FACTBOX: Key issues in Cyprus dispute

NICOSIA (Reuters) - Britain has offered to cede almost half of its military territory on Cyprus to help achieve a peace deal between estranged Greek and Turkish Cypriots.

The offer would be conditional on a settlement between the two sides, split since a Turkish invasion in 1974 triggered by a brief Greek inspired coup. They started peace talks in September 2008.

Here are some top issues relating to the conflict:

WHAT TRIGGERED THE DISPUTE?

- Former British colony until 1960, Cyprus's Greek and Turkish Cypriots participated in power sharing until 1963, when a tax disagreement spilled over into an all-out dispute over the functioning of government. Turkish Cypriots withdrew from the administration, leaving Greek Cypriots running the internationally recognized Republic of Cyprus.

- Violence erupted in December 1963, prompting dispatch of U.N. peacekeeping force on island six months later. Turkish Cypriots withdrew into enclaves, effectively partitioning the capital Nicosia.

- Turkey, citing its rights as guarantor power, invaded Cyprus in July 1974 after Greek-inspired nationalists staged brief coup which toppled legitimate government. Greece and Britain are also guarantor powers of Cypriot independence, with the latter holding on to 3 percent of Cypriot territory known as sovereign base areas, used partly for military purposes.

WHY SOLVE IT?

- Cyprus has been a member of the EU since 2004, but it is effectively represented by Greek Cypriots who have veto powers over Turkey joining the bloc in future. The vast Turkish market of 72 million people is a key ally of the United States perched on the edge of the volatile Middle East and Caucasus regions.

- With Cyprus being in the EU and Turkey being in NATO, defense relations between the two organizations have been problematic. Turkey has blocked military cooperation between NATO and the EU, saying NATO intelligence cannot be shared with non-NATO EU countries including Cyprus.

- Although it has been years since any violence between the two sides, 30,000 Turkish troops remain in the north and both sides have security concerns stemming from past conflict.

WHAT ARE THE KEY STUMBLING BLOCKS?

- Sovereignty: disputes focus on whether a peace deal should be an evolution of the present Republic of Cyprus, as advocated by Greek Cypriots, or a merging of two equal states advocated by Turkish Cypriots.

- Guarantor system: an emotional trigger for both sides. Greek Cypriots will not accept any system of third countries offering the island guarantees of its sovereignty, similar to that set up in 1960. Turkish Cypriots say they need Turkish guarantees because of past experience with Greek Cypriots.

- Governance: how much say will go to each community in the context of a federal system, and what deadlock-easing mechanisms can be adopted for the smooth functioning of the state.

- Settlement and Property Disputes: legal quagmire where thousands of individuals have claims on property seized decades ago.