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Our View: East or West, we will have to choose

When the US secretary of state talks of a strategic partnership, he is not spouting diplomatic niceties

MANY HAVE been wondering what the attraction of a struggling bank, operating in a tiny economy and with almost 50 per cent NPLs in its portfolio, was for American investors. What returns do they expect on their investment to be willing to sink hundreds of millions of euros in Bank of Cyprus? Yet if the extraordinary general meeting, scheduled for the end of August, approves the €1 billion euro increase in the capital of Bank of Cyprus, US interests could control as much as 45 per cent of the shareholding.

This attraction is related to the hydrocarbon prospects and future drilling operations in the sea surrounding Cyprus. American oilfield services giant Halliburton has also concluded a deal with the government to use Cyprus as its base for operations in the east Mediterranean. Schlumberger, another US giant that offers support services to the gas and oil industry, is also expected to set up offices in Cyprus. With US hedge fund Third Point having acquired more than a 20 per cent stake in Hellenic Bank it could be said that American business is not just showing great confidence in a small and struggling country, but it has also identified good investment opportunities.

Perhaps American companies know something we do not. What is clear is that this sudden business interest is not out of the blue. It is linked to the US administration’s unfolding political interest in Cyprus, exemplified by last May’s visit of Vice President Joe Biden who declared that Cyprus was a ‘strategic partner’ of the US. Before this, Foreign Minister Ioannis Kasoulides was invited to Washington where he met Secretary of State John Kerry, who first spoke about the new strategic partnership, between the two countries. Kerry also spoke about visiting the island this year though there is nothing definite.

The vice president of the world’s superpower does not visit a tiny and inconsequential island on a whim, nor because he has good relations with the Greek lobby. Nor can the secretary of state’s talk of a ‘strategic partnership’ be dismissed as diplomatic niceties.

The US administration means business. It has plans for the region and has decided that Cyprus, because of its geographical position, will be a key part of its strategic planning for the Middle East in which instability and uncertainty is growing by the day and Islamists are on the advance.

What role Cyprus would have and what form the strategic partnership would take is unknown. These matters may have been discussed between Kasoulides and Kerry and subsequently during Biden’s visit, but have been kept a carefully-guarded secret. The Anastasiades government, which is pro-West and has openly spoken about its wish to join NATO at some point in time, must have reached an understanding, if not a deal, or there would have been no talk of a partnership or repeated public US support for Cyprus’ right to exploit its hydrocarbon deposits.

Some speculation suggests that the primary objective of the Americans is to cut Cyprus’ political and economic ties with Russia because we are entering a new Cold War in which the competing powers are intent on expanding their spheres of influence. This is supported, to an extent, by the sudden interest of American investors in Cypriot banks and the arrival of big US companies. If the capital issue at the Bank of Cyprus is approved, control of the island’s systemic bank would pass from Russian to American interests.

Perhaps the US considers the hydrocarbon deposits in Cyprus’ EEZ could provide an alternative energy source to Europe which has a big dependence on Russian natural gas. Cyprus’ total deposits will only be a small fraction of Russia’s but this would be an indication of the West’s efforts to limit Europe’s energy dependence on Russia.

This is speculation. We do not know what the long-term US plans for the region are. What we do know is that Cyprus is part of them and this could be the reason it has become attractive to American business.

Whether we would agree to be part of these plans remains to be seen. The Anastasiades government is fully in favour, but there could be strong objections from the political parties and media that are not just pro-Russia, but also stridently anti-US and anti-West. But the time when we have to decide which camp we belong to is fast approaching, because the world is once again divided into rival spheres of influence. Sitting on the fence will not be an option.

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