In Cyprus port, Russian money flows freely

Sat Feb 23, 2013 11:42am EST
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By Deepa Babington

LIMASSOL, Cyprus (Reuters) - In this seaside Cypriot town, an image of the Kremlin's onion domes adorns the doors of a local mini-market, Ferraris stand ready for hire by wealthy Russians and shops selling mink coats line streets drenched in warm Mediterranean sunshine.

Home to over 30,000 Russians who began flocking to Cyprus after the Soviet Union's collapse and catering to many more tourists each year, locals jokingly refer to the town, complete with Russian signs and schools, as "Limassolgrad".

"Cyprus is a fantastic place to do business from - people are friendly and for Russians it's very convenient because every single person in Limassol speaks some Russian," said Vadim Romanov, a 28-year-old Russian property developer who says he also has business interests in restaurants in the town.

"It's like I never left Russia."

Limassol, in the Greek speaking Cypriot south, epitomizes the love affair between two Orthodox Christian nations that can be traced back to Byzantine times and is now underpinned by deep financial ties.

But those ties are coming under unprecedented scrutiny by European policymakers who question whether Cyprus is a hub for Russian money laundering, while pressing Moscow to extend its 2.5-billion euro loan to help the island avoid bankruptcy.

Eye-popping amounts of cash wash between the two countries every year - several times Cyprus's 18-billion-euro national income - as Russians take advantage of a treaty that lets them pay the island's low tax rates but also raising suspicions among some EU states that complex transfers are used to launder money that was illegally earned or on which more tax should be paid.

Cyprus - which will elect a president in a run-off vote on Sunday - is still waiting on EU aid eight months after asking for help, with a bailout held up partly on German fears that the euro zone could inadvertently be bailing out wealthy Russians who have parked their money in financial institutions in Cyprus.   Continued...

People listen to two musicians at main market street in Nicosia February 23, 2013. Cyprus will hold presidential elections on Sunday. REUTERS/Yorgos Karahalis