meant it could adopt the euro and open itself  up to do business directly with all of europe.

This made all of its previous  progress in the fields of agriculture,  

tourism, and financial services all the better.

In the years after admission into the EU  Cyprus saw a sharp spike in economic growth  

and money started pouring into the nation to  

set up administrative centers to  take advantage of this new market.

This investment took the form of everything  from venture capital looking to modernise  

farming techniques, all the way to major  hotel chains setting up resorts across  

the coastline to cater to the  new wave of European tourists.

This membership into the little  European club also opened the  

nation up to outward investment opportunities.

Given all of the tax and business laws  we mentioned earlier cyprian banks were  

flush with foreign cash, and these reserves only  escalated when those same banks could hold euro’s.

Re-investment into cyprus was an  option, but the whole nation only  

had a GDP of around 25 billion dollars  and these banks were now holding onto  

hundreds of billions of euro’s. It would be  like bill gates investing in a lemonade stand.  

No matter how good the returns,  it wouldn’t be worth their while.

So they invested in other  fast-growing European nations,  

specifically their ancestral homeland of  greece. Which was you know, not awesome.

The eurozone crisis hit cyprus extremely hard, not  necessarily through any fault of their own, but  

moreso that their banks had invested into nations  that were no longer able to make their repayments.

It didn’t take long before uneasy global  billionaires and multinationals wanted  

to withdraw their funds for cyprian banks  causing a minor run on these institutions.

Given that the nation no longer had free  reign to print its own currency after it  

adopted the euro the government needed  a more radical solution to this problem.

In 2013 cyprus confiscated funds held  in their banks exceeding 100,000 euros.  

a portion of this excess cash changed from money  sitting in the bank to shares in the bank itself.  

In theory the individuals effected were no worse  off but in practice well…. In an economic crisis  

would you rather have cash, or shares in a  sinking bank? The answer should be pretty obvious.

This is what is known as a bail  in, as opposed to a bail out. 

So you might be asking then, amongst  all of this why on earth would Amazon  

want to buy Cyprus? Well as we said earlier, it  doesn’t. This proposal was merely a demonstration  

of how easy it is for wealthy institutions  to buy their way into the systems of cyprus.

You see membership in the EU brought Cyprus much  more than just dodgy investment opportunities,  

it also brought with it all of the  perks of being being a member of the EU.  

It’s citizens could live  and work and do business in  

any member state almost with the  same ease as if they were citizens.

This is something that was great  for the people of the nation who  

might be interested in such opportunities  

but even better for wealthy individuals who  liked the sound of european citizenship as well.

If you are a wealthy person, getting citizenship  in cyprus is extremely easy. This means that  

legitimate and illegitimate global billionaires  alike have been able to claim dual citizenship  

in cyprus as a sneaky back door into Europe  where they will then set themselves up in Paris,  

or berlin or rome or wherever with all of the  amenities afforded to any other EU member.

This is particularly popular with  russian and chinese billionaires  

which would not be granted citizenship  in these more conservative countries.

This passports for sale scandal caused  a major outcry in the european community  

when it came under scrutiny in 2018,  

since then the nation has had to drastically  pull back on this lucrative little pass time.

But that might not be such a  big problem given that just a  

year later Exxon Mobil announced that  it had made the world's third-biggest

natural gas discovery

This gas was discovered off  the coast of Cyprus which is  

where these disputed borders get messy once more.

You see the Republic of Cyprus and even the  European Union had learnt to just accept  

northern cyprus as something that is there,  and there is not much that can do about it.

But now with a prize that could  be worth trillions of dollars  

tensions are starting to heat up over  who lays claim to these gas fields.

Countries get 200 nautical miles off their  coastline to exclusively exploit for fishing  

and drilling, but how large that coastline is,  really depends on how you draw these borders.

A flair up of tensions could ruin the  countries progress in transitioning from  

an agrarian afterthought in the middle of  the ocean to an advanced centre of business  

even if that business is  sometimes on the naughty side.

Ranking

Now it is time to put cyprus on the  economics explained national leaderboard  

and as always we will start of with size.

Now the economy of cyprus is fascinating but  it is very small, it’s recent advancements  

have made a big difference but with  a GDP of less that 25 billion dollars  

it’s almost inline with micronations like  Monaco or Malta it gets a 2 out of 10.

An important thing to note about this though  is that it does not take into consideration  

the economy of the north as that region  is not recognized by the international  

agencies that make these figures. Even  still the economy of northern cyprus is  

even smaller and more basic than the south  so it is unlikely to make much difference.

GDP per capita is a better story though  because the population of the island is very  

small especially when international  organizations don’t recognize all the  

people in the north. With a GDP per capita  of 28,000 USD it is a securely middle class  

economy somewhere between greece and italy  in terms of prosperity, it gets a 5/10.

Stability and confidence, well this  really depends on the timeframe,  

in recent years it has been doing  alright for itself and depending  

on what happens in these gas field it  might continue to do so, even still,  

in it’s short history as an independent state  it has been home to wars, divided territories,  

controversial bank bailouts, and international  scrutiny over selling passports. It gets a 3/10.

Growth, now we measure this figure over the  last decade because spoiler alert pretty much  

every country in the world has grown rapidly  when you extent the timeline out far enough.  

The ten year figure also works well because  it assesses how well an economy has been  

able to come back from the financial  crises that plagued the last decade.  

Which in the case of cyprus is.. Not  well. Despite recent improvements,  

the economy is still smaller than it was  at it’s peak in 2008 so it gets a 0/10.

Finally industry, this has certainly been  improving and the nation has openeined itself  

up to new profitable industries like all the  ones that we have discussed in this video  

but it’s still certainly not what you would  call a powerhouse by any means. It gets a 5/10.

Altogether this gives the  nation an average score of 3/10  

which is bad, and puts the nation into  last place on our leaderboard… for now.

The good news is that you can  put yourself in a more secure  

financial position by automating your savings…

With acorns...

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