The economy today
Cyprus must learn to live without the Russian presence
Audio 03:08
On the island of Cyprus, one in four tourists is from Russia.
© AP/Petros Karadjias
By: Dominique Baillard Follow
4 mins
In Cyprus, the high tourist season starts with a big question mark on the presence of Russian visitors.
Under the constraint of European sanctions, the island must review its economic model, which until now has been very oriented towards Moscow.
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On this Mediterranean island, very popular for its sunshine and its beaches, one in four tourists is from Russia.
These vacationers are very popular in this predominantly Orthodox country located south of Greece.
They have a well-stocked wallet and they don't look at the expense.
But since Russian flights have been excluded from Cypriot airspace as in the whole of the European Union, bookings from this loyal clientele have collapsed.
In ordinary times, it generates about a fifth of tourism revenue.
The Cypriot banking sector is the other big loser from European anti-Russian sanctions.
The two countries have been cultivating a privileged relationship for several decades, particularly on the financial level.
A tax treaty avoiding double taxation between them has long favored the circulation of capital.
It was very lucrative for the Russians to set up a company in Cyprus and reinvest the profits back home.
In the 1990s, the small tax haven briefly became the leading foreign investor in Russia.
Since then, the Cypriot government has taken other initiatives to attract the oligarchs.
With, among other things, the golden passport conferring Cypriot nationality for large real estate investments.
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For large Russian fortunes, Cyprus has become the gateway to the European Union.
A platform that pays little attention to more or less legal activities, such as the arms trade or betting.
In case of economic difficulty, Moscow provides assistance.
This is the case in 2011 when the island is contaminated by the Greek debt crisis.
It is from this crisis that Nicosia begins to become more selective with these investors
Under pressure from Brussels, which demands more rigor in return for its aid.
Other events are pushing Cyprus to tighten the accommodating conditions reserved for Russian capital.
In 2018, the United States is stepping up the hunt for dirty money from Russia.
Two years later, the golden visa regime was abolished, following the scandal of passports bought from corrupt officials.
In the aftermath, many visas are called into question, this is the case for example for that of the aluminum magnate Oleg Deripaska.
Vladimir Putin also gets tired, he puts an end to the tax treaty between the two countries.
Despite this takeover, the Russian footprint remains strong.
In 2020, a quarter of foreign investment made in Cyprus, i.e. 100 billion euros, was still from this country.
The war in Ukraine seals the “derussification” of the Cypriot economy?
In the days following the invasion of Ukraine, the Russian bank VTB sold its Cypriot subsidiary to nationals of the island.
Russian deposits, which peaked at 21 billion euros in 2013, fell last February to 6.5 billion euros.
There is definitely an acceleration.
Nicosia adopted all the sanctions.
In its fight against the Turkish enemy, which has occupied the north of the island since 1974, the European ally counts more than the Russian friend.
However, there is no question of changing the model from top to bottom.
Services and tourism constitute 80% of its GDP;
Cyprus will not call these activities into question, but it is seeking to get rid of this image of a country with little regard for Russian investors in order to attract new customers.
Why not Ukrainian?
Companies established in Ukraine, and in Russia, particularly in tech, have already relocated their offices to this European country renowned for the ease of bureaucratic procedures and low corporate taxation.
For the moment, the Russian inhabitants of Limassol, ie a quarter of the population of the port renamed “Limassolgrad”, are not yet planning to move.
► IN BRIEF
The American president is preparing to temporarily lift customs duties on solar panels imported from Southeast Asia.
This waiver is intended to relieve the current US supply shortfall.
The move comes as an investigation is underway to determine whether solar panel imports from Cambodia, Malaysia, Thailand and Vietnam are circumventing tariffs on products made in China.
A survey that penalizes renewable energy projects.
© RFI
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Economy
Cyprus
Russia