LIMASSOL, Cyprus: Cypriots say their island paradise, home to thousands of Russians seeking sun, tax benefits and an EU entry point, has not suffered from deteriorating relations between Moscow and the West and some have seen benefits.
The EU and eurozone member was worried its close links between the two would be put to the test when Europe and the United States started talking about sanctions on Russia to protest its seizure of the Ukrainian territory of Crimea.
Any deepening of the crisis could still hurt the economy. U.S. President Barack Obama appeared to toughen his stance Wednesday and agreed with the EU at a summit in Brussels to work on possible harsher economic sanctions.
But the sanctions so far – on individuals and one bank – have not had an impact and some businesses have even reported that interest has picked up from Ukrainian and Russian customers since the crisis began.
“When they talked about sanctions first we were very scared [of what it could mean for Cyprus], when we saw what they want, [we see] it is a joke,” said Phidias Pilides, president of the Cyprus Chamber of Commerce, which represents about 8,000 businesses. “It’s not just limited ... these are just for appearance.”
Some 40,000 Russians live in Cyprus out of a total population of 800,000. Many live in the port of Limassol, where shop and menu signs in Russian are common on the main seafront boulevard. There are three local Russian newspapers and children can attend a Russian school.
Christos Panagi, general manager of Limassol-based property developer Pandomus, said the bonds between Russia and Cyprus could grow deeper as a result of the crisis.
Cypriot law allows those who buy a house worth 300,000 euros to claim permanent residency rights, while those who spend 5 million euros or more on property can apply for passports.
Panagi said he had seen an increase in Russian and Ukrainian interest in property that would qualify them for residency or passports in the weeks since the crisis broke. “People don’t say that this [the crisis] is the reason,” he said, but added that the timing of the interest suggested an obvious link.
Cyprus has long straddled the line between the powerhouses of the East and West. It was a dynamic that featured prominently a year ago when Cyprus agreed to rescue its banks by seizing money from big savers, many of them Russian, as a condition of a 10 billion euros bailout from the EU.
Some Russians abandoned Cyprus after losing their savings but most stayed.
Andreas Neocleous, chairman of the Limassol-based legal firm Andreas Neocleous & Co. whose work includes advising Russian investors in Cyprus, said his clients had not been affected by the political drama in Ukraine.
Further sanctions would not affect businesses and individuals’ setting up holding companies in Russia, he said.
“There were some wheelers and dealers who left Cyprus [after the banking crisis] but the good businesses and good business people are still here,” he said.
“The bonds and relations between us and Russia go back in history to the Byzantine times. ... I don’t think the political situation between the U.S. and Russia will be able to affect those good relations.”
However, Pilides said tourism could suffer if Russians were forced to get visas to EU countries as part of further sanctions or if the Russian ruble became so weak against the euro that it was too expensive for Russian tourists to visit.
Data from the Cyprus Tourism Organization shows the number of Russian visitors to Cyprus was second to visitors from the U.K. in the first 10 months of 2013.
The CTO was expecting Russian visitor numbers to increase by 25 percent in 2014.
Ruble weakness would also make it expensive for Russians to do business in Cyprus. The ruble fell against the dollar and the euro Thursday.
Natalia Seleari, owner of a Russian bookstore in Limassol, said up to 30 percent of her summer trade comes from tourists but a weaker ruble would reduce the cost of her stock. She said she was not worried about an escalation of the crisis.
The U.S. and EU agreed to work together to prepare possible further economic sanctions against Russia.
But both Neocleous and Pilides say that other top locations for Russians including the Netherlands, Luxembourg and Britain would have a lot to lose from tighter restrictions.
“There are a lot of very wealthy Russians in London. ... There are more Russians in London than in Limassol,” Neocleous said.