Role as a financial hub
In the years following the dissolution of the Soviet Union it gained great popularity as a portal for investment from the West intoRussia and Eastern Europe.
More recently, although Russia and Eastern Europe remain the most important investment destinations, there have been increasing investment flows from the West through Cyprus into Asia (particularly China and India), South America and the Middle East. In addition, businesses from outside the EU use Cyprus as their entry-point for investment into Europe. The business services sector was the fastest growing sector of the economy, and had overtaken all other sectors in importance before the financial crisis imposed haircuts on large bank depositors. CIPA has been fundamental towards this trend.
Role as an energy hub
The eastern Mediterranean is home to vast reserves of natural gas. Noble Energy has already got promising results from the Leviathan gas field, off the coast of Israel (and edging into an area claimed by Lebanon), and is now drilling in the waters just south of Cyprus. Hence plenty of optimistic talk at the conference of co-operation between Cyprus and Israel to construct LNG terminals or a pipeline to transmit gas to energy-hungry Europe in competition with the network of pipelines, actual or proposed, from Russia and central Asia]
Noble Energy apparently reckons a pipeline could be in operation as soon as 2014 or 2015. Surveys suggest more than 100 trillion cubic feet (2.831 trillion cubic metres) of reserves lie untapped in the eastern Mediterranean basin between Cyprus and Israel - almost equal to the world's total annual consumption of natural gas.
Role as a Shipping hub
Cyprus constitutes one of the largest Ship management centers in the world; around 50 shipmanagement companies and marine-related foreign enterprises are conducting their international activities in the country while the majority of the largest ship management companies in the world have established fully fledged offices on the island. Its geographical position at the crossroads of three continents and its proximity to the Suez canal has promoted merchant shipping as an important industry for the island nation. As of 2005 Cyprus holds the 9th largest (by DWT)merchant navy in the world and the 3rd largest in the European Union.
In 2008 fiscal aggregate value of goods and services exported by Cyprus was in region of $1.53 billion. It primarily exported goods and services such as citrus fruits, cement, potatoes, clothing and pharmaceuticals. At that same period total financial value of goods and services imported by Cyprus was about $8.689 billion. Prominent goods and services imported by Cyprus in 2008 were consumer goods, machinery, petroleum and other lubricants, transport equipment and intermediate goods.
Cyprus export and import partners
Traditionally Greece has been major export and import partner of Cyprus. In 2007 fiscal it amounted for 21.1 percent of total exports of Cyprus. At that same period it was responsible for 17.7 percent of goods and services imported by Cyprus. Some other important names in this regard are UK and Italy.
In 2012, Cyprus became affected by the Eurozone financial and banking crisis. In June 2012, the Cypriot government announced it would need €1.8 billion of foreign aid to support the Cyprus Popular Bank, and this was followed by Fitch down-grading Cyprus's credit rating to junk status.Fitch said Cyprus would need an additional €4 billion to support its banks and the downgrade was mainly due to the exposure of Bank of Cyprus,Cyprus Popular Bank and Hellenic Bank (Cyprus's 3 largest banks) to the Greek financial crisis.
In June 2012 the Cypriot finance minister Vassos Shiarly stated that the European Central Bank, European commission and IMF officials are to carry out an in-depth investigation into Cyprus' economy and banking sector to assess the level of funding it requires. The Ministry of Finance rejected the possibility that Cyprus would be forced to undergo the sweeping austerity measures that have caused turbulence in Greece, but admitted that there would be "some negative repercussion".
In November, 2012 international lenders negotiating a bailout with the Cypriot government have agreed on a key capital ratio for banks and a system for the sector's supervision. Both commercial banks and cooperatives will be overseen by the Central Bank and the Ministry of Finance. They also set a core Tier 1 ratio - a measure of financial strength - of 9% by the end of 2013 for banks, which could then rise to 10% in 2014.