Russian oligarchs have outsmarted the EU
Judging by the russophobic rhetoric of the European authorities and the European media, the rationale behind the artificially created Cypriot crisis was to expropriate the money from “Russian accounts” held in Cyprus. After providing tax shelter for the Russian oligarchs, the eurocrats have decided to steal their money under the guise of a “Cypriot bailout”.
If several reports coming from Reuters and other European sources are correct, it seems that the eurocrats tried to beat the Russian oligarchs at their own game and lost the match. The week which passed between the beginning of the crisis and its final resolution was used by Russian businessmen to exploit each and every loophole to take their money out. Unsurprisingly, given their huge experience in the unforgiving business world of Russia, they succeeded. Now, the two biggest banks of Cyprus are drained of Russian capital and this will drastically increase the “haircut” on all other accounts left with those banks. Neither the Cypriot nor the European authorities are willing to admit their failure but it is only a matter of time until they have to.
How did the Russian money escape Cyprus even when the whole Cypriot banking system was “frozen”? Judging by the scant reports provided by Reuters, one of the main avenues for the capital flight was the Russian Uniastrum Bank, owned by the Bank of Cyprus, and the Russian branches of the Bank of Cyprus. While the Cypriot banks were closed with “frozen accounts”, the Russian branches of the bank, being outside the regulatory scope of the European Union, stayed open and were used to funnel the money out of the Cypriot banking system. From the European point of view, the situation got out of control and Brussels had to resort to outright blackmail in order to stop other European tax havens from accepting the money flowing out of Cyprus. A Reuters’ source from the ECB said that “it was made clear to our Latvian friends that if they want to join the euro, they should not provide a haven for Russian money exiting Cyprus”. From a Russian point of view, the European efforts were beneficial, because they forced the oligarchs to take their money out of Cyprus and return them to Russia and not to some other European offshore.
With the Russian money gone for good, it remains for the Cypriot citizens and the European businesses with accounts in the Cypriot banks to bear the brunt of the bailout costs. The eurocratcs are unlikely to be happy with such an outcome but they have only themselves to blame.