Russia has put aside its anger over what it sees as an unfair levy on major deposits held in Cypriot banks, and agreed to support Europe’s bailout of the island by refinancing a major loan to the country. The usually hawkish President Vladimir Putin had no sharp rhetoric for the EU or Cyprus today, but instead confirmed that Russia would backstop the EU bailout by restructuring a €2.5bn loan first extended two years ago.
Given the anger among many rich Russians who stand to lose from the levy, the conciliatory position came as a surprise to some. But although there are some state corporations with money in Cyprus, the main losers are likely to be middle-level businessmen and corrupt officials.
“There were no real victims at the highest level of the decision-making apparatus,” said Alexander Orlov, of Arbat Investment Services in Moscow. He added that €20bn has been removed from Cypriot banks in the past year, much of it believed to be Russian. “I think the €2.5bn loan given by the government previously could have been in order to buy time for ‘whom it may concern’ to withdraw their funds.”
It was left to Prime Minister Dmitry Medvedev to refer to the situation in Cyprus as “stealing”, but even this is more nuanced than it might first appear. He described the planned levy on high-value deposits as “the stealing of what has already been stolen”, a reference to a comment made by Vladimir Lenin after the 1917 revolution, and a partial acknowledgement that much of the money that Russians hold in Cyprus is considered by some to be “stolen” from Russia itself.
The softer tone from Moscow also fits in with a call from Mr Putin for a “de-offshorisation” of Russian money in an attempt to repatriate funds kept overseas. Many wealthy Russian businessmen are still nervous about keeping their money in Russia. “Unfortunately nowhere else is as perfect as Cyprus was, other destinations are either less protected, like the Cayman Islands, or are less welcoming, like Switzerland or Luxembourg,” said Mr Orlov.