Cyprus Crisis Burns Russian Investors
Cyprus crisis hit Russian investors
Russian businessmen are hastily looking for ways to withdraw their money from the former &# 171; tax haven&# 187;
MOSCOW – For many years, construction companies in Cyprus have tried to attract Russian investors to implement projects on the island.
Over the past ten years, about 40,000 Russians have emigrated to Cyprus. Now they make up 5% of the country’s population..
However, many of them were driven not only by the desire to escape from the harsh Russian climate to the warm Mediterranean..
Cyprus also attracted them with low taxes, the absence of strict legislative restrictions and the stability inherent in the countries of the eurozone..
While the skyscrapers of the new Moscow City business center remain half-empty, Russian deposits in Cypriot banks amount to $ 32 billion..
Tiny Cyprus is the largest foreign investor in Russia, with a GDP 75 times that of the Cypriot economy.
Mark Galeotti, professor of international relations at New York University, is tracking the movement of Russian capital. He explains why the Russians preferred to keep their money in Cypriot banks: “This is where the dirty money obtained by criminal means and the money of those who evade paying taxes in Russia flocked here. In addition, Cyprus has become a platform for the activities of many Russian oligarchs, who withdrew money from Russia and reinvested in Cyprus, taking advantage of the lower corporate income tax “.
Cyprus allowed wealthy Russians to minimize tax deductions.
However, according to Galeotti, Cyprus has also become a banking paradise for the Russian middle class..
“This is a place where you can go on vacation and at the same time put some money in the bank so that part of your savings, just in case, is kept outside of Russia,” he said. “Cyprus has become famous as a place not only for recreation, but also for safe keeping of money.”.
However, all this came to an end when this week, due to the banking crisis, it was decided to confiscate up to 40% of deposits exceeding 100,000 euros..
On the streets of Cyprus, protest slogans are heard not only in Greek, but also in Russian.
Maxim Mokeev, executive director of Moscow-based real estate agency Evans Property Services, notes that Russians perceived this as a hostile move..
“People take it very personally,” he said. “This is a matter of trust, which is now gone due to the fact that they confiscate 40% of the deposits.”.
According to him, the Russians are convinced that the currency restrictions adopted by the Cypriot authorities may persist for many years, and now the oligarchs are hastily looking for ways to withdraw money from the country..
“Almost every hour, planes full of businessmen arrive in Cyprus, who are trying to solve this issue by their usual methods – to use connections, achieve some kind of special relationship and still get their money in hand,” Mokeev said..
According to Mokeev’s forecasts, property prices in Cyprus could fall by 50% if Russians decide to stay away from this country..
“Cyprus has completely lost the confidence of investors who want to invest their money somewhere,” he said..
And if for Russian tourists Cyprus remains a popular destination, for investors it has lost all attractiveness..