Deadlock over Cyprus gives Europe new barbed wire frontier

The sentry point at the end of the main shopping street looks out over coils of barbed wire, warning signs and a row of derelict shops now overgrown with weeds. It may appear to be a scene from the Korean peninsula but this is Nicosia, the EU's new frontier.

On Wednesday the President of Cyprus will sign a treaty sealing his country's membership of the EU from 1 May 2004. Unlike most of the other nine newcomers, Cyprus will not be expecting subsidies from Brussels but it will bring a sizeable headache: the first disputed border within the EU since the Berlin Wall.

In 1974 Turkish troops partitioned Cyprus after an attempted Greek coup. Since then a buffer zone 100 feet wide – policed by the United Nations – has divided the Greek-controlled Republic of Cyprus from the north, controlled by Turkey and not internationally recognised.

Despite moves to reunify the island before the Greek part joins the EU, the two leaderships currently seem as far away from an agreement as ever. This week Kofi Annan, the UN secretary general, blamed Rauf Denktash, the Turkish Cypriot leader, for the breakdown. In a 35-page document he argued that Mr Denktash, "by and large declined to engage in negotiation on the basis of give and take".

While the Greek Cypriot government had some reservations on the UN plan for a reunified federal state, Mr Annan said that "in the case of the failure of this latest effort, I believe that Mr Denktash, the Turkish Cypriot leader, bears prime responsibility". In his spacious office the Greek Cypriot government's chain-smoking chief spokesman, Kypros Chrysostomides, says that Mr Denktash is "not prepared to discuss any reasonable plan," and is a "captive of his own chauvinism". Mr Chrysostomides wrote in 1989 that dealing with Mr Denktash was impossible and nothing since has led him to change his mind.

Cross the Green Line – down an empty road past UN barracks, more derelict buildings and the sign declaring "Turkish Republic of Northern Cyprus Forever" – and the views are equally entrenched. Aytug Pulumer, junior foreign minister, sits in another spacious office but one decorated with a portrait of a smiling Mr Denktash.

The Annan plan envisages the uprooting of 55,000, he says, before making a direct attack on the Greek Cypriot President, Tassos Papadopoulos, accusing him of supporting "ethnic cleansing against Turkish Cypriots in the 1960s". He adds: "There are many stories, even on the Greek Cypriot side, explaining his character and hatred for Turkish Cypriot people."

Yet this hardline position is under challenge as never before. Ten minutes' walk away is the Turkish Cypriot Chamber of Commerce, once a pillar of Denktash support and now a centre of opposition. Its staff describe it as "the alternative foreign ministry" and say they have received visits from four ambassadors in the past week.

When the Annan plan was published, about 70,000 Turkish Cypriots took to the streets in support. Hasip Erel, a member of the chamber's board of assembly and brother of its president, says that northern Cyprus, because of its status as a political pariah, has become an economic disaster.

With no direct flights to Europe, heavy tariffs for exports to the EU and no significant trade with the south, the territory has become ever more dependent on Turkish aid. Such is the economic stagnation that 7,000 Turkish Cypriots, who have special permits, commute for up to four hours a day to work on the Greek side of the Green Line. Many more emigrate: an estimated 100,000 Turkish Cypriots live on the island but 150,000 more are thought to be in Britain.

Mr Erel describes how the leadership creamed off the best Greek Cypriot properties and distributed them to cronies. "Our political system accepted corruption which was created because of a lack of democracy," he says.

Prospects for a breakthrough remain slim. Mr Denktash is still the most sizeable obstacle, despite his age and health problems (he likes to remind journalists that, although he is 80, his grandmother lived to the age of 104).

Elections in December could propel the opposition into government, setting up a power struggle with Mr Denktash, whose presidential term runs until 2005.

Meanwhile, in December next year the EU will decide whether to start negotiations on membership with Turkey. Many believe that Ankara will try to use Cyprus as a bargaining chip.

Even if Mr Denktash and his Turkish backers can be persuaded to back a deal it would still need to be sold to the other side. Underlying the Cypriots' dilemma is the question of land. The Annan plan proposes that some Turks who have settled in northern Cyprus since 1974 will stay, and not all property will be returned to its original owners, although there will be compensation.

Almost every Cypriot either owns land seized by the other side or knows someone who does. It has changed hands, or been taken as compensation for plots on the other side of the divide. Even supporters of the UN plan, such as George Zodiates, director of the Greek Cypriot government's EU division, acknowledge that initial, emotional reactions have to be overcome. "I cannot imagine travelling to my family home in [Turkish-controlled territory] Famagusta and seeing someone else there. But then you realise that, at the end of the day, I would not really want to move back to Famagusta and it would be better to take the compensation." But for many on both sides of the Green Line, these issues are almost too complicated to consider. As one diplomat put it: "If and when it happens, a settlement is going to be the most unsettling thing that has taken place in 37 years. In some ways the buffer zone is a comfort zone. Take take that away and all manner of things change."