Russian businessmen transfer billions of dollars to Cyprus – often from dubious deals. That’s why there is resistance to EU aid loans for the island.
Cyprus: a place in the sun for Russian black money. Photo: dpa
Cyprus is an island, small, sunny and warm. The exact opposite of Russia. Tens of thousands of Russians have therefore moved to the Mediterranean island for good in the last 20 years. Moreover, since the collapse of communism in the early 1990s, Cyprus has risen to become the offshore paradise of the Russian business world.
This has now also come to the attention of the German Federal Intelligence Service (BND). It presented a "secret" report, the contents of which have been whistling from the rooftops for years. According to the report, 26 billion dollars from Russian black money accounts are stored in Cyprus, reports Der Spiegel. The BND’s conclusion: It would be mainly black-money Russians who would benefit from potential EU loans.
Accordingly, opposition to EU aid formed over the weekend. "Before the SPD agrees to an aid loan for Cyprus, the country’s business model must be discussed," said SPD budget expert Carsten Schneider. Voices against an ill-considered Cyprus bailout also increased in the CDU/CSU and FDP.
Officially, 2,000 Russian companies are registered around Nicosia. In fact, the number of unreported cases is probably higher. At the beginning of 2012 alone, 1,400 Russian companies applied to register in Cyprus. A company with a letterbox can be obtained for around 2,000 euros.
Fast and cheap
The account at the Bank of Cyprus costs nothing and is ready for operation three days after opening. Ideal conditions compared to the inhospitable business climate in Russia. In addition, Cyprus entices with a company tax of ten percent and an exemption from income and profit tax.
But now the place in the sun for Russian capital is in danger. The Cypriot economy, which was recently up to 70 percent based on financial services, is itself in crisis. President Dimitris Christofias has applied for an EU bailout loan. The sum is expected to be between ten and 17 billion euros – money that is urgently needed to bail out banks that have gone bust on Greek government bonds. Nicosia also requested a five-billion loan from Russia.
Moscow already helped out last year with fresh money on favorable terms. The Russian government provided the capital not only out of altruism. Among officials and government members, Cyprus is a popular address. The Russian Ministry of Economic Development estimates that by the end of 2011, some $78 billion had landed on the Mediterranean island.
Russia’s most capitalized corporations
Reportedly, in quiet times, at least a billion dollars a month are transferred from the north to Cypriot accounts. In May, bankers registered as much as $18 billion in "investments." Eight out of ten Russian companies with more than a billion in annual profits have a registered office in Cyprus. Among them are such well-known giants as Gazprom, Norilsk Nickel, Severstal and Lukoil.
In keeping with the BND’s warning, negotiations between the Troika and Cyprus are stalling. The government in Nicosia has so far blocked austerity proposals. It presented its own ideas, such as savings and tax increases. That was not nearly enough for the euro partners and the International Monetary Fund. Finance Minister Wolfgang Schauble (CDU) recently stated that he does not expect a conclusion before 2013.
But: The matter is urgent. If Cyprus does not receive new loans soon, the payment of public sector salaries could run into difficulties – the coffers are frighteningly empty.