EU Presidency under Russian influence…

by N. Peter Kramer

But it is still in talks with Russia about a loan to help shore up its bloated and overstretched public finances. After Russia last year gave the island state a three-year loan of €2.5 billion at a below-market rate 4.5%, the government is now trying to get a new €5 billion loan from Russia. This loan is the favoured option, since it would come with fewer conditions than an EU bailout. One analyst in Brussels noted that if a second Russian loan will be accepted, nearly two-thirds of its GDP could potentially be in thrall to Russian lenders.

What’s behind this Russian kindness? Will Russia ask for a stake in the large reserves of natural gas recently discovered in Cypriot waters in the Mediterranean? That would certainly upset the anti-Russia clan in the European institutions. They claim the Cypriot gas as European in order to offset EU energy dependence on Russia. There are fears in the EU palaces in Brussels that by turning too much to Russia, Greek-Cyprus could become a vassal of the Kremlin.

Added to this President Demetris Christofias is a keen ally of Russian President Vladimir Putin and the only Communist leader in the European Union. He was one of the few European leaders to support Russia when Georgia attacked it. He backed Moscow in critisising a proposed US missile defence system in former communist East-European countries. On a trip to Moscow, Christofias called himself ‘the red sheep of Europe’ and in fluent Russian. He studied at university in Moscow and is no exception, many Greek-Cypriots studied in Russia during Soviet times and marriages between Greek-Cypriots and Russians are commonplace. Christofias lambasted recently the European Union saying that the European Commission and the European Central Bank had operated like a ‘colonial force’ by forcing draconian cost-cutting measures and untrammelled capitalism on economically distressed countries.

Probably the real reason Moscow likes to keep Nicosia close to its heart is the 10 percent corporate tax rate, the lowest in the EU and the main draw for the estimated 50.000 Russians in Cyprus. Thousands of Russian companies are registered in Greek-Cyprus thus gaining admittance to the European Union, the world’s largest trading block. In Limassol, also called ‘Limassolgrad’, there are Russian schools, Russian real estate agents, a Russian radio station and a Russian weekly. Restaurants beckon their visitors in cyrillic. Russia’s spy agencies are said to operate from Greek-Cyprus, a location close to the Middle East. In January a Russian cargo ship with 60 tons of ammunition stopped on the island on its way to Syria. Greek-Cyprus, as an EU member, must obey the Brussels strict embargo on military supplies to Syria. But the ship was allowed to sail after giving assurances that it would alter its route.

This is not a one way story. Greek-Cyprus accounted for 20 percent of foreign investment in Russia, more than China. The relationship between one of the tiniest EU member states and the Russian big bear is grounded in mutual interest. It will be very interesting to see how the EU Presidency in the next six months is doing its political split and how the rest of the EU will thaw.