I won’t bore you with the details of the Cyprus banking crisis. All you need to know is that the island has a huge banking industry that acts much like the Cayman Islands. It relies heavily on rich oligarchs who want to avoid taxes in their home countries. Unfortunately, the banks made bad investments, they’re broke, and they don’t have the money to honor their deposits. Europe floated the idea of punishing small depositors who thought they were insured in order to prevent a total collapse of the entire industry, but that idea quickly sunk like a stone. Cyprus has no way out, and now Europe plans to give a major haircut to any investor with more than 100,000 euros in a Cyprus bank.
Enter Russia. Russian oligarchs have about 30 billion euros deposited in Cyprus. But this massive tax avoidance, rather than annoying the Russian government, has caused them to issue threats.
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.”
Isn’t that wonderful?
And do you want to know how afraid Russia is of alternative clean energy?
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.”
His refreshing candor is completely depressing.