Turkish President Tayyip Erdogan said on Tuesday peace talks on the future of ethnically divided Cyprus can take place only between "the two states" on the Mediterranean island, in comments sure to further annoy Greek Cypriots and the EU.

Turkish Cypriot officials also announced plans for the potential resettlement of a small part of the now abandoned Greek Cypriot suburb of Varosha on the island's east coast.

That move too is likely to infuriate Greek Cypriots as essentially staking ownership over an area the United Nations says should be placed under the control of peacekeepers.

"A new negotiation process (to heal Cyprus' division) can only be carried out between the two states. We are right and we will defend our right to the end," Erdogan said in a speech in the divided Cypriot capital of Nicosia.

He was marking the anniversary of a Turkish invasion on July 20, 1974, days after a Greek Cypriot coup engineered by the military then ruling Greece. The island has remained split ever since into a Greek Cypriot south and a Turkish Cypriot north.

Greek Cypriots, who represent Cyprus internationally and are backed by the European Union, reject a two-state deal for the island which would accord sovereign status to the breakaway Turkish Cypriot state that only Ankara recognises.

Decked out in red-and-white Turkish and Turkish Cypriot flags, the celebratory mood in north Nicosia on Tuesday stood in stark contrast with a sombre mood in the south, where Greek Cypriots were woken by air raid sirens marking the day Turkish forces landed 47 years ago.

VAROSHA

Although the United Nations has grappled inconclusively with Cyprus for decades, the dispute has come into sharper focus due to competing claims over offshore energy reserves and the recent re-opening by Turkish Cypriots of part of Varosha to visitors.

Varosha has been a Turkish military zone since 1974, widely viewed as a bargaining chip for Ankara in any future peace deal.

On Tuesday, Turkish Cypriot leader Ersin Tatar said his administration would scrap the military status of about 3.5% of Varosha and allow beneficiaries to apply to a commission mandated to offer compensation or restitution of properties.

A spokesman for Cyprus's internationally-recognised government said authorities would be briefing the EU and the United Nations Security Council on the matter.

The sealed-off area includes 100 hotels, 5,000 homes and businesses previously owned mostly by Greek Cypriots.

Turkish Cypriot authorities opened up part of it to the public in Nov. 2020.