Opinion Losing their roubles
Corrupt Russian officials have long found Cyprus to be a friendly haven,but the rules have changed with the EUs bailout
I realise this is a somewhat irresponsible thought,but I keep wondering why anyone should care if some Russian oligarchs and businesses and corrupt officials lose a bundle in Cyprus. Yes,I know,the EUs original,ham-handed proposal a tax on every bank deposit in Cyprus was potentially destabilising to the worlds financial system. It raised the spectre of bank runs not just in Cyprus but all over Europe. It served as a jolting reminder that the European crisis is still with us. Yada,yada.
But it also turns out that much of the hot money held in the Cypriot banking system is Russian. Russian companies like the low taxes that come with having entities in Cyprus. Because of the wink,wink,nod,nod relationship between Cyprus and Russia,rubles deposited in Cypriot banks are as untraceable as dollars once were in Swiss bank accounts,according to Dmitry Gudkov,an opposition politician (about whom more in a moment). Corrupt officials who embezzle money have long found Cyprus to be a friendly haven. Bloomberg Businessweek reported earlier this week that a substantial amount of the $230 million fraud perpetrated in 2007 against Hermitage Capital a crime unearthed by Sergei Magnitsky,the brave lawyer who died in prison after he exposed the fraud can be traced to Cyprus.
To put it another way,the henchmen of Russias president,Vladimir Putin,who have gotten rich by trampling over the rule of law,are now getting a taste of their own medicine. In Cyprus,with no warning,the rules changed,and deposits larger than 100,000 euros may now face haircuts of as much as 40 per cent. Though the purpose of the tax is to save the countrys banking system,the outcome is the same as when Russian officials create phony tax charges to steal a businessmans assets. People feel they are being robbed. And they become extremely upset.
The funniest part is that according to Reuters,some Russian entities are threatening to sue. Actually,that makes a certain perverse sense: one of the reasons Russian bureaucrats are so quick to move their newly stolen wealth out of Russia is that they want it in a place where the rule of law actually has some meaning. They dont want done to them what theyve done to their fellow citizens.
Ever since Putin reclaimed the presidency last year,the trampling of the rule of law has only accelerated. It is now being used to stifle the last remnants of political opposition. There are lots of recent examples,like the bogus charges brought against Alexei Navalny,the heroic investigative blogger. And then theres the case of Dmitry Gudkov and his father,Gennady.
Both men were opposition politicians in Russias Duma. Both supported the Sergei Magnitsky Act,which President Obama signed in December and which freezes the US assets of Russian government officials who are labelled gross human rights violators. Putin and his underlings are understandably threatened by the new law. They have retaliated by passing a bill banning the adoptions of Russian children by Americans. Then,this month,Dmitry Gudkov,who was also one of only seven Duma members to oppose the adoption ban,made a week-long trip to the US. His primary purpose,he told me on Wednesday,was to investigate the adoption of Russian children in the US. But he also made a speech critical of Putin. Upon his return,Gudkov was accused by Duma leaders of being a traitor.
Garry Kasparov,the former chess champion and now a leading Putin critic,gave me a simple framework for understanding how Putin and his henchmen operate. Its like the mob, he said. The only thing that matters is loyalty. The hit man must be loyal to the boss. The boss must protect the hit man.
In that case,maybe they should start thinking about the coming Cyprus haircut in terms they understand. Its protection money.
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