The Week in the Cyprus Region 18 Jan 2024
Links to regional developments of relevance to Cyprus
Welcome to the Week in the Cyprus Region (formerly Sapienta Cyprus Selection), a selection of links to articles of medium- to long-term relevance to people living and doing business in Cyprus. Topics marked with * will be, or already have been, analyzed in our monthly issues of Sapienta Country Analysis Cyprus. The Week in the Cyprus Region is part of the Sapienta Cyprus Snippets series. Learn more about the different subsections here.
Global inflation*. Shipping rates have soared in recent weeks following attacks on ships in the Red Sea and the risks to ships elsewhere. Reuters reported that the benchmark Shanghai Containerized Freight Index rose by 16% in a single week. Relevance to Cyprus: as a country that still relies very heavily on the dirtier fossil fuels (diesel and mazut) for electricity generation, we can expect inflation rates to remain elevated.
Eurozone economy*. The global investment bank, ING, is pretty downbeat about the eurozone economy, not least because of the abovementioned disruptions to shipping. Noting that eurozone GDP shrank in the third quarter, it says that the fourth quarter figures (not yet reported) could show another decline. Relevance to Cyprus: the Cyprus economy had already been slowing last year. We shall be revisiting our forecast in the end-January issue of Sapienta Country Analysis Cyprus.
Egypt economy. Following the diversion of ships from the Red Sea, Egypt saw its Suez Canal revenue drop year on year by 40% in the first 11 days of the year. This comes at a time when Egypt is in delicate negotiations with the IMF over a loan agreement. Relevance to Cyprus: Egypt’s macroeconomic instability (and related poor payment record with Israel) is a key reason why the Cyprus energy minister, George Papanastasiou, is wary of depending wholly on Egypt for exports of Cyprus gas.
Turkey-Israel relations*. Relations between Turkey and Israel continue to deteriorate. This week Israel’s defence minister, Yoav Gallant, accused Turkey of serving as the “executive arm of Hamas”, after an Israeli footballer was arrested. Last week Israel’s ambassador to Cyprus, Oren Anolik, said that the option of exporting Israeli natural gas to Turkey was “no longer on the table” and that transferring gas to Cyprus, potentially for conversion into liquefied natural gas (LNG), remained an option. Relevance to Cyprus: the key to piping gas to Cyprus will be whether energy companies can find a way to make it all commercially viable.