News / Europe

Cyprus Crisis Burns Russian Investors

James Brooke
For years, construction companies in Cyprus lured Russians to invest in the Mediterranean island. Over the last decade, 40,000 Russians moved to Cyprus. They now make up five percent of the population.

The lure, however, was more than just trading Moscow's cold winters for fun in the sun. Cyprus offered low taxes, low regulation, and the security of the euro zone.

While the glass office towers of Moscow City, Moscow's new financial district, languish half-empty, Russians now have $32 billion deposited in banks in Cyprus.

Tiny Cyprus is now the largest foreign investor in Russia, a nation with an economy 75 times larger.

Minimizing taxes

Mark Galeotti, an international affairs professor at New York University, tracks Russian money movements. He explains why some Russians have chosen to place their money in Cyprus banks. "It's been the den for all kinds of dirty money, criminal money, but also money just avoiding tax in Russia. Secondly, it has been a turntable for a lot of Russian oligarchs. Rich Russians move money out of Russia and then reinvest it to take advantage of a lower corporate tax rate,” he said.

For Russia's ultra rich, Cyprus was a key to minimizing taxes. Galeotti said Cyprus also emerged, though, as a safe banking haven for Russia's new middle class.

“It is a place where you can go, and enjoy a nice holiday and perhaps also stash a little bit of your money, so you feel you have something safely outside of Russia, just in case,” he said. “There was a sense that Cyprus gave you security, as well as a suntan."

All that ended this week with the Cyprus banking crisis, and the decision to slap 40 percent taxes on all deposits over $130,000.

Protesting taxation on deposits

In Cyprus, protesters chant in Greek. But the street protests also have been sprinkled with Russian flags - and protest signs in Russian.

Maxim Mokeyev, executive director of Evans Property Services, a Moscow real estate company, said Russians see the tax as a hostile act.

"People take it very personally,” Mokeyev said in Moscow. “It is a trust issue that is completely gone. Because they have confiscated 40 percent of the deposits."

He said Russians believe that currency controls could last for years, and that the oligarchs are fighting to get their money out now.

"The almost hourly flights to Cyprus were almost full of Russian businessmen trying to do it the Russian way, to use their connections, do whatever they can, to try to be different, to get their money out,” he said.

Mokeyev predicts that values for Cyprus vacation homes could drop by 50 percent as Russian buyers stay away.

"Cyprus has completely lost any trust from any investor or anyone who wants to park their money anywhere," he said.

And so, while Cyprus may remain a safe haven for Russian tourists, it is no longer to be a safe haven for Russian investors.

You May Like

UN Ambassador Power Highlights Plight of Women Prisoners

She launches the 'Free the 20' campaign, aimed at profiling women being deprived of their freedom around the world More

Satellite Launch Sparks Spectacular Light Show

A slight delay in a satellite launch lit up the Florida sky early this morning More

Fleeing IS Killings in Syria, Family Reaches Bavaria

Exhausted, scared and under-nourished, Khalil and Maha's tale mirrors those of thousands of refugees from war-torn countries who have left their homes in the hopes of finding a better life More

This forum has been closed.
Comment Sorting
Comments
     
by: NVO from: Cyprus
March 28, 2013 6:41 PM
Don’t be surprised when the global elite confiscate money from your bank account one day. They are already very clearly telling you that they are going to do it. Dutch Finance Minister Jeroen Dijsselbloem is the president of the Eurogroup – an organization of eurozone finance ministers that was instrumental in putting together the Cyprus “deal” – and he has said publicly that what has just happened in Cyprus will serve as a blueprint for future bank bailouts. What that means is that when the chips are down, they are going to come after YOUR money. So why should anyone put a large amount of money in the bank at this point?

Perhaps you can make one or two percent on your money if you shop around for a really good deal, but there is also a chance that 40 percent (or more) of your money will be confiscated if the bank fails. And considering the fact that there are vast numbers of banks all over the United States and Europe that are teetering on the verge of insolvency, why would anyone want to take such a risk? What the global elite have done is that they have messed around with the fundamental trust that people have in the banking system. In order for any financial system to work, people must have faith in the safety and security of that financial system. People put their money in the bank because they think that it will be safe there. If you take away that feeling of safety, you jeopardize the entire system.

by: Hovhannes from: Montevideo
March 28, 2013 3:23 PM
If values for Cyprus homes drop by 50 percent, it's the right time to move there and buy cheap houses.

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Nobel Prize Winner Malala Talks to VOAi
X
August 31, 2015 2:17 AM
Nobel Peace Prize winner Malala Yousafzai met with VOA's Deewa service in Washington Sunday to talk about women’s rights and unveil a trailer for her new documentary. VOA's Katherine Gypson has more.
Video

Video Nobel Prize Winner Malala Talks to VOA

Nobel Peace Prize winner Malala Yousafzai met with VOA's Deewa service in Washington Sunday to talk about women’s rights and unveil a trailer for her new documentary. VOA's Katherine Gypson has more.
Video

Video War, Drought Threaten Iraq's Marshlands

Iraq's southern wetlands are in crisis. These areas are the spawning ground for Gulf fisheries, a resting place for migrating wildfowl, and source of livelihood for fishermen and herders. Faith Lapidus has more.
Video

Video Colombians Flee Venezuela as Border Crisis Escalates

Hundreds of Colombians have fled Venezuela since last week, amid an escalating border crisis between the two countries. Last week, Venezuelan President Nicolas Maduro ordered the closure of a key border crossing after smugglers injured three Venezuelan soldiers and a civilian. The president also ordered the deportation of Colombians who are in Venezuela illegally. Zlatica Hoke reports.
Video

Video Rebuilding New Orleans' Music Scene

Ten years after Hurricane Katrina inundated New Orleans, threatening to wash away its vibrant musical heritage along with its neighborhoods, the beat goes on. As Bronwyn Benito and Faith Lapidus report, a Musicians' Village is preserving the city's unique sound.
Video

Video In Russia, Auto Industry in Tailspin

Industry insiders say country relies too heavily on imports as inflation cuts too many consumers out of the market. Daniel Schearf has more from Moscow.
Video

Video Scientist Calls Use of Fetal Tissue in Medical Research Essential

An anti-abortion group responsible for secret recordings of workers at a women's health care organization claims the workers shown are offering baby parts for sale, a charge the organization strongly denies. While the selling of fetal tissue is against the law in the United States, abortion and the use of donated fetal tissue for medical research are both legal. VOA’s Julie Taboh reports.
Video

Video Next to Iran, Climate at Forefront of Obama Agenda

President Barack Obama this week announced new initiatives aimed at making it easier for Americans to access renewable energy sources such as solar and wind. Obama is not slowing down when it comes to pushing through climate change measures, an issue he says is the greatest threat to the country’s national security. VOA correspondent Aru Pande has more from the White House.
Video

Video Arctic Draws International Competition for Oil

A new geopolitical “Great Game” is underway in earth’s northernmost region, the Arctic, where Russia has claimed a large area for resource development and President Barack Obama recently approved Shell Oil Company’s test-drilling project in an area under U.S. control. Greg Flakus reports.
Video

Video Philippine Maritime Police: Chinese Fishermen a Threat to Country’s Security

China and the Philippines both claim maritime rights in the South China Sea.  That includes the right to fish in those waters. Jason Strother reports on how the Philippines is catching Chinese nationals it says are illegal poachers. He has the story from Palawan province.
Video

Video China's Spratly Island Building Said to Light Up the Night 'Like A City'

Southeast Asian countries claim China has illegally seized territory in the Spratly islands. It is especially a concern for a Philippine mayor who says Beijing is occupying parts of his municipality. Jason Strother reports from the capital of Palawan province, Puerto Princesa.
Video

Video Ages-old Ice Reveals Secrets of Climate Change

Ice caps don't just exist at the world's poles. There are also tropical ice caps, and the largest sits atop the Peruvian Andes - but it is melting, quickly, and may be gone within the next 20 years. George Putic reports scientists are now rushing to take samples to get at the valuable information about climate change locked in the ice.

VOA Blogs