Cyprus turns to Russia for love

Cyprus, which is heavily exposed to the Greek banking sector, has been one of the less covered fronts of the European crisis. Interestingly, as Dan Bilefsky reports, the country is turning not to the EU for help but to a friend farther East: The Russian government last year gave Cyprus a three-year loan of 2.5 ...

By , a former associate editor at Foreign Policy.
PATRICK BAZ/AFP/GettyImages
PATRICK BAZ/AFP/GettyImages
PATRICK BAZ/AFP/GettyImages

Cyprus, which is heavily exposed to the Greek banking sector, has been one of the less covered fronts of the European crisis. Interestingly, as Dan Bilefsky reports, the country is turning not to the EU for help but to a friend farther East:

The Russian government last year gave Cyprus a three-year loan of 2.5 billion euros, or $3.1 billion at the current exchange rate, at a below-market rate of 4.5 percent to help it service its debt. Cyprus now needs at least 1.8 billion euros, or $2.3 billion, by the end of this month to buttress its ailing banking sector.

Officials say they hope to negotiate securing a new loan from Moscow as early as this week. Analysts say it could be as high as 5 billion euros. A loan from Moscow is the favored option, Cyprus officials say, because it would come with fewer conditions than a European Union bailout and help ensure that Cyprus’s 10 percent corporate tax rate — the lowest in the Union and the main draw for the estimated 50,000 Russian-speakers in Cyprus — remains unchanged.

Cyprus, which is heavily exposed to the Greek banking sector, has been one of the less covered fronts of the European crisis. Interestingly, as Dan Bilefsky reports, the country is turning not to the EU for help but to a friend farther East:

The Russian government last year gave Cyprus a three-year loan of 2.5 billion euros, or $3.1 billion at the current exchange rate, at a below-market rate of 4.5 percent to help it service its debt. Cyprus now needs at least 1.8 billion euros, or $2.3 billion, by the end of this month to buttress its ailing banking sector.

Officials say they hope to negotiate securing a new loan from Moscow as early as this week. Analysts say it could be as high as 5 billion euros. A loan from Moscow is the favored option, Cyprus officials say, because it would come with fewer conditions than a European Union bailout and help ensure that Cyprus’s 10 percent corporate tax rate — the lowest in the Union and the main draw for the estimated 50,000 Russian-speakers in Cyprus — remains unchanged.

President Demetris Christofias — a fluent Russian speaker and the EU’s only Communist leader — is already a staunch ally of President Vladimir Putin, ties that are only likely to deepen even as Cyprus takes over the rotating presidency of the EU on July 1. One analyst pithily told the Times, “Cyprus needs to decide if it wants to be a member of the European Union or the Soviet Union."

Northern Cyprus is already something of a proxy state, a semi-autonomous region recognized only by Turkey. It should be an interesting dynamic to watch if the south becomes increasingly dominated by Moscow.  

Joshua Keating was an associate editor at Foreign Policy. Twitter: @joshuakeating

Tag: Russia

More from Foreign Policy

An illustration shows George Kennan, the father of Cold War containment strategy.
An illustration shows George Kennan, the father of Cold War containment strategy.

Is Cold War Inevitable?

A new biography of George Kennan, the father of containment, raises questions about whether the old Cold War—and the emerging one with China—could have been avoided.

U.S. President Joe Biden speaks on the DISCLOSE Act.
U.S. President Joe Biden speaks on the DISCLOSE Act.

So You Want to Buy an Ambassadorship

The United States is the only Western government that routinely rewards mega-donors with top diplomatic posts.

Chinese President Xi jinping  toasts the guests during a banquet marking the 70th anniversary of the founding of the People's Republic of China on September 30, 2019 in Beijing, China.
Chinese President Xi jinping toasts the guests during a banquet marking the 70th anniversary of the founding of the People's Republic of China on September 30, 2019 in Beijing, China.

Can China Pull Off Its Charm Offensive?

Why Beijing’s foreign-policy reset will—or won’t—work out.

Turkish Defense Minister Hulusi Akar chairs a meeting in Ankara, Turkey on Nov. 21, 2022.
Turkish Defense Minister Hulusi Akar chairs a meeting in Ankara, Turkey on Nov. 21, 2022.

Turkey’s Problem Isn’t Sweden. It’s the United States.

Erdogan has focused on Stockholm’s stance toward Kurdish exile groups, but Ankara’s real demand is the end of U.S. support for Kurds in Syria.