Media: Invasion of Ukraine shatters Russian connection to Cyprus

With so many Russians and Russian money and Russian investors and Russian residents and Russian oligarchs, it’s long been called Moscow on the Med, Cyprus now may have to learn to live with less of what they’ve brought.

That’s come over Russia’s invasion of Ukraine that has forced the pro-Russian government of President Nicos Anastasiades to reluctantly back European Union sanctions that include barring Russian airlines and tourists.

That has set the island government that’s a member of the European Union – not including the northern third occupied by Turkish-Cypriots since unlawful 1974 Turkish invasions – scrambling to reach out to other foreign travelers.

But the worry goes beyond Russian tourists, the second-biggest market in the sector beyond those from the former Colonial ruler the United Kingdom, with more far-reaching financial repercussions.

The Russians have been coming for decades, their rich lured by being able to hide their wealth in Cypriot banks and welcomed by governments accused by critics of not vetting for money laundering and criminal activity, including through a now-canceled program granting residency permits and EU passports to wealthy investors.

Now, asked the news site POLITICO in a feature, what would happen if the Russians aren’t coming? And if they go away for good?

It’s a prospect frightening to the government and businesses, including the luxury resorts, hotels, bars, taverns, cafes and shops catering to them, including signs and huge billboards in Russian with offers.

“In Cyprus, Russian connections are everywhere,” the site noted.

It reported that the Russian tourists pour in and spend big and that there was 100 billion euros ($110.33 billion) in 2020 – when the COVID-19 pandemic broke out and essentially halted international travel and tourism.

That was nearly 25 percent of all Foreign Direct Investment (FDI) for the legitimate government, the kind of numbers that for generations have made politicians and businesses look the other way over any other worries about Russians.

POLITICO also noted the darker and greyer areas of Russian investments that have been tolerated, if not encouraged because of the money it brings to the Cypriots who benefit and don’t care what’s behind it.

That, the report said, includes money from arms dealers, gambling firms, and pornographic websites showing abuse and exploitation of women, the country opening its arms to hardline foreign government officials carrying bags of cash.

As each embarrassment was reported, governments made small steps to move away from them but it took the invasion of Ukraine to bring a hard push – and even now officials said they reserve to right to break the EU sanctions and allow Russian airlines and tourists if too many go to Turkey instead.

At least five people on the EU’s sanctions list have assets in Cypriot banks, according to bank officials, the report said, sanctions are likely to hit the economy hard, with dozens of luxury units going unsold without a Russian audience.

“The Cypriot economy is disproportionately affected compared to other countries due to the structure of the Cypriot economy and its reliance on Russian tourists,” Cypriot Finance Minister Constantinos Petrides told POLITICO.

“Based on our estimates, we expected to have one million tourists from Ukraine and Russia this year, some 20-25 percent of the tourist market of Cyprus,” Petrides said.

“Τhe key is the duration of this crisis. If this ends in a month, we will come out unscathed. If it lasts more, no economy will manage to come out clean,” Cyprus long said to have allowed dirty Russian money.

Despite the government saying otherwise, the site said that Cypriot authorities were initially against banning major Russian banks from the SWIFT international payment network.

And some Russian executives were looking to use Cyprus to get around the sanctions, the Russian state-owned VTB Bank quietly transferring all its shares in the Cypriot RCB bank to Cypriot shareholders, making it a 100 percent Cypriot-owned bank to avoid having assets frozen.