Written by Diana-Alexandra Coman
In order to attract foreign investment after the 2013 Banking Crisis, the Cypriot government appealed to the “Citizenship by Investment” scheme. Through investing a minimum of €2 million in Cypriot real estate, wealthy individuals were granted a Cypriot —and thus an EU— passport. Between 2013 and 2020, the Cypriot government attracted 8 Billion Euros in foreign funds through this citizenship pathway, which undoubtedly proved economically beneficial for the island. However, it also attracted a disproportionate amount of high-income Russians (roughly one 6th of the 6.700 recipients), who now constitute a substantial and powerful share of the island’s wealthy population. Historically, the USSR was known for its attempts to influence foreign governments by exploiting business, political, and cultural positions. The formation of the Russo-Cypriot EOP Party (Εγώ ο Πολίτης – I the Citizen) in 2017 has showcased that this trend is replicating itself. Owing much of its funding and guidance from Russian businessmen who have close ties to Putin and his advisers, it seems that the EOP, the Russian Population, and general ignorance of the developing situation on the island, could serve as tools for the Russian Government to spy and influence the inner workings of the European Union and the wider Western community.
Selling Passports to Save the Economy
Prior to the Banking Crisis in 2013, Cypriot Banks held assets valued eight times the country’s GPD, which mainly came from Russian oligarchs. However, poor financial governance and reckless investments in Greek bonds led to the collapse of the Cypriot economy and the dissolution of the Laika Bank (the Cooperative Bank of Cyprus). To address this financial crisis, the newly elected President, Nikos Anastasiadis, formulated a plan to attract foreign direct investment and keep money in Cypriot banks. Thus, the “Citizenship by Investment'' scheme was introduced.
While controversial, EU countries such as Malta, Spain, and Bulgaria also partook in what has come to be known as the “Golden Passports” system. For its recipients, the ability to travel across the EU, run businesses with less hassle, and be restricted by the laws of their other nationality seemed to offset the monetary investment. But for Russian citizens, the EU passport also meant that they could avoid EU sanctions that were applied to their country following the 2014 Annexation of Crimea.
This loophole led the European Commission to raise concerns over money laundering, which eventually caused the Cypriot government to end the scheme in 2020. This move did not affect the 50,000 Russians who already have the right to reside within Cyprus.
How deep are the Russian roots
The EOP claims that its focus is on bettering the life of Cypriot citizens. Its policy plans include stimulating economic prosperity through the increasing liberalization of the economy and the exploitation of new technologies. But its links to Russia are clear. Its founding leader, Alexey Voloboev, was replaced by a Greek Cypriot called Yorgos Kunturis in 2019. Mr. Kunturis happens to be an alumnus of the Conservatory in St. Petersburg and a member of the Expert Council of the Russian Cultural Centre in Cyprus. The party’s spokesman, also a Greek Cypriot, Dimitris Michalakakos, studied in St. Petersburg and had been a member of the Communist Party. Furthermore, the Russian Embassy and the Russian Cultural Centre in Nicosia often host the EOP and associated Russo-Centric meetings, of which many participants come from the wealthy Russian population of Cyprus.
The success of this cooperation led to 100 billion euros alone entering Cyprus as foreign direct investment in 2020. However, due to the European Union’s sanctions on the Russian Government and its citizens, the Russian businessmen’s capabilities to directly affect Cyprus’ finances have been severely limited. Russian tourism has also plummeted due to the lack of direct flights between Russia and Europe, further limiting their physical footprint on the island. Overall, these factors have led to the EOP’s official Twitter becoming inactive and the political parties’ activity being muted. This would indicate a reduction in the risks posed by this subsection of Cyprus’s society to the country itself and the wider European Union. However, this conclusion is counterintuitive, as the current situation now allows for Russian Cypriots to do the most damage.
An open flank for Europe?
At the core of statecraft lies information. For Russia, in its current wartime climate, there is a large and imminent necessity to understand how the EU and the wider Western community are articulating themselves against Putin and his regime. To gather information, espionage techniques serve for acquiring actionable intelligence so that politicians can make decisions. Through Cyprus, the Russian Government now has a golden opportunity to recruit and place its actors within three key strategic areas, being the European academia/industry, the Cypriot Military, or bodies within the European Union itself. Since many Russians have settled in Cyprus, their children have also been eligible for Cypriot citizenship. As many come from wealthy families, they have been enrolled in the numerous British/international schools on the island that offer British-accredited certifications, which may grant easier access to top Universities in Europe. But due to their EU nationality, they also have the capacity to slip vetting nets when applying for government, educational and private institutions following their studies. These individuals become, then, of high interest to Russian International intelligence organizations.
National service laws on the island mean that ethnically Russian Cypriot passport holders are required to serve in the military for 14 months, following their 18th birthday. But this also poses a security challenge. Due to the presence of the British airbase RAF Akrotiri, many interactions and joint training take place between members of the British Armed Forces and those of the Cypriot national service forces. In addition, operation TOSCA, which is the UN-mandated operation to keep the peace between the Greek and Turkish sides of Cyprus, sees a large rotation of multinational forces enter and exit the country annually. From the training and interactions experienced by Russian Cypriots, the Russian intelligence services have a large capacity to glean, copy, and even steal tactics and even equipment from multinational “Western” forces; which could be used against the EU, the UK, and even NATO in the future.
Lastly, while many of the 50,000 Russians living on the island choose what parties they vote for, have no affiliation with the Russian government, and may indeed want to live a life apart from their birth land, the possibility of Russian actors infiltrating other Cypriot political parties is high. This could, under a long-term and protracted campaign, allow Russian actors to manipulate the domestic political discourse on the island. While little evidence of such actions has taken place, the risk nonetheless exists.
It seems that while the decision to allow wealthy business people to acquire Cypriot passports did much good for the Cypriot Economy in a time of crisis, the security pitfalls of such a move seem to have been an afterthought. While other European countries partook in the said scheme, the creation of the EOP, the Anglo-centric education systems, and the dense military presence on the island all have directly led to noteworthy opportunities for Russian Intelligence Services to capitalize on this situation. But although it would be far-fetched to demonize Russian Cypriots, it would be beneficial for institutions considering hiring Cypriot nationals to dig a bit deeper into the heritage and/or network of current and prospective employees.
About the author: Diana-Alexandra Coman
Diana is a passionate irregular warfare researcher. After completing her Bachelor’s in Political Science, she enrolled in a Master’s of Military Strategic Studies at the Netherlands Royal Military Academy to refine her understanding of Civil-Military Interaction. Her focus is predominantly on the Middle-East, however her eagerness to learn extends to all areas of the globe in which irregular methods are used to wage war.
This article was edited by Thomas Courtier.