Cyprus has inherited some of Russia’s economic woes, which have hobbled Cyprus’ own recovery, as reported by Reuters. Since the end of the Cold War, Cyprus has been a favorite vacation spot for the Johnny come lately capitalists of Russia, as well as an ideal place to do business.
Russia’s richest including Alisher Usmanov (a Muslim), and his wife and member of the J-tribe Irina Viner, have “de-offshored” assets overseas, which will be subject to a special tax. Usmanov transferred some of his holdings, which were in Cyprus, back to Russia to stimulate the Russian economy in the face of low oil prices and sanctions. This trend has led to Cyprus’ many problems, according to Reuters.
Russian tourism is down dramatically since the ruble fell against the dollar by 40%. Tourism, which generates 11% of Cyprus’ revenues, has declined 24%. What is especially difficult is that Russian tourists make up a large number of Cyprus’ tourist trade and on the whole, they tend to spend more than visitors from Europe. The combination of difficulties leads to a perfect storm and Cyprus’ fifth year of recession. This follows after the Cyprus’ own economic collapse and bailout from the IMF in 2013 to save it from bankruptcy.
Michael Florentiades, chief economist and head of investment research at XM.com, said “Russia’s presence in the economy has been a huge supporting factor. Its footprint is everywhere from tourism to real estate, so it is worth monitoring the impact.”