Stratfor Intelligence forecasts that though Greek and Turkish Cypriots are getting closer to an agreement on reunifying the island, lingering obstacles will likely delay any deal for at least a year.
It also said the ongoing reunification negotiations will make Cyprus less likely to use its veto power to impede progress in Turkey’s accession talks with the European Union, and that a reunification deal would enable Cyprus to proceed with plans for exploiting offshore natural gas reserves and would make it easier for it to export natural gas to Egypt and Europe.
Stratfor is a geopolitical intelligence firm that provides strategic analysis and forecasting to individuals and organizations around the world by placing global events in a geopolitical framework.
The agency said that even if a Cyprus agreement were reached, Cypriots would have to approve it in a referendum, adding that the main challenge for the current negotiators was to reach an agreement acceptable to the sides, and the two populations.
“At this point, the suggested May  date for a referendum is not realistic,” Stratfor said. Northern and southern Cypriots will continue to negotiate, but reunification is unlikely in 2016.”
Before an agreement is reached, it said, there will likely be compromises over reparations for displaced Cypriots and over the presence of foreign armies on the island. The two sides will also have to agree on what the new federation would look like and how the two communities would be represented. After that, a referendum would have to take place, and a constitution written.
“So while the stars may be close to aligning for Cyprus’ reunification, the island’s status is unlikely to change in the near term,” it said.
According to Stratfor, during the early stages of reunification, the island would be under external supervision from entities like the European Union and the United Nations.
It said the two sides are also interested in the economic benefits of reunification and that a recent study by the Cyprus Centre of the Peace Research Institute Oslo stated that reunification would increase Cyprus’ per capita income by about 1,700 euros in the first five years alone.
“Reunification would also benefit the island’s tourism sector and create new jobs, allowing it to put economic crisis behind it,” the report said.
The desire to exploit energy reserves was another factor behind the push for reunification, Stratfor said.
“Cyprus has significant natural gas resources, but political frictions have hampered their development. Resolving the Cypriot standoff would make exports to North Africa easier, and also open the door for Cypriot natural gas to reach Europe. While building a pipeline to Europe would be technically and financially difficult, the main challenge has been political, since the pipeline would have to cross the Turkish-controlled part of the island.”
Foreign actors were also pressing for an agreement, it added, citing the recent visits by top officials from the US, Germany, Russia, France and the UK.
“Despite domestic and foreign interest in the reunification of Cyprus, significant problems remain. The most complicated issue is how to compensate people on both sides of the island forced to leave their homes after the Turkish invasion,” said the Stratfor report.
Greek Cypriot and Turkish Cypriot negotiators have agreed to create an independent commission to study solutions, but its task will be very complex. Returning land and other property lost four decades ago seems impossible, so the most likely solution would involve monetary compensation. But in addition to settling on a value for lost properties, the two sides would have to fund the restitution.”
It said the status of foreign military troops in Cyprus was similarly problematic as was the situation of Turkish settlers in the north of the island. “These families tend to be more conservative than their Turkish Cypriot neighbours and generally more supportive of a two-state solution than of a federation. The status of these settlers post-reunification is among the many legal issues the negotiators will have to determine.”
Stratfor said the political situation in Greece and Turkey would also affect negotiations. It said The November elections in Turkey removed an important stumbling block to Cypriot reunification: The victory of Erdogan’s Justice and Development Party allowed it to form a government without the Nationalist Movement Party, which opposes reunification.
“Turkey recognises its significant leverage over the European Union thanks to the migration crisis, but must still contend with the Cypriot government’s veto power over EU-Turkey accession talks,” the forecast said. “Thus, the more progress Ankara makes in the negotiations over Cyprus, the more progress it will make in the accession talks.” But it also warned that the immigration crisis I Greece could harden the position of the Independent Greeks, a nationalist party that is currently a junior member of the Greek government coalition. “A more nationalistic Greece could well oppose an agreement with Turkey over the reunification of Cyprus,” it added.