web analytics
March 5, 2015 / 14 Adar , 5775
At a Glance
InDepth
Sponsored Post


Home » InDepth » Op-Eds »

Does Russia Have its Eye on Strategic Cyprus?

Russia's strategic geopolitical interests provide an important incentive for Russia to gain a foothold in Cyprus.
Cyprus

Cyprus

Cyprus’s banks are on the brink of collapse. As a result of a crisis that began in Greece, and as one of the 17 European countries that use the euro as their currency, Cyprus, is a victim of the euro’s domino effect, and is being dragged down by the eurocrisis, along with the entire southern rim of the eurozone.

Since last spring, Cyprus, a small country with barely one million inhabitants, has been negotiating with the other members of the eurozone about a financial bailout. When Greece was given 85 percent relief on its debts, the Cypriot banks suffered heavy losses on top of the huge losses already incurred as a result of a domestic real estate bubble. To stay afloat, Cyprus’s banks currently need some €17 bn ($23 bn) — an immense sum for a country with a 2011 GDP of only €19 bn ($25 bn) and a contracting economy.

Cyprus’s fortune, however, is its location. It is the easternmost island in the Mediterranean and of considerable strategic importance. Cyprus is like a huge aircraft carrier situated in front of Turkey, Syria, Lebanon, Israel and Egypt. In addition, huge offshore fields of gas and perhaps oil have recently been discovered in Cypriot territorial waters.

Cyprus is also the place where the Arab Spring meets the Eurocrisis. The Syrian port of Tartus hosts Russia’s only naval base in the Mediterranean. The impending fall of the Assad regime in Syria is forcing Russian President Vladimir Putin to look for an alternative to Tartus — leaving him with only one option: Cyprus.

Politically and economically, Russia and Cyprus are already closely tied. Cyprus’s President, Demetris Christofias, is the leader of the Cypriot Communist Party. He met his wife during his studies at the Russian Academy of Sciences in Moscow in the 1960s. When Russia became “capitalist,” the ties between the two countries became even closer. Thousands of wealthy Russians have put their “black money” in Cypriot banks. Although Cyprus joined the eurozone in 2008, its banks have almost no clients from other EU countries. With the exception of Greece, with which the Greek-speaking Cypriots share close cultural and historic ties, Cypriot banks cater almost exclusively to Russian oligarchs; as a consequence, tiny Cyprus is Russia’s largest foreign investor.

In November 2011, Cyprus was bailed out by a €2.5 bn loan from Russia. The eurocrisis has since deepened and more money is now urgently needed. Last June, Cyprus turned to the European Union, the eurozone’s European Central Bank (ECB) and the IMF, asking for emergency aid of at least €10 bn. In return, however, the E.U., ECB and IMF – the so-called Troika – have asked Cyprus to reform its economy. Negotiations over these “structural reforms,” such as privatization of state-owned enterprises and reduction of wages, have dragged on for almost eight months.

No agreement could be reached between the ruling Cypriot Communists, who refused to implement the reforms demanded by the Troika, and Germany, the euro’s major paymaster. Next fall, general elections will be held in Germany. With an electorate that is tired of bailing out banks and governments in Greece, Ireland, Portugal and Spain in order to save the euro – a currency which many Germans feel was forced upon them – making Chancellor Angela Merkel reluctant to come to Cyprus’s aid.

Last November, a leaked intelligence report of the Bundesnachrichtendienst (BND), the German equivalent of the CIA, made matters even more difficult for Merkel. The report asserted that a bailout of Cyprus would boil down to using German taxpayers’ money to save the funds of rich Russians, who deposited up to €26 bn in “black money” in Cypriot banks, which are now on the brink of bankruptcy. The BND accuses Cyprus of creating a fertile ground for Russian money laundering, a charge further exacerbated by the ease with which Russian oligarchs can obtain Cypriot nationality and thus gain automatic access to all the E.U. member states. The BND said 80 oligarchs have managed to gain access this way to the entire E.U.

As the financial blog Testosterone Pit explained: “Taxpayers in other countries, including those in the U.S. – via the U.S. contribution to the IMF – will be asked to [bail out] tiny Cyprus.” However, given that Chancellor Merkel has already decided that the euro must be saved at all costs, she has no other option but to bail out Cyprus, including the investments of Russian oligarchs.

The Cypriot bailout was supposed to have agreed upon on in principle at a meeting in Brussels last week and formally approved on February 10. But at the meeting in Brussels the potential bailout was pushed off. Meanwhile, Cypriot Finance Minister Vassos Shiarly has indicated that Russia might be asked to join the efforts to save Cyprus if the E.U. approves the bailout. “First there must be an E.U. agreement, then we might ask them [Russia] to join,” Shiarly said.

Some think that it is in Putin’s interest to do so, to avoid investigations into the role of Cypriot banks in Russian money laundering. However, Russia’s strategic geopolitical interests are a much more important reason for Russia to gain a foothold in Cyprus.

The same applies to Israel. The Jewish state and Cyprus are also currently strengthening their ties. Israel is seeking to work with Cyprus on national gas exploration and extraction. The Cypriot-Israeli rapprochement has already angered Turkey, which is bullying both Nicosia and Jerusalem.

Israel is also collaborating with Cyprus in the EurAsia Interconnector project. This is a undersea cable which will link Israel with Cyprus. The 286-kilometer link will be the world’s longest undersea power cable in the world.

If Europe fails to bail Cyprus out, there are at least two countries, Russia and Israel, for whom it makes political, economic and strategic sense to step in. Indeed, while a monetary union between different nations makes little sense, a monetary union between the Cypriot currency and the Israeli shekel would make more sense than the current conflictious monetary marriage between the Cypriots and the Europeans.

Originally published at the Gatestone Institute, under the title “Cyprus: Russia’s Next Lunch?”

About the Author: Peter Martino is a European affairs columnist for the Gatestone Institute.


If you don't see your comment after publishing it, refresh the page.

Our comments section is intended for meaningful responses and debates in a civilized manner. We ask that you respect the fact that we are a religious Jewish website and avoid inappropriate language at all cost.

If you promote any foreign religions, gods or messiahs, lies about Israel, anti-Semitism, or advocate violence (except against terrorists), your permission to comment may be revoked.

No Responses to “Does Russia Have its Eye on Strategic Cyprus?”

Comments are closed.

Current Top Story
US Secretary of State John Kerry with German Foreign Minister Frank-Walter Steinmeier before P5+1 talks. (Nov. 22, 2014.)
Fears Over US Iran Deal Trigger Mideast Nuclear Race, Saudi-South Korea Deal
Latest Indepth Stories
Ron Prosor

Values at the very heart of the UN are threatened by extremist ideologies targeting our way of life

Ayatollah Ali Khamenei

Anti-Semitism today focuses on Israel and the quest to delegitimize it.

Ballots for elections "made in Samaria."

Any Jew who ties his fate to Israel should be able to vote in Israel’s elections-even before aliyah

A young Moshe Meir Weiss introduces his mother, Mrs. Agnes Weiss Goldman, to Rav Moshe in 1979.

There were no airs about him. Rav Moshe was affectionately known as the Gaon of Normalcy.

Israel’s full sovereignty over a united Jerusalem is the only path for true peace in the region.

Just like Moses and Aaron, Mordechai decides to ruin the party…

The president has made clear – I can’t state this more firmly – the policy is Iran will not get a nuclear weapon.

Obama has an apparent inability to understand Islam in particular and Mid-East culture in general

Pesach is a Torah-based holiday whose fundamental observances are rooted in Torah law; Purim is a rabbinic holiday whose laws and customs are grounded in the rabbinic tradition.

In honor of Prime Minister Netanyahu’s successful speech before Congress.

Mr. Spock conveys a message with painfully stark relevance to our world today, especially in the context of PM Netanyahu’s speech to Congress.

Obama created the “partisan politics” by asking Dem. party members to avoid Bibi and his address

Enough is enough. The Jewish community has a big tent, but the NIF should have no place in it.

I vote for the right and get left-wing policy. Every. Frigging. Time.

More Articles from Peter Martino
The Anne Frank Museum in Amsterdam, pictured above, is run by the Anne Frank Foundation, which wrote in a report, "Israel pushes Palestinians economically into a corner and humiliates them psychologically."

“It appears that the suffering of the Jews has not transformed their view on how others should be treated.” — David Ward, British MP.

angela and friend

Because of the “5% hurdle,” Germany’s new coalition will tilt be to the left, while voters clearly wanted Germany to turn to the right.

Belgian children aged 6 to 12 are being instilled with a deep hatred for.

Islamic immigrants are hoping that by turning out a large number of their voters at a time of German voter apathy, they will be able to promote the further Islamification of Germany.

Europeans are rebelling against the unelected E.U. and its grandiose, self-regarding project of abolishing the national sovereignty.

The valuable Cypriot gas fields are located halfway between the Cypriot and Israeli coast.

Indicative of the national mood, the French are the world’s largest consumers of anti-depressants.

What we are witnessing is the Obama administration actively interfering in European politics to advance European centralization.

Printed from: http://www.jewishpress.com/indepth/opinions/does-russia-have-its-eye-on-strategic-cyprus/2013/01/27/

Scan this QR code to visit this page online: