NICOSIA, CYPRUS, FEB. 22 (MONDAY) -- George Vassiliou, a millionaire independent who had the support of the Communist Party, was elected president yesterday in this troubled island nation on the eastern flank of the North Atlantic Treaty Organization.

Conservative ex-majority leader Glafkos Clerides conceded last night, and early today the electoral office declared Vassiliou victor with 51.6 percent of the 342,000 votes cast to 48.4 percent for Clerides in the runoff vote.

Both candidates had campaigned for reopening of unity talks with the island's breakaway Turkish minority. The division of this strategic eastern corner of the Mediterranean pits NATO members Greece and Turkey against each other.

"I would not like to divide people between victors and losers," Vassiliou said. "We are all winners. It is democracy that has won."

Clerides said that "although the margin was small, there is no doubt that {Vassiliou} has won the election. As democrats we must respect the verdict of the people."

Vassiliou and Clerides in campaigning diverged little on foreign affairs and economics. The real meaning of the election, analysts said, was that it represented the first real break with a political past forged by the late Archbishop Makarios, the leader of the Cypriot struggle for independence from the British in 1960 and its president until his death in 1977.

Vassiliou, the son of founders of the communist AKEL party, was educated in Hungary before studying business in London. He runs the Middle East Marketing Research Bureau and is considered an unabashed capitalist. He will replace Makarios' protege, Spyros Kyprianou, for a five-year term that begins March 5.

Western diplomats expressed no concern that Vassiliou had communist backing and pointed out that the party also had supported Makarios and Kyprianou, until he kicked them out of his coalition in 1985.

It was clear that Greek Cypriots were voting for dialogue with their Turkish minority, which since 1983 has sought to run an independent state in the northern third of the island, which Turkish troops have occupied since 1974.

The new orientation of Greek Cyprus was determined a week ago when the country's 11-year incumbent, Kyprianou, came in third in the first round of voting.

Kyprianou's rule has been characterized by intransigence on talks with the Turkish Republic of North Cyprus, which is recognized only by Turkey. In the last five years he turned down at least four peace initiatives launched by U.N. Secretary General Javier Perez de Cuellar.

The president's showing of 27.2 percent in a Feb. 13 vote was described by analysts as a sign that the voters wanted talks with the Turks -- who make up 18 percent of the island's 700,000 population but control 37 percent of the territory.

The Turkish Army invaded to protect its ethnic minority after Makarios was briefly overthrown in a coup backed by the military then ruling Greece. The coup leaders in Cyprus had sought to implement enosis, the policy of merging the binational independent nation with Greece. Turkey considered that an act of war.

The issue of the island's division dominated the presidential campaign. Kyprianou defended his insistence that there be no negotiations until Turkey agreed to withdraw 65,000 settlers sent there from mainland Turkey and the estimated 30,000 troops.

"I think that there is still room for negotiations but in a few years there won't be," Clerides said yesterday, "because a de facto situation that persists for many years is difficult to undo." It was a position that Vassiliou echoed.

The fact that Greek Prime Minister Andreas Papandreou and Turkish Prime Minister Turgut Ozal held a historic meeting last month to try to end their animosity was seen here as a hopeful sign for peace.