Cyprus praises Russia, lets in warships

The Cypriot president has, on a visit to Moscow, showcased his country’s economic dependence on Russia and the emergence of an increasing threat to EU and US unity on sanctions.

Nicos Anastasiades i used the trip, on Wednesday (25 February), to formalise an accord for Russian warships to use Cypriot military bases and to speak out against EU policy on Ukraine.

He noted that his own “small homeland” is “largely dependent on the Russian Federation, whether it's the economy, or services, or tourism, or defence, or solidarity on the Cyprus issue”.

He said he supports Ukraine’s territorial integrity.

But he went on to describe the situation as a “civil conflict” and to “welcome” Russian leader Vladimir Putin i’s contribution to the peace process, which was recently revived in Minsk - remarks which go against the EU joint position that Russia is arming, commanding and fighting alongside the anti-Ukrainian paramilitaries.

For his part, Putin told press the naval treaty concerns counter-piracy and counter-terrorism operations, adding: “I don't think this should worry anyone”.

He noted that Russian investors and banks are highly active in Cyprus - a relationship rooted in its favourable taxation regime and a history of laxity on anti-money laundering.

“Cyprus is in second place in terms of investment in Russia’s economy, with $65 billion. We know that a large part of this is repatriated capital, but that it is coming via Cyprus is already not a bad thing”, the Russian leader said.

He added that Sberbank and VTB Bank - both facing credit restrictions as part of the EU sanctions package - are “working actively” in Cyprus.

He also said Russia brings in 80 percent of Cypriot foreign investment and 600,000 tourists a year and reminded Anastasiades that Moscow recently extended the soft terms of its €2.5 billion “stabilisation loan”.

Putin stopped short of publicly asking Anastasiades to help dismantle the EU sanctions policy.

But he said Cyprus, despite being “small”, is an “equal member” of the EU and has the “same voice” as others on sanctions.

He also said EU states should take sanctions decisions based on their “national interests” and not “on the basis of some obscure reasons of a general nature formulated by some unknown people”.

The Russian leader used the Anastasiades meeting to threaten the EU that he will cut gas supplies via Ukraine in the coming days unless Ukraine agrees to pay for gas consumed by Russia-occupied territories in east Ukraine.

He said Ukraine’s refusal to do so “smells of genocide”.

Cyprus, like Greece, has a history of protecting Russian interests in the EU Council. But the two countries’ recent pro-Russian statements come amid concern in Brussels and Washington that Moscow is trying to sow division in order to gain a free hand in Ukraine.

Putin earlier this month also met with Hungarian PM Viktor Orban i in Budapest in an event seen in a similar light.

Mariupol next?

The Anastasiades meeting came during a lull in fighting in east Ukraine.

But Russian and pro-Russian forces have massed near the Ukrainian city of Mariupol, a tactically important land bridge to Crimea, which Russia annexed last year, raising fears of an impending assault.

British leader David Cameron i told parliament on Tuesday that fresh escalation should see Russia disconnected from the so-called Swift system of international bank transfers.

The French foreign minister, Laurent Fabius i, told France Info on Wednesday: “The problem today is particularly around Mariupol. We've told the Russians clearly that if there was a separatist attack in the direction of Mariupol things would be drastically altered, including in terms of sanctions.”

The US secretary of state, John Kerry i, testifying in Congress the same day noted: “On Ukraine, we’ve held together Europe and the United States in unity to put in place sanctions … We are poised yet to do another round, potentially, depending on what happens with Minsk [the name of a recent ceasefire deal] in these next few days.”