Some international media sources claim that the current crisis in Cyprus is the result of Germany and Russia’s actions rather than the eurozone crisis along with the Fed and the ECB.
In particular, Stratfor, an American internet sources, say s that the current situation in Cyprus will turn Russia and Germany from partners into enemies. At the same time, Il Legno Storto (Italy) also claims that the Cyrus crisis is a confrontation between Moscow and Berlin. The edition decided to quote Jean-Claude Junker who said that Europe may face another World War I. And finally, Jim Sinclair, a famous trader, said that today’s situation in Cyprus resembles the shots in Sarajevo that started World War I. The Russian Empire and Germany were the key participants of the war.
It seems like mass media start preparing us for worst-case scenarios. Are they right? Are Germany and Russia really standing behind the Cyprus crisis? Let’s try to ponder upon these questions together.
Russia’s Interest
First of all, let’s talk about Russia’s interests. According to Türkiye, the Cyprus bailout initiated by the EU was aimed at preventing Russia from expanding its role in the area. Indeed, the bilateral relations between Russia and Cyprus have improved dramatically over the last few years, which is a major concern for EU officials.
There are number of reasons for the improvement:
There are over 50 000 Russians living in Cyprus . Moreover, Russian tourists like visiting Cyprus . Before the 2008 crisis, over 200 000 Russian tourists used to visit Cyprus every year.
Both the countries share the same religion. They are orthodox. They have stable geopolitical relations. Dmitiris Christophias, the previous president of Cyprus , studied in Russia and speaks fluent Russian. By the way, he was the only communist among all the EU leaders. That is why he always lobbies Russia’s interests and criticized the NATO.
Moreover, the economic and financial relations between the two countries are tight as well. At least, when it comes to money, Cyprus addresses Russia more frequently than the EU. Moreover, Moscow has never laid down such tough conditions. By the way, Russian businessmen invested tons of money in Cyprus (over $24bn, according to Moody’s). Russians are the biggest foreign depositors of Cyprus banks.
However, Western mass media are sure that it is not about money. Vladimir Putin is angry with the Cyprus bailout because they say Russia may lose something more valuable. In particular, they name the following interests of the Russian Federation in Cyprus .
Russia wants to preserve its influence in the Middle East. Cyprus is within spitting distance from Syria, Lebanon, Israel, and Egypt, not to mention Turkey. Some sources report that Moscow may use Cyprus seaports to deliver arms to Asad’s troops in Syria.
Moreover, Russia is said to want to get access to Cyprus ’s abundant reserves of oil and natural gas. They are estimated at $600bn. They say Russia was ready to provide financial support in exchange for access to local oil and NG deposits.
Russia may conduct a dialog with the EU through Cyprus as an ally and a mediator. Cyprus is an offshore as well as an EU and eurozone member. Therefore, hundreds of Russian businesses can reach the world’s biggest market and trade block.
Moreover, Russia can build local military bases and deploy its troops in Cyprus . They say that the Russian military base located in Syria needs urgent location change as the civil war in Syria is coming to an end as Asad’s troops are doomed.
Let’s go back to Cyprus itself.
Still, the Cyprus bailout hasn’t solved the internal economic and financial problems. Investors are scared, markets are uncertain and panicking, stocks are depreciating, the common European currency is weakening against other major currencies. At the same time, the Cyprus authorities are desperately trying to prevent a huge flight of capital as foreign investors are looking for safe-haven assets.
The chart below, courtesy of , reflects the current state of affairs in the market of EURUSD:
They never tell us as much lie as in advance of elections…
Now let’s consider Germany’s interests. Some media sources put the blame Germany for being responsible for the current crisis in Cyprus . In particular, Christian Science Monito says that the crisis was provoked by Germany’s unwillingness to pay for Russian oligarchs. It is not a secret, that Germany has been waging an info war against Cyrus, calling her a laundry for dirty Russian money.
Germany (which is the eurozone’s biggest donor) seems to be not in a hurry to provide financial support to Cyprus . It is pathetic if it is all about Russian oligarchs because in this case the German authorities will have to admit that they are ready let an entire European economy go bankrupt, thereby putting the whole EU and the eurozone in jeopardy. It is nonsense, isn’t it?
Then what is the real reason why Germany behaves so aggressively?
Boris Grozovskiy, an economic observer for Forbes.ru, assumes that Germany dreams of put an end to Cyprus ’s offshore jurisdiction. This wouldn’t harm Germany much as Russian businessmen are the biggest group of foreign investors who make use of local offshore benefits.
Il Legno Storto quotes a famous historian who assumes that Germany is trying to dominate Europe and take it under control for the 3rd time in 100 years.
Germany is interested in preventing Cyprus from going under the Kremlin’s control.
Obviously, Germany would like to get access to Cyprus ’s natural gas reserves to reduce its energy dependence on Russia.
Other sources say that the Cyprus intrigue is directly connected with the forthcoming elections in Germany scheduled for September 2013.
Obviously, if Germany wants to consolidate its position in Europe, Russia becomes a major rival for it. Therefore, Germany is interested in undermining Russia’s position in the EU and the eurozone.
Mark Fisher from The Washington Post has written an article where he says that the Cyprus bailout is a geopolitical collapse of Russia. However, this statement seems to be premature has the author is likely to have poor knowledge of European history.
He should probably have taken into account the words said by Otto von Bismarck, afamousGerman statesman:
Do not expect that once taking advantage of Russia's weakness, you will receive dividends forever. Russian has always come for their money. And when they come - do not rely on an agreement signed by you, you are supposed to justify. They are not worth the paper it is written. Therefore, with the Russian is to play fair, or do not play.
