RUSSIA: It’s starting to get cold on the continent

8 mins read

 * Russia parliamentary group shows disdain at Cyprus *

A fresh row is expected to erupt between Cyprus and Russia, sparked by the distrust prevailing among parliamentarians in Moscow over what seems to be efforts to depose Russian investors from the Bank of Cyprus, as well as the way the Central Bank took control of the FBME Bank.


The Federation Council (upper house) members have proposed to suspend activities in the EU countries, including Cyprus, that have the most aggressive attitude to Moscow and Russians.
Igor Morozov, a leading member of the Federal Council considers the FBME takeover and now the dilution of Russian shareholders in Bank of Cyprus as “unfriendly actions against Russian interest” and wants to suspend talks with working group with the Cyprus Parliament.
In fact, a response is reportedly being drafted within the Russian parliament to the “hostile takeover” of FBME and similar raids against Russian shareholders in the Bank of Cyprus and the now defunct Laiki Bank.
A former diplomat told the Financial Mirror that “Russia started getting ready when Dmitry Medvedev visited Cyprus – to revise the Treaty on avoiding double taxation. Russian amendments (and later unilateral actions taken by the Ministry of Finance and the Central Bank) have totally annihilated the advantages and benefits of having Cyprus company.”
“Whatever your Energy Minister (Yiorgos) Lakkotrypis is doing to find buyers is irrelevant – one should watch Vladimir Putin and Gazprom’s chairman Alexei Miller. Putin was the first whom Abdel Fatteh el-Sisi of Egypt went to see prior to the presidential elections, and these days he is meeting the King of Jordan,” the former diplomat-turned-analyst said.
On the other hand, even the present Ambassador to Cyprus, Stanislav Osadchiy, recently threatened to withdraw Russian businesses from Cyprus.
“As for the EU, there are no worries in Russia, sanctions or no sanctions – it’s starting to get cold on the continent.”
The International Affairs Committee of the Russian Federation Council (FC) has refused to attend a meeting of the US-Russia Business Council due to the sanctions the West imposed on Russia and its citizens, the Izvestia daily reported.
The Federation Council members have also proposed to suspend active work in the EU countries that have the most aggressive attitude to Moscow and Russians, the newspaper writes with reference to acting head of the International Affairs Committee Vladimir Dzhabarov.
“We have never had great inter-parliamentary relations with the United States, and the current attempts to welcome the Americans at the first opportunity seem not right after our former colleague — senator and currently the head of state (US President Barack Obama), called the Ebola virus the first global threat, and Russia — the second,” deputy head of the International Affairs Committee Andrey Klimov told Izvestia.
The Federation Council members also proposed not to create the working group on parliamentary cooperation with the parliament of Cyprus.
“The Central Bank of Cyprus under the American pressure has made an emission of 1 bln euros on the extremely unfavourable terms for Russian businessmen that switched to it from the collapsed Laiki Bank: instead of 84%, they got 18%. All the steps are unfriendly. A week ago, Russian businessmen met with the country’s former president (Demetris Christofias) who explained the actions of official authorities by the US pressure,” Izvestia quoted FC member Igor Morozov as saying.
Ironically, one of the two funds pooled by buyout investor Wilbur Ross to pump 400 mln euros into Bank of Cyprus, is based in Russia, suggesting the bank is swapping one group of Russians for another.
“I think Cyprus is in a difficult situation. The way in which both the FBME issue and the Bank of Cyprus recapitalisation was handled could be an indication that it is being pressurised by the money it owes to the EU and the “strategic partnership” it got from the US into reducing ties with Russia,” a leading economist told the Financial Mirror.
“In principle this is not such a bad thing. There has been too much dependence on Russian funds and now there is too much dependence on Russian tourists. But this is a shift that needs to happen gradually. The economy is still fragile. Cyprus just missed a bailout payment and it still owes EUR 2.5 bln to Russia, so we need more of the gentle art of diplomacy.”
However, some commentators suggest that perhaps it is Cyprus that should be upset with the Russian government which, together with the devaluation of the rouble, which is currently worth 20c compared with 21.8c in June, has contributed to the bankruptcy of two Russian tour operators.
“The Russians want to have their cake and eat it. They want to be respectable and respected in the neo-liberal capitalist world as sophisticated grown-ups who have shaken off the old communist nonsense – but when the very world they aspire to be part of seeks to impose order, however imperfectly, on overseas financial institutions where they have interests, they are suddenly throwing their toys out of the pram,” wrote one analyst.
Meanwhile, the Russian parliament's upper house said it is suspending contacts with countries supporting the EU and US sanctions.
“It doesn't mean a complete break in relations. We are just cancelling at the moment our planned parliamentary trips to the United States and Greece,” Vladimir Dzhabarov, first deputy chairman of the Federation Council’s International Affairs Committee, said on Tuesday said.
“We are not engaged in parliamentary tourism,” he added. “We want our contacts to bear fruit.”
The United States and the European Union have imposed several rounds of sanctions against Moscow since March over its stance on the conflict in Ukraine.
By the beginning of September, some 420 Russian individuals and 143 companies have been put on the sanctions lists of the European Union, the U.S., Canada, Australia, Japan, Switzerland and Norway.
Retaliating for Western penalties, Moscow introduced a one-year ban on imports of selected foods from sanctioning countries. The ban, announced at the start of August, bars imports of meat, fish, dairy, fruit and vegetables from the U.S., the 28-nation EU, Canada, Australia and Norway.