Cyprus caught at the crossroads

A Greek Cypriot soldier patrols the old town of the capital, Nicosia. Photo / AP

Patchwork island stuck between east and west is facing an uncertain future.

The Princess of Wales pub in Pyla looks as if it has been flatpacked and flown in from a town in the UK, complete with British pensioners who tuck into roast beef and talk about the weather in London accents.

Head towards the beachfront, and you will find a taverna offering a €15 ($23) special on mezze, the local feast.

Nearby is a karaoke bar, where lonely Russian women stagger through Siberian ballads in the pre-dawn hours. You will see half-finished construction sites, where the hoardings for new apartments are in Greek and Chinese.

Head a few kilometres in the opposite direction, and you will enter an occupied zone where the currency, language and food are Turkish, mosques fly the flag of the crescent moon from their minarets and the fields are dotted with box-like apartments to house settlers from the mainland.

This is Cyprus, whose location in the eastern Mediterranean has made it a meeting point - and occasional flashpoint - of cultures from east and west.

Its landscape is dotted with the remains of conquest and change, from the temple of the goddess Aphrodite near Paphos to the magnificent castle, built by the Crusaders and enlarged by the Venetians, at Kyrenia.

Its citizens, be they ethnic Greeks or ethnic Turks, are steeped in a history of trade and entrepreneurship, a willingness to do business with anyone who has the money. This freewheeling, cosmopolitan spirit created Cyprus's wealth; today, as Cypriots contemplate the cost of bailing out their ravaged banks, it seems to have contributed to Cyprus' crash.

Nowhere is the promise, tragedy and strangeness of Cyprus more visible than Varosha, a beach resort that lies just across the so-called Green Line that, monitored by UN troops, has divided the country since Turkey invaded in 1974.

In its heyday, Varosha attracted the likes of Elizabeth Taylor, Raquel Welch and Brigitte Bardot. As Turkish troops sped towards them, the locals fled. All expected to return when the fighting ceased. None did, for Varosha became incorporated into the so-called Turkish Republic of Northern Cyprus, an entity accounting for about a fifth of the island. The breakaway state is recognised only by Turkey, which garrisons some 30,000 troops there.

UN Security Council Resolution 550 prohibited any new settlement in Varosha. Today, the resort is surrounded by high fences topped with barbed wire and watchtowers, photography is forbidden and Turkish troops are under orders to shoot intruders. Those who have been able to see inside report on a ghost town stuck in the 1970s, with shop windows whose manikins sport original bell-bottom trousers, 1974-model cars decay in garage forecourts and nightclubs have pre-disco decor. Grotesque, a symbol of decline and estrangement, Varosha is located on a magnificent beach, next to a newly built hotel where holidaymakers catch the spring sun, gazing out to sea rather than behind them.

Yet after a few days in Cyprus, incongruity seems to become the norm. The country was a British colony for 88 years before it gained independence in 1960, but Britain retains two "sovereign base areas," Dhekelia and Akrotiri, covering 250sq km, or roughly half the size of urban Auckland. Their administrator is appointed by the Queen and answers to the Ministry of Defence in London. Even though Britain and the Republic of Cyprus - the Greek part that accounts for nearly three-quarters of the island - are part of the European Union, the bases technically are not in the EU.

Traffic in Cyprus drives on the left, even on the Turkish side. But there you find many of the cars are imported from mainland Turkey so they are left-hand drive. Along the main motorway on the Greek side, which runs from party resort Ayia Napa westward to Paphos, road signs are in Greek and English with speed limits in kilometres and miles per hour.

True to its crossroads tradition, Cyprus looks both west and east in its business outlook. It pitches strongly to tourists from Europe and is home to more than 12,000 British retirees. Hundreds of Chinese have emigrated to Cyprus since the Government in 2012 passed a granting permanent resident status to foreign buyers of homes costing at least €300,000 ($461,000) - a move that makes it far easier to gain a visa to travel in the EU, and eventually to get a coveted EU passport.

Greek Cyprus has always opened its arms to Russia, with which it shares a cultural heritage in the Cyrillic script and Orthodox Christianity. In the Soviet era, Nicosia looked as much to Moscow as it did London. Cyprus was one of the few countries where Russians with a few roubles and many connections could come for sun and fun; in return the Soviets bought agricultural produce that Cyprus could not sell for hard currency.

Cyprus lured tens of billions of euros in deposits from Russians, creating for itself a bloated banking monster and a reputation for money laundering. As it fell into a spiral of debt, it found few friends in Brussels. The financial sector, the big motor of development until the crisis started to emerge in 2008, is now on the skids and unemployment beckons for thousands.

What does the future hold for this battered mosaic of an island? Alexis Kyprianou, a Greek Cypriot businessman who owns an apartment in the divided capital Nicosia, is confident. He says his countrymen are resourceful, with the ability to retrench and wait for the next opportunity.

"We are geographically sitting between the east and the west, which means we tend to be a spillover area. We've already had a few miracles to the economy through the Lebanese - every time they have a civil war or the Israelis invade, the Lebanese still bring their money here. The reason why the Russians have been here is because the Russian economy collapsed in 1990s."

He adds: "There are things that money can't take away. One is sunshine, one is hospitality, another is good cuisine. So I think Cyprus is probably going to be going back to grassroots because everybody wants some of that and it is something that is not going to go away."