Cyprus continued to dominate Greek foreign policy in the mid1970s . From the Greek standpoint, the unresolved status of the island was chiefly the doing of the United States, and a substantial anti-Western backlash changed Greek foreign policy during that period.

After the invasion of 1974, Turkish troops have remained on the island. Although a cease-fire was negotiated in Geneva in August, talks broke off almost immediately, and the Turkish army began to expand its zone of occupation to a line that included 37 percent of Cypriot territory. Karamanlis, however, was intent on avoiding armed conflict, for which Greece was unprepared, and talks resumed shortly thereafter. In 1975 a Turkish Federated State of Cyprus was declared in the northern part of the island, and negotiations continued intermittently for another two years. A 1977 agreement divided the island provisionally, but no lasting, workable solution was achieved. In 1994 the fate of Cyprus remained a pressing issue that continued to impair relations between Greece and Turkey.

The Greek public reacted to the Turkish presence on Cyprus with resentment toward NATO and the United States. In the view of many Greeks, the benefits of membership in a West European security organization were meaningless if the alliance could not stop one NATO ally from invading another. In protest Karamanlis withdrew Greece from military commitments to NATO, a status that it maintained until 1980. Greece held the United States and its foreign policy establishment particularly responsible for the Cyprus invasions because of its failure to prevent Turkish action or to compel Turkey's withdrawal after the fact. In 1975 the United States Central Intelligence Agency was still widely held responsible for aiding the junta's accession and supporting its regime. This hostility was partly a backlash against the dependent relationship of postwar Greece to the United States, partly the result of resentment for United States support of the junta.

In blaming the United States for events in Cyprus, Greeks also overestimated the United States' leverage over Turkey. Tension increased in 1976 when the United States, having repealed partially its arms embargo, exchanged US$1 billion in military equipment for military installations in Turkey. Greek protests resulted in a similar agreement with Greece, worth US$700 million, and the establishment of a seven-to-ten ratio that became the standard formula for United States aid apportionment between the two countries.

In the late 1970s, two new issues exacerbated animosities between Greece and Turkey. The first involved the control of the northern Aegean. Each side claimed (and still claims) large areas of the regions on the basis of offshore territorial rights. Because the boundaries between mainland Turkey and the Greek islands in the Aegean are so close, the six-mile offshore limits often overlap. Control of the continental shelf became much more critical with the discovery of oil in the region. On three occasions since the late 1970s, Greece and Turkey have nearly gone on to war over this issue. Other sources of irritation were the question of air control over the Aegean, and Greece's attempts to extend its six-mile limit to the twelve-mile limit used elsewhere, and the two countries' treatment of their respective Greek and Turkish minorities. The end of the Cold War greatly diminished the incentive for cooperation against communist neighbors, emboldening both countries to take more independent stands over regional issues.