As has been made abundantly clear on these pages since the breakout of the latest Cyprus crisis, the Russian policy vis-a-vis its now former Mediterranean offshore deposit haven-cum-soon to be naval base, has been a simple one: let the country implode on the heels of the Eurozone's latest humiliating policy faux pas, so that Putin can swoop in, pick up assets (including those of a gaseous nature, much to Turkey's chagrin [7]) for free, while being welcome like the victorious Russian red army saving Cyprus from its slavedriving European overlords (a strategy whose culmination Merkel has very generously assisted with).
Curiously there had been some confusion about Russia's "noble" motives in Cyprus (seemingly forgetting that in Realpolitik, as in love and war, all is fair). We hope all such confusion can now be put to rest following the clarification by Jorgo Hatzimarkakis, the German Euro deputy of Greek origin, who told Skai television on Sunday morning that Russia did not want Cyprus to stay in the eurozone.
From Kathimerini [8]:
Jorgo Hatzimarkakis, the German Euro deputy of Greek origin told Skai television on Sunday morning that Russia did not want Cyprus to stay in the eurozone.
“Cyprus’s alternative plan was only a half-plan that also relied on Moscow’s help. However Russia preferred a Cyprus outside the eurozone, but inside the European Union,” stated Hatzimarkakis.
Cypriot Finance Minister Michalis Sarris returned to Cyprus on Friday after his week-long effort to convince Russian authorities to lend some support to the Republic in the form of a new interstate loan, contribution to a bailout fund or even the extension of the 2.5-billion-euro loan from 2011, but to no avail.
At this point it bears (pun intended) pointing out that what Russia does as Cyprus situation devolves into utter ad hoc chaos, in both Cyprus and Europe, is the biggest and most important wildcard. So here, according to the Guardian, are some things a suddenly quite furious Russia can do (aside from watching quietly on the side as its billionaires are suicided):
Fears are growing of Russian reprisals against European businesses as EU authorities desperately seek a deal to save the Cypriot economy by imposing a 25% levy on bank deposits of more than €100,000.
As the island scrambled to put together a rescue programme, its finance minister, Michalis Sarris, said "significant progress" had been made on the latest levy plan in talks with officials from the European Union, the European Central Bank and the International Monetary Fund.
The government in Nicosia faces a deadline of Monday to reach an agreement or the European Central Bank says it will cut off emergency cash to the island, spelling the likely financial collapse of its banking system and a potential exit from the European single currency.
However, with Russian investors having an estimated €30bn (£26bn) deposited in banks on the island, the growing optimism about a deal was accompanied by fears of retaliation from Moscow. Alexander Nekrassov, a former Kremlin adviser, said: "If it is the case that there will be a 25% levy on deposits greater than €100,000 then some Russians will suffer very badly.
"Then, of course, Moscow will be looking for ways to punish the EU. There are a number of large German companies operating in Russia. You could possibly look at freezing assets or taxing assets. The Kremlin is adopting a wait and see policy."
Nekrassov rejected suggestions that Russia might hit back by cutting off gas supplies, a tactic the country used in 2009 after the collapse of talks with Ukraine to end a row over unpaid bills and energy pricing.
"Gas is no longer a weapon," Nekrassov said. "When Russia did that before, it realised that the foreign energy lobby reacted and efforts to find alternative sources were increased. If Russia kept threatening, it knows that nobody would be buying its gas in 20 years' time."
Mike Ingram, an analyst at City broker BGC Partners, said: "In Russia, historically, if they want an asset they just grab it. If they want cash out of a [EU] business [in Russia] they just create a tax bill or raid offices and make your life unpleasant. They could also make life difficult diplomatically on issues such as Syria. They might also rattle a few sabres over deployment of the missile defence system."
Sadly, unlike the rest of the algorithmic world, Russia does not succumb to the idiotic policy of "if S&P is up, then all is well" and neither does it have an endogenous bent toward seeing everything in an optimistic light, unlike Mr. Ingram above. Which is why with the decision-making process in Europe in total disarray, keep a very close eye on Russia's next steps, as well as on any potential future suicides of Russian oligarch billionaires.