Russia's Interest in Resolving the Financial Crisis in Cyprus

Player utilities

Listen to the story.

Marco Werman: In addition to the EU, Cyprus was looking to Russia for some financial help. But today, Russian Prime Minister Dmitry Medvedev made it clear Moscow will not help until Cyprus strikes a deal with the EU. Russia has a lot at stake in this crisis because a lot of Russians have money in Cypriot banks. Many of those Russians, about 40,000, actually live on the Mediterranean island. The Guardian�s Moscow correspondent ,Miriam Elder ,arrived in Cyprus last night. So you're in Cyprus� second largest city, Miriam. It's Limassol, specifically to take pulse of the Russian ex-pats there. Describe the kind of Russian community that has developed in Cyprus over the years.

Miriam Elder: Well it's interesting. It seems that there's sort of a double community. First you do have these super-wealthy Russians that either live around Limassol, or live back in Russian or in other cities and will fly in to deal with their bank accounts here. But then on the other hand you also have a community of, I suppose, what you could call average Russians, just shopkeeps and hair dressers and lawyers and financial advisors, and tons of fur stores, which is very strange for a country that is perpetually warm. An entire community that's been created to feed all this Russian wealth that's being kept on the island. You'll see a lot of the ads for luxury properties and for banking are written entirely in Russian.

Werman: Right, I doubt the rich Russians, the oligarchs, are standing in lines at ATMs, but are those middle-class Russians who are there as part of this kind of Russian infrastructure, are they lining up?

Elder: Yeah, absolutely, I talked to quite a few people who spent an hour or so at the ATM today trying to take out as much cash as they could. You have people who have lived here, Russians who have lived here for 12 years, so at that point they almost consider themselves Cypriots and they're living through the crisis just as their Cypriot neighbors are.

Werman: Now as for those Russians, the really wealthy ones, they have a big stake in Cyprus' banks, but I'm still not sure why Russians got interested in Cyprus in the first place.

Elder: Well, a lot of wealthy Russians prefer to keep their cash abroad. Russia remains unpredictable in a lot of ways for wealthy people. The reason that they came to Cyprus in particular is that Russians have been coming here since the collapse of the Soviet Union, but then in the past decade or so, a lot of financial infrastructure has been put in place to draw Russian money here. So there's a beneficial mutual tax treaty, which means that Russians who keep their money here will avoid paying taxes in both Cyprus and Russia. Then there's also a visa-free treaty. So there have been a lot of agreements between the governments to boost the amount of Russian money in the Cypriot system.

Werman: And how much money do Russians have in Cyprus? Do you have a number?

Elder: The best estimate we have comes from Moody's, the rating agency, and they say that it's about $32 billion, which is almost half of the entire amount of deposits in Cypriot banks.

Werman: So with all that money there, don't the Russians have a personal incentive to make sure the country and Cyprus' banks stay afloat?

Elder: Yeah, and that's what you hear from a lot of people on the street here, these average Russians who are sort of servicing this larger community, saying we've been living here for such a long time and there is so much Russian money here, we really expected the government to come in and create some kind of a deal to help Cyprus stay afloat. Dmitry Medvedev, the prime minister, did say that Russia wouldn't offer any sort of help until the EU stepped in, but he did leave the door open to offering some sort of aid in the future.

Werman: So now Cyprus is pinched between the Russians and the EU. It's this tiny country, not like Italy or Spain. Part of the island is Turkish, the larger part Greek-Cypriot. It's kind of an oddity. What does it say about the rest of Europe, do you think?

Elder: Well, I think what this crisis has shown is just a very troubling degree of, I guess, of incompetence inside the European Union. That's what you're hearing from people here. People are very shocked that their situation was allowed to go this far. They refer to the European Union as a family, and one person told me he was very surprised that one family member didn't help another. So it just leads to an entire questioning of this system. It is a tiny island, but it's very representative of the entire infrastructure of the EU.

Werman: The Guardian's Moscow correspondent, Miriam Elder, in Cyprus. Thanks very much.

Elder: Thank you.