After the Soviet Union’s collapse, Russian oligarchs flocked to Cyprus, not for its picturesque beaches but for its favorable financial environment. Alexandra Attalides, a local expert, suggests that Cyprus provided a sanctuary for oligarchs to safeguard their assets. The island’s low tax rates and lax banking regulations made it an attractive destination. An interesting 60 Minutes report explains the background to the Russian invasion of Cyprus.
Maira Martini, an analyst for Transparency International, notes that Cyprus’s financial system was historically designed to attract foreign wealth. The country’s banking secrecy allowed individuals to open accounts and companies without revealing their identity or the money’s origin. By 2012, Cyprus, with a population of about a million, had bank deposits nearing 72 billion euros, with 30% from Russian nationals.
However, 2013 brought challenges. The Greek debt crisis threatened Cyprus’s economy. To retain Russian capital, Cyprus introduced a “citizenship by investment” program. Foreigners investing over 2 million euros, primarily in real estate, were granted a Cypriot passport, effectively an EU passport. Between 2013 and 2020, Cyprus issued nearly 7,000 such “golden passports,” with almost half going to Russians.
This program transformed Limassol’s skyline with luxury apartments and its port with mega yachts. However, a 2020 Al Jazeera investigation exposed corruption within the program, revealing that Cyprus had illegally issued passports, including to criminals. Facing EU pressure and public outcry, Cyprus terminated the program, but the issued passports remained valid. These golden passports also benefited Russian elites.
Notably, sanctioned Russian oligarchs like Igor Kesaev, Alexander Ponomarenko, and Oleg Deripaska obtained them. Martini warns that Cyprus’s close ties with wealthy Russians are causing international concern, dubbing Cyprus as one of the “weakest links” in implementing sanctions.
Cyprus’s Finance Minister, Constantinos Petrides, acknowledges past mistakes but defends the country’s efforts. He claims that sanctioned oligarchs’ passports are being revoked and that Cyprus has seized 105 million euros of Russian deposits. However, this is a mere fraction of the 5.6 billion euros of Russian deposits in Cyprus in the previous year.The article concludes with the U.S. Department of Justice’s efforts to locate and seize assets of sanctioned oligarchs worldwide, emphasizing the challenges posed by hidden assets and complex financial networks.
