ΝΙCOSIA – Heavily dependent on Russian investors, wealthy bank account depositors and tourists – the second-biggest market – Cyprus is set to take another blow to its economy after backing European Union sanctions for Russia’s invasion of Cyprus.
Struggling to get back to some sense of normality, the island’s legitimate Greek-Cypriot government that’s a member of the European Union will lose Russian visitors, the sanctions barring Russian airlines from coming.
On top of that, Russia’s Ambassador said Cyprus had “shot itself in the foot” by backing EU sanctions. “Where will Cyprus get its Russian tourists from?” he said in an interview with Cypriot Sigma TV.
“They won’t come; where will they go? To Turkey, is that what you want? Summer is coming. You’ve closed your airspace,” he snapped, another bad omen for a country that was slowly coming back from the COVID-19 pandemic.
In a feature, the Washington, D.C.-based Al-Monitor, which specializes in reporting and analysis about the Middle East, reported about the dire straits in which Cyprus finds itself, businesses there reeling from another shock.
The invasion – and sanctions – come just as the government of President Nicos Anastasiades, which had been Russian-friendly and wooing so much Russian money it was accused of being a money laundering haven was opening to tourists and easing health restrictions.
The Cypriot Parliament unanimously passed a resolution condemning the invasion, while Anastasiades said the island stood “together with all Europeans,” after initial reports he would not go along with sanctioning Russian banks before doing so.
Cypriots and Ukrainians marched outside the Russian embassy in protest with placards decrying “Russian Aggression,” the report noted about the furious backlash against Russia and President Vladimir Putin.
Finance Minister Constantinos Petrides said Cyprus “will be affected much less than other countries” without explaining how as the island relies on Russians coming, especially after they were limited during COVID lockdowns.
Russians, after those from the former Colonial ruler the United Kingdom, make up the biggest tourism market for Cyprus, and some 1,000 wealthy Russians were able to buy residency permits that came with EU passports before scandals shut down the scheme.
There are also some 18,000 Russians living on the Greek-Cypriot side of the island, the northern third having been occupied by Turks since unlawful 1974 invasions seized it.
Tourism in 2019 – before COVID hit the next year – brought in 2.68 billion euros ($2.97 billion,) some 15 percent of the annual Gross Domestic Product (GDP) before two years of COVID almost shut it down.
Now, just as hopes were rising and the pandemic waning enough to allow more tourists to come, it won’t include the Russians that Cypriot businesses count on every summer, including their spending.
Ironically, tourists from Ukraine were expected to come but the invasion has seen a million of them become refugees, many fleeing to EU countries, and the rest trying to survive, not travel for leisure.
In 2019, about 20 percent of the tourists annually, some 782,000 out of 3.9 million, came from Russia and found a friendly place on an island with brethren speaking their language and spreading their culture.
After the shutdown year of 2020, there was a gradual return in 2021 thanks to vaccines and a third of those who came were from Russia and Ukraine, now mortal enemies and EU sanctions becoming a real killer for tourism.
With Turkey so far not going along with EU sanctions as the bloc’s relationship with President Recep Tayyip Erdogan has soured over Turkey’s provocations against Greece and drilling for energy in Cypriot waters, Cypriot businesses worry the Russians will go there.
That led Cypriot Foreign Minister Ioannis Kasoulides to say Cyprus had the right to rethink its Russian flight ban if Turkey didn’t go along, which would see Anastasiades’ government break solidarity with the EU.
Russiand and Ukrainians prefer the popular beach resorts of Ayia Napa and Protaras, where they make up about half of the visitors and the prospect they’re not coming has brought shivers to businesses.
Doros Takkas, head of the Famagusta hotels association, said it was a “huge blow” to the sector, the news site reported.
“Many of the hotels in the region work exclusively with these specific markets,” Takkas told reporters. “That means about 30 percent of hotels may not be able to open at all.”
Tourism Minister Savvas Perdios warned of a “considerable loss,” and said Cyprus will have to look for visitors from other countries, even though many holiday packages are set and the invasion has driven up fuel prices, further likely to limit international air travel that was coming back.
“This season will be hard, but it will not be grim,” Perdios told the state-run Cyprus News Agency (CNA,) suggesting that Cyprus can hope to lure more flights from countries such as Austria, France, Germany, Hungary, Israel, Italy and Poland.
“These markets will conduct between 20 and 40 flights per week, compared to 100-120 from Russia and Ukraine,” he said, not enough to make up even a smidgeon of the difference and losses.
There’s reason for other financial whacks too although Petrides said Cyprus has no reserves held by the Russian Central Bank with the EU barring most Russian banks from the SWIFT system of international transfers.
“The sanctions concerning the EU banking system do not affect Cyprus to a large extent, as Cyprus’ banking system has no exposure to Russia,” Petrides said, quoted by CNA – but Russians who stack their money in Cypriot banks can’t come for now – and Cyprus has long faced criticism it’s home to offshore companies of Russian oligarchs.
Petrides said the Cypriot banking system “maintains one of the highest levels of capital adequacy and liquidity, and there is no reason for concern for any bank in Cyprus,” unlike in 2013 when it nearly collapsed.
That was because of huge losses from big holdings in bad loans to Greek businesses who didn’t pay them back and in Greek bonds devalued 74 percent in a failed attempt to slow that country’s economic crisis.