09 March 2014 15:13

As the European Union contemplates sanctions against Russia over the crisis in Ukraine, Cyprus, heavily dependent on tourists from both warring sides, could find itself caught in the crossfire.
Critics have warned that Cyprus will have to object to any possible EU sanctions against Moscow now that the cash-strapped island badly needs strong allies.
"The Cyprus Republic should not become part of the problem. Under no circumstances should Nicosia agree to any sanctions against Russia," George Lillikas who heads the Citizens Alliance said.
"Right now, Cyprus needs allies more than ever and it is absolutely essential to restore recently damaged relations with Russia rather than undermine them," added the former foreign minister.
Lillikas was referring to the island's banking crisis last year which led to a bailout by depositors above €100,000 including many Russians and Ukrainians whose accounts were in collapsed Laiki Bank and Bank of Cyprus (BoC) which absorbed it.
Depositors in BoC lost up to 47.5% of their deposits after the island's €10 billion international bailout demanded massive contributions from savers.
Incumbent foreign minister Ioannis Kasoulides on Friday played down the imminent dangers of Cyprus taking a stand against Russia in a bid to toe the EU line.
But he did say that authorities - with the Central Bank of Cyprus in charge - will do their best to see if any of the 18 Ukrainian officials black-listed by the EU accused of embezzlement have accounts in Cyprus. The EU list includes Ukrainian President Viktor Yanukovych's two sons.  
There was a top-level meeting at the foreign ministry on Friday with the participation of Central Bank officials as well as from MOKAS (anti-fraud squat) to look into these cases.
"If the investigation reveals that capital or bank accounts here belong to any of these 18 officials, the Cyprus government will have to abide by the EU decision," Kasoulides said.
He said foreign deposits in Cyprus banks are already affected by capital restriction measures still in place since March 2013 and cannot be taken out.  
At the same time, bilateral and commercial relations between Cyprus and Ukraine were prospering with the island's direct investments there taking up first place among foreign investors.
A prominent economist and former banker who asked for anonymity said Cyprus-Ukrainian economic relations have - so far - not been affected by the escalating crisis.
"What could affect us though is if Kiev decided to impose controls on capital movement because there are a lot of offshore companies here in Cyprus," the economist said.
"On the other hand, it could be of benefit to Cyprus if oligarchs with massive amounts of money get scared from the crisis and take the money out of the country. Cyprus was and still is a good destination. Just like rich Egyptians who have brought over here a lot of money," he added.
 
 


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