- Cyprus – European Union (EU) member state, also one of the most popular tax haven jurisdictions –has done it wrong!
- They have made a very bad investment, by lending money to Greece. This is back when Greek economy was on a brink of bankruptcy, Cyprus made the risk and bought Greek government bonds.
- So idea was to tax everyone with savings account of certain savings and use that money towards the debt. This caused a panic and everyone, obviously, decided to withdraw their savings. So banks closed down, after government declared national holiday. ATMs, of course, have restrictions and limits on withdrawals.
- Cypriot government had insured their accounts, but abolished that promise. However the proposed legislature refused to pass through this kind of absurd law. Now Cypriot government has till Monday to come up with a new plan to present to the EU and to the International Monetary Fund (IMF).
- EU has refused bailout, reasoning that they don’t want to bail out offshore criminals. So Cyprus decided to turn to Russia for help.
- If Cyprus would step out of EU and If Russia were to step in and provide rescue, could this become a source for diplomats to consider diplomatic consequences?
- Here is also another loop to consider, the commercial interest of Russia perhaps? Aphrodite gas field, even though the value of these fields is uncertain…
- Apparent indications to Russia’s potential value of Cyprus is evident since Syrian civil war when it was suspected of allowing itself to be used as a transit point for Russian arms shipments to the Assad regime in 2012, when Russian operated ship made a stop in Cyprus before reaching Syria, alleged of carrying ammunition. This was in violation of an EU arms embargo. So here Cyprus could be of an interest to Russia too. Keeping up relationship with Cyprus could mean keeping access to Mediterranean perhaps?
- Chaos in EU could cause further disruptions, as investors in other countries start pulling their investments from banks. Some commentators are quiet sure that Spanish and Italian alert is unfounded, meanwhile others say that American markets are the ones where stocks have fallen…
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