Cyprus Mail
Business Cyprus

Cyprus’ banking fiasco fails to stem flow of capital out of Russia

By Stefanos Evripidou

THE NEAR collapse of Cyprus as a financial centre saw a reduction in Russian capital on the island but it failed to stem the flow of investment out of Russia, with Russians investing almost €50 billion abroad in the first quarter of 2013, with almost half, €23.7 billion, parked in the British Virgin Islands.

According to The Moscow Times, the latest figures released by the Central Bank of Russia show that Russian President Vladimir Putin’s calls for domestic companies to repatriate their funds back home from offshore jurisdictions have fallen on deaf ears.

With the British Virgin Islands seeing a massive increase in Russian direct investment, counting for 47 per cent of the total outflow from Russia, Cyprus’ close competitor as a financial centre, Luxembourg was home to the second largest Russian investment in the first quarter, counting for over €10 billion.

According to the Wall Street Journal, the latest first quarter figures revealed a massive drop in Russian direct investment in Cyprus, with just €2 billion invested on the island from January to March, compared to €15.8 billion in the last quarter of 2012.

The Moscow Times quoted Alexei Devyatov, chief economist at UralSib Capital, saying that “the figures are, apparently linked to the financial problems in Cyprus”.

While the Cyprus crisis broke out in March, 2013, he suggested many Russian investors had expected problems, resulting in the redistribution of capital flows between offshore centres in the first quarter of the year.

Following the Eurogroup’s decision last March to wind down Laiki and restructure the Bank of Cyprus (BoC), Russian investors saw their accounts either frozen or hacked or both, with Laiki uninsured depositors almost wiped out and a 47.5 per cent haircut imposed on BoC’s large deposits.

Capital controls were imposed in Cyprus, marking a first for the Eurozone.

Putin used the crisis to suggest Russians bring back their money from offshore jurisdictions, but the Russian Central Bank’s figures reveal a different trend.

Analysts suggest the huge bump in investments in Britain’s Caribbean territory, the British Virgin Islands, could be linked to the takeover in March of TNK-BP, Russia’s third-largest oil company, by Russia’s largest oil producer, the state-controlled OAO Rosneft.

Meanwhile, Russian papers also reported on a ban which came into effect earlier this week on Russian state officials holding accounts and assets abroad comes.

According to Kommersant, the laws were adopted as part of a Kremlin drive to repatriate funds from the West, banning politicians and public officials from holding foreign bank accounts. The paper claims the targets of the ban have had to give up foreign property and re-register it with other people.

Related posts

President tells UN secretary-general he’s ready for talks

Nick Theodoulou

Pandemic slashes worldwide income from work by a tenth

Leo Leonidou

Twenty-one Syrians arrive at Cape Greco

Nick Theodoulou

EU sanction threat on Turkey fades after it accepts talks with Greece

Staff Reporter

Coronavirus: 36 new cases mostly footballers, new measures in Larnaca (Update 2)

Nick Theodoulou

Coronavirus: Ethnikos Achnas announces 17 new cases

Nick Theodoulou


Comments are closed.