Cyprus: The Next Stop of China’s Belt and Road Initiative

In November 2021, China and Cyprus formally announced their strategic partnership on the 50th anniversary of their diplomatic ties, which is of milestone significance to bilateral relations. The two heads of state decided to upgrade the China-Cyprus relationship to a strategic partnership during a phone conversation. During the call, Chinese leader Xi Jinping said that “the two countries firmly support each other’s core interests and major concerns,” and “have achieved fruitful cooperation in such fields as energy and telecommunications.” In addition, China and Cyprus “are partners in the joint construction of the Belt and Road.”

The Eastern Mediterranean has emerged as a crucial component of the China’s Maritime Silk Road Initiative (MSRI), half of the larger BRI framework. Chinese investments in port facilities and key large-scale infrastructure projects in the Eastern Mediterranean aim to open new trade links between China and the Eurasia-Africa regions. The MSRI is a grand scheme of a sea route running from ports on China’s east coast to the South China Sea and Southeast Asia, then through the Indian Ocean and Middle East area into the Eastern Mediterranean. Chinese investments in key ports and large-scale infrastructure projects in the Eastern Mediterranean region are proportional to the importance of the European market, China’s largest trading partner.

China carries out its relations with the world by using the strategy of partnership diplomacy rather than alliance politics (these relationships are not alliances, as, historically, Beijing shies away from concluding alliances). Within the BRI framework, China has signed a number of strategic partnership agreements – with the primary and resource-rich, middle-income countries in the Middle East, for example – detailing significant economic investment and trade. Nevertheless, it is essential to note that China’s partnership diplomacy hinges on bilateral relations and bilateral partnerships with existing U.S. allies to increase regional competition over influence and resources while simultaneously avoiding confrontation with Washington.

China’s relations with Cyprus are closely related to its MSRI strategy in the Eastern Mediterranean. The island potentially constitutes a stop on the Chinese Maritime Silk Road, connecting the Indian Ocean and the Mediterranean Sea through the Gulf of Suez and energy projects. Although the BRI framework does not immediately bring the two countries closer, it allows them to discuss China’s new role in the Mediterranean region and maximize the bilateral relationships without challenging Cyprus’s pro-West orientation. As a new maritime trade node, Cyprus allows China to increase its footprint and strengthen its dominance in the Mediterranean region.

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China’s investment in the island aligns with the BRI framework, which emphasizes facilities and connectivity). Cyprus marks the passage from the Maritime Silk Road to the land-based one directed toward Europe. As Chinese Ambassador to Cyprus Huang Xingyuan said in May 2017: “The initiative is about connecting China with Europe, and Cyprus is at a strategic point between Asia, Europe, and Africa. So, it can play a key role in promoting this Initiative as it has a developed shipping sector and a vibrant services sector. This is just an example of how the Belt and Road Initiative could benefit the countries involved.”

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As Huang hinted, Cyprus is one of the most important legs of China’s MSRI strategy in the Eastern Mediterranean because of its central location that connects Asia, Europe, and Africa. The island and the Middle Eastern countries have been actively building BRI routes. Although Cyprus is tiny in size and population, it is a crucial crossroads that links the three continents and is vital in realizing the initiative. The importance of Cyprus’ strategic geographic position as a principal transit island – thanks to its location at the crossroads of Europe, Asia, and Africa – is bolstered by its EU membership, its social development advantages, economic benefits, and its traditionally good political relations with China. All these factors confer upon Cyprus an essential role in successfully promoting the aims and values of China’s MSRI strategy.

More importantly, the island can become one of the most important legs of China’s MSRI strategy in the Eastern Mediterranean. Cyprus is the first European port that vessels meet when they exit the Suez Canal and enter European waters, utilizing the proximity of the Middle East. Besides, the island is also a credible international business and services center. The island’s strategic geographic position is ideal for constructing industrial areas and distribution centers to other regions, including Eastern Europe, Southeast Europe, the Middle East, and North Africa.

In addition to its geographical advantages, Cyprus is better placed than many other countries, possessing a diverse geographical spectrum for business, a highly skilled workforce, a cost-effective business operating environment, and one of the most competitive tax frameworks available. As a result, the island is especially attractive to China for investing in industrial areas and logistic centers close to ports to facilitate the delivery of goods from China to its growing markets in the Middle East, North Africa, and Europe. Located in the northeastern corner of the Mediterranean Basin, at the intersection of major international and regional shipping lanes, Cyprus’s ports are a natural stopover for vessels sailing in and out of the Mediterranean region. Thus, despite the relatively small size of the country’s external trade, some 100 different lines service Cyprus regularly, providing comprehensive, regular, and frequent connections between the island and the rest of the world.

Cyprus is the EU’s largest, most prominent management center and among the top three in the world. Today, the global shipping companies present in Cyprus are some of the largest of their kind globally and manage around 20 percent of the world’s third-party managed fleet. The number of companies increased from 168 in 2017 to 220 in 2019, with the number of ship management operators rising to 50, placing Cyprus at the top of this category in the EU. The island also has the third-largest merchant fleet in Europe and the 11th largest globally. In 2020, Cyprus’ merchant fleet had more than 1,857 ships with 21 million in gross tonnage.

The BRI framework brings China and Cyprus closer, allowing the two countries to discuss China’s new role in the Mediterranean region and maximize the bilateral relationship without challenging Cyprus’s pro-West orientation. Cyprus’ vision aligns with China’s MSRI strategy to deepen cooperation in ports, sea transportation, and infrastructure construction to drive the local economy further. China is valuable to Cyprus for economic reasons and as a permanent member of the U.N. Security Council.

Located in a hub position between Europe, Asia, and Africa, the island is set to play a critical role in China’s expanding footprint in the Eastern Mediterranean, given its advantageous maritime location, developed shipping sector, gas reserves, and substantial experience in providing financial services. China can utilize Cyprus’ ports’ geographical advantages to facilitate and increase transfer flows from China and the Far East to the European Union, the Balkans, and the Black Sea region, and vice versa. The Cypriot option could further boost the throughput capacity of China’s quick sea-land link with Europe.