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July 27, 2016 / 21 Tammuz, 5776

Posts Tagged ‘Cyprus’

Cyprus: When the Law Prescribes Theft

Sunday, March 31st, 2013

Who will shoulder the pain from the Cyprus bailout deal?

The first-order sufferers will be small businessmen (mostly Russian) and upper-middle Cypriots and foreign residents with their money in Cypriot banks.  But the whole region will take a longer-term blow from the loss of Cyprus as a place for upstart businesses to park capital.  Capital that can’t be parked cheaply in the E.U. won’t be invested in the E.U. – at least not by the smaller, less financially “connected” entrepreneurs who drive economic dynamism and growth.

The big Russian firms that bank with the Russian Commercial Bank in Cyprus have protection in the deal, although they will have more trouble moving capital around under the “capital controls” to be implemented, which hwill keep depositors from draining their accounts.  Russia has been relatively quiet and mild on the terms of the Cyprus deal, largely because the biggest Russian depositors in Cyprus bank with the Russian Commercial Bank and won’t be hit with the 40% “amputation” tax on their accounts.  For the average traditionally-autocratic government, smaller entrepreneurs are always easier to accept as roadkill.  They may create jobs and revenue, but they aren’t in a position to line politicians’ pockets and they’re not easy to marshal as a means of geopolitical leverage – unlike, say, Gazprom.

It will hurt the E.U. for Russians to flee Cyprus; it will hurt equally for only the biggest, most state-connected Russians to remain in Cyprus.  All the Russians won’t necessarily flee,  but if nothing else changes, and the bank deal defines the future, the dynamism of the Russian economic presence in Cyprus will be bled off.  The economy of Cyprus will become more of an elephants’ dance than a coyote squabble, even with the gas eventually coming up from the ocean floor.  Cyprus will go further down the road taken by too much of the E.U., discouraging entrepreneurship and overserving itself on the future obligations.

Italy and Spain are obvious others to bring up, of course, and everyone is doing that.  Besides serious debt and bank-solvency problems, they have already gone further down the controlled-economy road than Cyprus has (which is the main reason for their debt and solvency problems).  Their big-name companies, the international giants, are incapable of growing the economy, because it doesn’t work that way.  The big firms aren’t the future.  Small entrepreneurship is always and everywhere the future, and in Italy and Spain, engaging in it openly is discouraged by regulation and the tax code.

There is a regional aspect to this, of course; a difference among points of the compass, inside both countries, and between city and hinterland.  Such differences are creating fault lines throughout the E.U.  Those gaps aren’t going to narrow any time soon.  Now is a good time for the E.U. to take stock and recognize that the entire Cyprus problem, like the Greece problem, was created by the actions of government.

Left to their own devices, people coming together for economic activity don’t do this to themselves.  Failure is liquidated; it is not enshrined in policy.  But governments do the opposite, propping up and enabling failure for as long as they can, because they insist for political reasons on the policies that make it inevitable.  Government’s perspective is always political, and therefore inimical to economic efficiency.  The more government is chartered to control, the richer a society has to be to afford it.  And unfortunately, there’s a kind of “peak government” rule to this: a society in which government controls too much cannot stay rich.

The U.S. is headed down this path too, but most of the E.U. is already further down it.  The E.U. and its individual nations created this problem through policy.  There’s a political relief-valve aspect to making “the Russians” pay for it (although the FT article linked to above points out that at-risk Russians expect to find ways to get their money away from the amputator’s saw).  But the Cyprus crisis illustrates nicely that the cost of over-regulatory government will lead to outright theft from the people.  Policy as cosmically comprehensive as that in the E.U. model will indebt everyone, until theft seems to be the only option left.

This isn’t a condition for stability.  Moscow hasn’t given up on Cyprus, which still sits enticingly athwart Turkey and Europe.  The Cyprus deal won’t last very long – not while Cyprus and the E.U. remain in the vise of the E.U.’s negative, defensive policies.  (If the Russians sneak enough of their money out, the Cyprus deal won’t last long enough to auction off the office supplies with the Laiki logo).

J. E. Dyer

Why Israel Should Recognize the Turkish Republic of Northern Cyprus

Sunday, February 24th, 2013

The Republic of Cyprus has decided to upgrade the Palestinian delegation to Cyprus in order to make it an “embassy.” The Republic of Cyprus did this despite the fact that they are opposed to other countries recognizing the Turkish Republic of Northern Cyprus, also known as Northern Cyprus, which comprises the north eastern portion of the Island and desires recognition as a state.

Article 1 of the Montevideo Convention states that for an entity to be a state under international law it must possess: a permanent population; a defined territory; a government; and the capacity to enter into relations with other states. Presently, Northern Cyprus meets all of these criteria. They have a permanent Turkish Cypriot population that makes up the majority of the population in Northern Cyprus, with an effective united government ruling over this territory and they furthermore have the ability to enter into relations with other states, if only the international community was receptive to them.

Contrast that with the Palestinians who are divided between Fatah in Judea and Samaria and Hamas in Gaza. Israel also controls 60 percent of Judea and Samaria, as well as Jerusalem, which Palestinians claim as their capital. The Palestinians thus neither have a defined territory or government. Furthermore, with a great part of the Palestinian’s “refugee” population living in exile and Jewish communities scattered throughout areas that the Palestinians claim for a state (with Jews making up the majority of the population in what is known as “Area C”), it is questionable whether the Palestinians possess a permanent population as well.

The Turkish Cypriot cause is also one that Israelis should sympathize with. The London and Zurich Agreements of 1959 proclaimed that the island of Cyprus was supposed to be a partnership between the Turkish and Greek Cypriot communities. The Greek Cypriots violated this agreement in an attempt to unite the island with Greece, in order to deny the Turkish Cypriots political equality (just as the Palestinians and the rest of the Arab world were against permitting Israel to exist under any borders). During 11 years of bloodshed, 103 Turkish Cypriot villages were destroyed. By the Turkish Intervention of 1974, the junta government of Cyprus had demonstrated genocidal ambitions against the Turkish Cypriots. As Nicos Sampson, then ruler of Cyprus, himself declared, “Had Turkey not intervened I not only would have declared Enosis (unification with Greece) but I would have annihilated the Turks in Cyprus.” That mirrors similar and continuing statements from Palestinians.

Since then, the Turkish Cypriots, like the Israelis, have been attempting to reach a peace agreement. Very much like the Israelis, the Turkish Cypriots have not had much luck in this regard. Under the most recent peace proposal, the U.N.-backed Annan Plan, 65 percent of the Turkish Cypriot population accepted while 76 percent of the Greek Cypriot population rejected the peace agreement. The Greek Cypriots have since remained intransigent in their positions – an intransigence Israel has similarly felt from the Arabs.

Regardless of the justice of the Turkish Cypriot’s cause, as of last November, 131 countries have recognized the fictitious “State of Palestine” – despite the fact the Palestinian’s seeking of such a status without Israeli agreement violates the Oslo Accords – and the Israeli government has yet to take punitive action against any of them. If Israel recognizes the Turkish Republic of Northern Cyprus, it would send a strong message to all states that have elements that seek to secede and form separate states, that they too will face the consequences.

The Cyprus issue is also considered a top priority in Turkish foreign policy. Recognizing the Turkish Republic of Northern Cyprus, has the potential to significantly lesson the hostility between Israel and Turkey, despite the fact that the Islamist AKP is in power, without Israel having to issue any apology for the Mavi Marmara affair or making any other concessions to the AKP leadership. This could be good for regional stability and would lesson Israel’s isolation within the Islamic world.

Such a move might also enable Israel to build relations with the Turkish Cypriot nation, which is significantly more secular than the AKP government in Turkey and thus is not inherently hostile towards Israel. Israel could enjoy a similar relationship with the Turkish Cypriots that Israel presently enjoys with Azerbaijan, offering Israel many business and tourism opportunities.

Rachel Avraham

Hizbullah Fingered in Cyprus Terror Plot against Israelis

Thursday, February 21st, 2013

The noose tightened on Hizbullah Wednesday after a Swedish-Lebanese citizen on trial in Cyprus admitted that the terrorist organization recruited him to stake out areas where Israelis gather.

Hossam Taleb Yaacoub traveled to Cyprus on business and with no ulterior motives, according to his lawyer, before Hizbullah hooked him into cooperating with it.

Cyprus police arrested Yaacoub two weeks before a suicide bomber killed five Israeli tourists and a bus driver in Bulgaria in July.

Bulgaria has accused Hizbullah of being behind the attack, and the revelation of the plot in Cyprus adds pressure on the European Union to join the United States and Britain and define Hizbullah as a terrorist organization.

Tzvi Ben-Gedalyahu

Does Russia Have its Eye on Strategic Cyprus?

Sunday, January 27th, 2013

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.

Peter Martino

Swede Held for Planning Attack on Israelis in Cyprus

Tuesday, July 24th, 2012

A Swedish citizen of Lebanese origin suspected of planning to attack Israeli targets in Cyprus was ordered held over by a court there.

The Cypriot court on Monday ordered the man, 24, detained after noting the similarities between his actions and those of the Bulgarian suicide bomber who killed five Israelis and a Bulgarian bus driver in an attack on an Israeli tour bus at the Burgas airport.

The man in Cyprus had been arrested earlier this month, accused of tracking the movements of Jewish tourists, Reuters reported. He reportedly is being held on suspicion of espionage and conspiring to commit a crime.

Cypriot Justice Minister Loucas Louca said in a news conference Monday that the investigation will continue through Friday. He said the suspect belongs to an organization not on the European Union list of known terrorist groups, but did not name the group.

He was arrested two days after arriving in Cyprus from London, and was found with a list of tourist spots frequented by Israelis, according to reports.

JTA

Russia’s Masterstroke: Bailing Out Cyprus

Monday, June 25th, 2012

What a fine mess the Europeans have made with their deluded dream of a common European currency for 17 countries with different languages, cultures, traditions and economic systems. As a result of the experiment with the euro, almost all countries along Europe’s southern rim are on the brink of bankruptcy. One of them is Cyprus. It, too, urgently needs a bailout. This week, the Cypriotic government needs €4bn to recapitalize the country’s second largest bank.

Cyprus, however, is in a comfortable position. The other beggars are forced to accept bailout from the European Union in exchange for diminished national sovereignty, EU imposed austerity measures, and direct supervision from Brussels over their budgets and economies. Cyprus, however, has an alternative. “We have other options,” the Cypriotic Finance Minister Vassos Shiarly recently told journalists in Nicosia. Economists expect that to keep Cyprus afloat, it will need between €25 and 50bn in the coming years. Nicosia, however, is resisting pressure from the other EU countries to take a first bailout package worth as much as €10bn.

Cyprus does not want to accept the strings attached to the European offer. The Cypriotic alternative is called Russia. Already last December, Moscow gave Nicosia a bilateral loan of €3bn. Eager, since the era of Peter the Great, to acquire a strategic foothold in the Eastern Mediterranean, Russia is now offering even more. And with President Demetris Christofias of Cyprus happy to accommodate his friend Vladimir Putin, there is no doubt that Nicosia will turn to Moscow rather than to Brussels.

Christofias is a Communist – he is, in fact, the only Communist leader in the European Union – and, under the EU’s rotating chairmanship, he will be chairing the EU meetings from July 1st until the end of the year.

As pointed out earlier, if Russia steps in, the strategic situation in the entire Eastern Mediterranean could change. Russia stands to gain most out of the eurozone crisis. Cyprus is a prey which it has long been eying. If Moscow loses Syria as its ally, it needs Cyprus as a substitute. Bailing out Nicosia is a bargain price to acquire a permanent naval base for the Russian fleet in the Eastern Mediterranean.

Cyprus is said to be so high on Russia’s priority list that President Putin himself is currently dealing with the €4bn loan request from Nicosia. The interest charged by the Russians is 4.5%, which is far better than Cyprus can get anywhere else. The financial risk for the Russians is limited. There is every chance that Cyprus will be able to repay their bilateral loans fairly soon. Nicosia hopes to start exploiting the huge gas reserves off the Cypriotic coast in the coming decade. With Russian help, it might even be able to exploit these gas fields within the next five years.

The gas fields are an additional reason why Cyprus is a good long-term investment for the Russians. But there are many other reasons. The Russian presence in Cyprus is already very strong. Cyprus is a favourite holiday resort for the Russian middle and upper classes. It could easily become a Russian Florida. Some 50,000 Russians – mostly retirees – are already living permanently on the island. They are attracted by its climate and by the cultural affinities with the Cypriots, who, like the Russians, are Orthodox Christians. Cyprus is also used by Russians as an offshore banking center. This, too, is why the Russians will do their best to support the Cypriotic banking system.

A Russian deal is a win-win situation for both Russia and Cyprus. As soon as Russia has acquired a solid foothold on Cyprus, the third largest island of the Mediterranean Sea, it will be able to drop Assad, thereby reducing the current diplomatic tensions between Washington and Moscow over Syria. Cyprus, on the other hand, welcomes Russian backing: its intention to exploit the gas fields has merely led to tensions with Turkey. With the Russian bear behind its back, it will be easier to deter the Turks. The pro-Turkish attitude of the EU authorities in Brussels has long angered the Cypriots.

Few regions in Europe have the importance of Cyprus. Situated on the doorstep of both North Africa and the Middle East, the island has been of strategic importance since ancient times. From Cyprus, the Russians will be able to reach the whole area surrounding Israel. Russia, an ally of Syria, has never been a close friend of Israel. This might change once Assad is toppled. Although the Russian bear has interests rather than friends – it dreads anything resembling a democracy, and is always on the prowl for its next lunch – the presence in Israel of many Jewish immigrants of Russian origin may lead to a slight rapprochement between Jerusalem and Moscow. If Russia, as a result of its interference in Cyprus, becomes involved in a quarrel with Turkey, this, too, might lead to superficially better, if unreliable, relations with Israel. The animosity between Israel and its NATO ally Turkey has been rising lately. There is little doubt that Putin, during this week’s visit to Israel, will discuss not just Syria, Iran and Turkey with the Israeli leadership, but also Russia’s growing involvement in Cyprus.

If Cyprus proves to be better off with Russia’s financial, political and strategic backing than Greece with the assistance of the European Union, the close relations between the Greeks and the Cypriots might convince Greece that it, too, should turn to Moscow rather than to Brussels for financial and economic help. A strategic realignment in the Eastern Mediterranean and the Middle East might then be in the offing. If the EU and NATO keep regarding the pro-Islamic government in Turkey as their preferred ally, before they know it they might be confronted with an alliance of Russia, Cyprus and Greece – a strong Christian-Orthodox axis against the Turks. And whom would this alliance target after that?
Originally published by Gatestone Institute http://www.gatestoneinstitute.org

Peter Martino

Eurocrisis: Russia Offers Its Services

Tuesday, June 5th, 2012

Europe’s politicians will not admit it openly but they are afraid that the dire economic situation in countries such as Greece and Spain might lead to revolution. In two weeks’ time, the Greeks will go to the voting booths again. The far-left Syriza party is leading in the polls. During the past months, violence has hit the streets of Athens and Thessaloniki. Desperate people are committing suicide in public, reminding Europe’s leaders that the so-called Arab Spring, which toppled many Arab regimes, was triggered in December 2010 by the self-immolation of a street vendor in Tunisia.

Later this month, Greece needs a new round of €5.2 billion in bailout funds from the other European Union countries. In return, the Greeks must pass €14.5 billion worth of austerity measures. With a newly elected Greek parliament unwilling to introduce them, however, and with Greek politicians threatening to annul prior loan agreements, other countries are unwilling to come forward with new funds. Meanwhile, Greek citizens are moving their money out of the country, exacerbating the situation of Greece’s banks. The prospect of a bankruptcy of Greece, and of the country leaving the eurozone, seems ever more likely. Grexit – as the European media call the scenario of Greece leaving the euro – is a possibility. But how will the Greek people react? If the level of anger and frustration keeps rising in Greece, the country might descend into chaos.

The situation is equally unstable in Cyprus. The economic situation of this strategically located country is inextricably intertwined with that of Greece. A collapse of Greece will drag Cyprus along with it. Economists expect that to keep Cyprus afloat, it will need between €25 and 50 billion from the other EU countries. If the EU does not provide the money, others might. Last December, Russia already gave Cyprus a bilateral loan of €3 billion. Russia is definitely capable of bailing Cyprus out. The Russians, however, are likely to want something in return. If Russia steps in, the strategic situation in the entire Eastern Mediterranean could change. Given the large gas supplies in the waters around Cyprus, Turkey, too, is interested in gaining a stronger foothold in Cyprus. Can Israel tolerate this?

Greece and Cyprus are not the only countries in Southern Europe that are heading for political instability. In Portugal, Spain, and Italy there have also been street protests in response to austerity measures. The EU is particularly worried about Spain. Last week, the Spanish Socialist former Prime Minister Gonzalez said that his country is in a “state of total emergency.” Spain is heading full speed for a debacle.

Last month, panic-stricken Spanish citizens withdrew more than €70 billion from Spanish banks and moved it to foreign safe havens. While Greece is confronting Grexit, Spain is already in the grip of what the European media call Spanic. The Spanish banking sector is about to collapse. Bankia, Spain’s third largest bank, urgently needs the Spanish government to bail it out with €21 billion. Bankia, a state-owned institution which was formed last year out of the ruins of seven regional banks which could no longer shoulder the huge losses of the Spanish real estate crash, is virtually bankrupt. To save the Spanish banks, however, the debt-ridden government in Madrid needs at least €90 billion.

Meanwhile, with youth unemployment higher than 50%, Spain’s younger generation has no prospects whatever. They have nothing to lose and, hence, can be easily persuaded to rebel against a political system that seems incapable of offering them hope for a better future. This is a politically dangerous situation, which the United States should be taking into account. The whole of Southern Europe might soon be in turmoil.

If Spain goes down the drain, Italy is bound to follow. And if Italy, the third largest economy in the EU, goes, France is likely to go as well. The Europeans are preparing for disaster. In May, economic activity in the eurozone countries, including France and Germany, contracted at the fastest rate since June 2009.

Last week, the heads of government of the eurozone countries met in Brussels for their 19th emergency gathering since the eurocrisis began two years ago. Spain, Italy, and France have stated that they want the European Central Bank to intervene by issuing eurobonds, pooling the sovereign debts of all 17 eurozone countries.

Peter Martino

Printed from: http://www.jewishpress.com/indepth/analysis/eurocrisis-russia-offers-its-services/2012/06/05/

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