Russia's elite are angry. Cyprus's plan to seize deposits is "unfair, unprofessional and dangerous," said Russian President Vladimir Putin's spokesperson Monday (18.03.2013). Russian Prime Minister Dmitry Medvedev added fuel to the fire. "This simply looks like the confiscation of other people's money," he said.
Events in Cyprus also affected Moscow's stock exchange, as shares from two major Russian banks - VTB and Sberbank - dropped roughly five percent when trading started. According to media reports, both banks are said to have more than $10 billion (7.7 billion euros) stashed in deposits in Cyprus.
Figures help to explain Russia's swift reaction: According to Russian state statistics agency Rosstat, Cyprus businesses invested $78.2 billion (60.4 billion euros) in Russia in 2011 alone. That is almost three times as much as Cyprus's investments in Germany. The small EU country is by far the largest investor in Russia and accounts for almost half of all foreign investments.
"That is by no means Cypriot money," said Heinrich Steinhauer, who heads the German regional bank Helaba in Moscow. The invested funds were "Russian money that gets re-invested via Cyprus," he told DW.
According to Hans-Henning Schröder of the Berlin-based German Institute for International and Security Affairs (SWP), Cyprus, with its low tax rates, is considered "an important station for Russian cash flows." He told DW that Cyprus is where Russians transfer money in order to "protect it against the grip of the Russian state."
But it's not just Russia that is affected by the proposed bank account tax in Cyprus. Oligarchs in Ukraine also like to transfer money to Cyprus and then re-invest it back home. Just like in Russia, Cyprus has been the largest foreign investor in Ukraine. In 2011, the country invested more than $10 billion, according to Ukraine's statistics agency Derzhkomstat. That represents one-fifth of the total foreign investments in the former Soviet republic.
More than 90 percent of all Ukrainian foreign investments in 2012 went to Cyprus. If ownership changes in the Ukraine, a company with a postal address in Cyprus simply gets replaced by another one in Cyprus.
Note EU-Digest: Cyprus and the Netherlands (and probably some other as yet undisclosed countries in the EU) are "government sanctioned" and "EU based financial tax dodgers havens".
It is high time the EU Commission closes down these unethical financial loopholes. If not, the tax payers in the EU will continue ending up paying for the consequences of this fraudulent behavior by international financial cartels.
Read more: Russian oligarchs stung by Cypriot bank tax | Europe | DW.DE | 19.03.2013
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