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Economic affairs in Cyprus are dominated by the division of the country into the southern (Greek) area controlled by the Cyprus Government and the northern Turkish Cypriot-administered area. The Greek Cypriot economy is prosperous but highly susceptible to external shocks. Erratic growth rates in the 1990s reflect the economy's vulnerability to swings in tourist arrivals, caused by political instability on the island and fluctuations in economic conditions in Western Europe. Economic policy in the south is focused on meeting the criteria for admission to the European Union. As in the Turkish sector, water shortage is a growing problem, and several desalination plants are planned. The Turkish Cypriot economy has about one-fifth the population and one-third the per capita GDP of the south. Because it is recognized only by Turkey, it has had much difficulty arranging foreign financing, and foreign firms have hesitated to invest there. The economy remains heavily dependent on agriculture and government service, which together employ about half of the work force. Moreover, the small, vulnerable economy has suffered because the Turkish lira is legal tender. To compensate for the economy's weakness, Turkey provides direct and indirect aid to tourism, education, industry, etc.

Cyprus changed hands numerous times prior to the Medieval era, and was an important outpost of Christianity and European civilization during the Crusades. The tumultuous history introduced a variety of styles, including music from Armenia, France, Greece and Arabs. The island's peak as a cultural capital of Europe occurred from 1359 to 1432.

Cyprus gained independence from the United Kingdom in 1960, with the UK, Greece and Turkey retaining limited rights to intervene in internal affairs.

Cyprus is geographically in Western Asia. Historically, Cyprus has always been a bridgehead between Europe and Asia, with interchanging periods of Levantine, Anatolian, and Greek influences.

Cyprus is mentioned by biblical historian Flavius Josephus as being settled by Kittim, son of Javan, grandson of Japheth. "Cethimus possessed the island Cethima: it is now called Cyprus; and from that it is that all islands, and the greatest part of the sea-coasts, are named Cethim by the Hebrews: and one city there is in Cyprus that has been able to preserve its denomination; it has been called Citius by those who use the language of the Greeks, and has not, by the use of that dialect, escaped the name of Cethim."

Turkish Cypriots, together with Turkey, do not accept the Republic's rule over the whole island and call it the "Greek Authority of Southern Cyprus". They control the northern third of the island, following a military invasion by Turkey in 1974. This happened following a coup sponsored by the military regime of Greece, see: the 1974 crisis between Greece and Turkey.

Government computerization and telecommunications development, two of the priorities of the government's 5-year development plan (1994-1998), provide excellent opportunities for U.S. exports. Sales of computer-assisted design systems, new capital equipment for textile, clothing, footwear production, medical equipment, environmental equipment, and services are also expected to grow. U.S. pressure resulted in the adoption of a new copyright law in 1994 and a new patent law in 1998.