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Moscow on the Med: Cyprus and its Russians

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Via Financial Times

It was a rich Russian customer who taught Michalis Constantinou an early lesson about succeeding as a high-end jeweller in Limassol. Not long after he opened in the Cypriot coastal resort two decades ago, she came into his shop and asked to buy a pricey water-resistant Omega timepiece to wear while swimming. 

Constantinou, a burly 48-year-old former javelin thrower, recalls the incident with a chuckle. “I said, ‘Don’t you think a €20,000 gold watch is expensive for the sea?’ She replied: ‘No, no, no, this is the cheap one, because I have a €150,000 Patek Philippe at home — I just forgot to bring it to Cyprus with me.’ I was like, ‘OK, I realise I have to grow up a lot here if I want these clients!’”

Since then, a whirlwind of booms, busts and revivals of Russian fortunes has helped Constantinou build a chain of shops and kept him in Louis Vuitton loafers. He is a self-proclaimed Russophile who listens to Russian music in his car. He says it is now “not possible” to tear Cyprus from its Russian community, whether they are naturalised citizens or investors. 

“It’s so well mixed,” he reflects, leaning forward to make his point over a sample tray of diamond rings priced up to €327,000. “It would be like trying to separate the fruits of a blended juice.”

The role of Russian-speakers in Cyprus’s recent history is much more than just a source of wealth for luxury-goods retailers such as Constantinou. The post-Soviet influx of money and people into this Mediterranean island of barely one million inhabitants has, at times, turned it into a Petri dish of western worries about Russia’s activities in Europe, both real and imagined. Economic and political connections between the two countries have highlighted deepening tensions within the EU over how to deal with President Vladimir Putin’s Kremlin. 

Michalis Constantinou in his high-end jewellery shop in Limassol, where wealthy Russians make up many of his customers
Michalis Constantinou in his high-end jewellery shop in Limassol, where wealthy Russians make up many of his customers © Antonis Theodoridis

The Moscow factor reveals how Cyprus has become a microcosm of the multiple headaches afflicting the European bloc. A scandal late last year around a Cyprus government programme to sell citizenship to thousands of rich foreigners has exposed rising unease about similar schemes under which most fellow member states offer passports or residency for money. This nexus between lucrative business and Cypriot officialdom underscores broader fears about the threats of political corruption and a slide in the rule of law elsewhere. 

In a world of growing conflicts over territory and resources, troubles in the region are symptomatic of increasing stresses at the EU’s periphery. Cyprus’s north has been occupied militarily for almost 50 years by Turkey, where President Recep Tayyip Erdogan is increasingly assertive. A near-decade-old war rages in Syria to the east. “We ask ourselves, are these things going on all over the EU but we see it more starkly?” says Andromachi Sophocleous, a Cypriot political analyst and activist, about the narratives propelling her island’s story. “This is the constant question.”


Cyprus has a long history of being buffeted by powerful forces. Originally settled by ancient Greeks, it has been subordinate to Assyrians, Egyptians, Persians, Romans and an Arab caliphate, as well as Venice and the Ottoman Empire. It came under British administration in 1878 and then became a colony until the nationalist struggle won independence in 1960.

The defining event since then was the tumultuous week in July 1974 when, in response to a coup that sought to unite the territory with Greece, Turkey launched an invasion of the country’s north, claiming it was protecting the minority ethnic Turkish community. Northern Cyprus declared itself an independent state in 1983, but is not recognised by the UN nor any national capital other than Ankara. 

Luxury new-builds have sprung up in Limassol, as have companies that help foreigners to live, do business or stow wealth on the island
Luxury new-builds have sprung up in Limassol, as have companies that help foreigners to live, do business or stow wealth on the island © Antonis Theodoridis

In 2004, Cyprus joined the EU, but the bloc’s rules are suspended on the northern side of the UN-supervised Green Line that divides the country. “Cyprus strives for this balancing act,” says Fiona Mullen, director of Sapienta Economics, a consultancy based in the capital Nicosia. “They don’t want to be enemies of anybody because they have got this one big enemy in Turkey.”

Like other small states around the world with limited economic options, modern Cyprus built a financial sector geared to entice overseas money. Low taxes, light regulation, a favourable tax treaty and, more recently, the rule of law and depositor guarantees offered by EU membership helped turn it into a haven for Russian investors after the USSR collapsed.

The attraction built on political ties between the Cyprus Communist party and its Russian counterpart, as well as cultural links via the Orthodox church. By late 2012, Moody’s estimated Russian banks and corporates had $31bn on deposit in Cyprus — more than the island’s annual gross domestic product. Russian banks’ cross-border loans to Cypriot-based Russian companies totalled somewhere between a further $30bn-$40bn. 

Limassol has historically been the centre of Cyprus’s Russian community. About an hour from Nicosia, its sprawling cluster of new builds radiate from a long corniche. Cranes yank up the ever-rising skyline, while the highway from the capital is fringed by billboards advertising extravagant new developments.

The streets are sprinkled with the offices of law firms and businesses that help Russians and other foreigners to live, do business or stow wealth on the island. One company, Limassolgrad, promises clients who want to buy property that they will be able to move “instantly, no need to wait”. At night, its neon sign stands out, with the company’s name emblazoned in the middle of the distinctive London Underground logo.

The neon London Tube-style sign for the property company Limassolgrad, which tells clients they will be able to move to the island ‘instantly, no need to wait’
The neon London Tube-style sign for the property company Limassolgrad, which tells clients they will be able to move to the island ‘instantly, no need to wait’ © Antonis Theodoridis

Victoria Maltabar has watched the highs and lows of Russians in Limassol for more than 20 years. She casts herself as a well-connected organiser and problem-solver, having played various roles from convener of lavish parties to aide to fellow Russian-speakers navigating the legal and administrative requirements to invest and live in Cyprus. “They call me Russia’s secret weapon, they call me Russian mafia,” she jokes, as we drink coffee overlooking the sea. 

Now in her mid-thirties, Maltabar is immersed in a community of Russian-born residents that numbered more than 10,000 in the island’s 2011 census. She was born in Ukraine, then lived in Siberia until her father decided he wanted her to speak English and be closer to the family roots of her grandfather, a Greek émigré to Crimea. At the age of 12, she travelled to Limassol to join her sister, who was in her twenties and already enjoying the ease, safety and sun of Mediterranean life. 

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Maltabar came to love it too and, despite spells away, has been drawn back ever since. After returning to Russia to study law and help market a new mobile network her father was setting up in Siberia, she came back to Cyprus in the mid-2000s and sold subscriptions to the Russian satellite channel NTV. 

“No matter what financial status we had, we were just friends, friends in some other country,” she recalls of the close-knit diaspora circles in which she moved. 

Later, she assisted people and companies who wanted to do business in, or immigrate to, Cyprus. Russians were prominent around town, and clubs and restaurants targeted them. “It was always a lot of Russians and money, and they were spending like crazy,” she says. “You would never see a cheap car, it was starting from Bentley and Lamborghini.”

She recalls a 50th-birthday party for a visiting Russian celebrity in a nightclub, where the crowd parted to reveal bearers striding through fireworks carrying “a huge, huge beam, a metallic beam with a huge, huge bottle of champagne. I cannot even say how many litres it was, it was half of my head up to here,” she says, indicating a height nearly as tall as herself. 

Victoria Maltabar has lived in Limassol for more than 20 years, and helps Russians move to and invest in Cyprus: ‘They call me Russia’s secret weapon,’ she jokes
Victoria Maltabar has lived in Limassol for more than 20 years, and helps Russians move to and invest in Cyprus: ‘They call me Russia’s secret weapon,’ she jokes © Antonis Theodoridis

Then, in 2013, “everything changed in one day”. Maltabar remembers going to buy petrol but being unable to pay for it because bank transactions had temporarily stopped. It was the start of a financial crisis that pushed the island close to bankruptcy. Under the €10bn EU bailout package that followed, large depositors lost big chunks of their money. The measures hit rich Russians and Russian companies particularly hard. “Of course a lot of people suffered, because they lost a lot,” Maltabar says of that time. “And they still talk about it.” 

One condition of the bailout was a clean-up of Cyprus’s financial system. Over the following years, tens of thousands of bank accounts linked to Russians were closed and company boards shaken up, although critics say the changes did not go far enough.

The international investor and anti-corruption campaigner Bill Browder is a strong critic of the Russian financial presence in Cyprus. He has alleged money ended up there from a tax fraud perpetrated by Russian officials and uncovered by his former accountant Sergei Magnitsky, who was arrested and beaten to death in a Moscow jail in 2009. Browder is currently battling an attempt by the Russian authorities to seek legal assistance from Cyprus for a corruption case against him, in which he denies wrongdoing. 

“The situation in Cyprus is still a mess when it comes to dealing with Russia,” he says. “The reason for that is that they have such a conflict of interest because so many Russian individuals and companies base themselves there to invest in Russia. So there are numerous lawyers, company-formation agents, real estate brokers and others who are making money off the Russians. And the unfortunate thing is some people in government are making money out of this, or have family members who do.”


The financial collapse in 2013 left the newly elected president Nicos Anastasiades desperate to revive the economy. He hit upon the “citizenship by investment” scheme, the so-called golden passport initiative that offered nationality to foreigners prepared to pay at least €2m for a property. Under the scheme, Cyprus acquired thousands of new nationals and raised more than €6bn from real estate sales, but critics warned the entry conditions were too easy and the supervision too lax.

Russian investors and their families accounted for nearly half of the 3,153 golden passports awarded between 2013 and February 2018, according to an answer to a government answer to a parliamentary question (Chinese nationals were the second-biggest beneficiaries, with almost 500 awards). The scheme boomed, even as EU countries slapped sanctions on Moscow over its 2014 annexation of Crimea.

Prominent Russians with Cypriot nationality include Viktor Vekselberg, a metals, energy and telecoms tycoon placed under US sanctions in 2018. He has denied any wrongdoing and a spokesperson said a company ultimately owned by him is still the largest shareholder in the Bank of Cyprus. 

The time bomb that sceptics always claimed lay at the heart of Cyprus’s golden passport scheme exploded at the end of last year. In October, Reuters reported that eight relatives and associates of Hun Sen, Cambodia’s authoritarian prime minister of 35 years, had received Cypriot nationality.

The following month, the Cypriot news organisation Politis revealed the country had also given citizenship to Jho Low, a Malaysian businessman under US criminal indictment for his alleged role in helping siphon billions of dollars from the country’s 1MDB state investment fund (Low has always denied wrongdoing).

Cyprus’s authorities, which toughened due diligence on the scheme last year, subsequently launched a process to strip nationality from 26 people because of “mistakes” in the award process. People familiar with the matter say they included Low and the Cambodians.

Another was reportedly the billionaire Russian industrialist Oleg Deripaska, who was placed under US sanctions in 2018 but denies any wrongdoing and is contesting the designation. Deripaska’s spokesperson did not respond to a request for comment. The Cyprus government has declined to disclose details of the 26. The process has proved legally complicated and is not yet complete.

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Stelios Orphanides, a Cypriot investigative journalist, says the citizenship scheme has both deepened Russian links and opened up others. “Now you also get influence from billionaires from other countries,” he says. “You never know what kind of influence you are granting when you give golden passports to people connected with opaque regimes such as China or Saudi Arabia.”

The scandal highlighted bigger concerns about what the European Commission has branded the “inherent risks” of such citizenship schemes. Most bloc member states offer “golden visas” to investors that grant a right of residence to the wealthy and give a route to nationality, according to a Commission report published last year. Cyprus was one of three — along with Bulgaria and Malta — that offered passports up front. The Commission wrote to the trio last month asking them to phase out their programmes.

The Jho Low case also exposed details about how nationality was being sold in Cyprus. Low’s case had been backed by Archbishop Chrysostomos, head of the Eastern Orthodox church of Cyprus, who told local media the Malaysian businessman had given €300,000 towards a theological school. His citizenship application was sealed in days thanks to a fast-track process signed off by the country’s cabinet, headed by president Nicos Anastasiades.


Cyprus’s president, Nicos Anastasiades, who introduced the ‘golden passport’ citizenship scheme. He denies that his government is too close to the Kremlin, saying, ‘Our family is European’
Cyprus’s president, Nicos Anastasiades, who introduced the ‘golden passport’ citizenship scheme. He denies that his government is too close to the Kremlin, saying, ‘Our family is European’ © Antonis Theodoridis

I meet Anastasiades at the presidential palace in Nicosia, which bears the scars of the island’s turbulent modern times. The sandstone frontage is pocked with bullet holes from 1974. During his seven years in office, the 73-year-old has rebuilt ties with Russia after the financial crisis. He was the only EU head of government reported as having attended the 2015 parade in Moscow to mark the 70th anniversary of Victory in Europe in the second world war, an event boycotted by most western leaders after Moscow’s Crimea occupation. 

Cyprus is of growing strategic interest to Russia as it expands its Mediterranean influence, notably in Syria and Libya. In 2015, the island — which still hosts two large British military bases dating back to colonial days — signed a deal to allow Russian navy ships to visit its ports. The American Hellenic Institute advocacy group says it received a letter last month from the US deputy assistant secretary of state Matthew Palmer, in which he urged Cyprus to stop “Russia’s regular navy port calls”. He said these vessels were contributing to “destabilising actions” in Syria, where Moscow supports president Bashar al-Assad’s regime in the long-running civil war. (A US official did not dispute the reported contents of the letter.)

Wearing a dark pinstriped suit in the style of his former profession of corporate lawyer, Anastasiades is quick to contradict the suggestion made by some EU diplomats that his government is too close to the Kremlin. He says Cyprus has built links with many countries as part of a “multilevel” foreign policy to deal with the threat from Ankara.

I ask what he would say if Putin called him tomorrow to ask him to veto the next rollover of EU sanctions on Russia. He says he has been loyal to the bloc policy — “our family is the European Union” — despite domestic criticism, and sidesteps a follow-up question about whether he thinks the sanctions are a good idea. He says he supports those countries — including France — that, contentiously, favour greater dialogue with the Kremlin. 

People with knowledge of the matter say US officials have generally been pleased with Cypriot co-operation on Washington’s Russian sanctions, via measures such as a crackdown on anonymous shell companies. Yet the island’s wider regime against money laundering and terrorist financing still suffers from “various major shortcomings”, according to a report published in December by the Moneyval committee of the Council of Europe intergovernmental watchdog. The report found that authorities were “not yet sufficiently pursuing money laundering from criminal proceeds generated outside of Cyprus, which pose the highest threat to the Cypriot financial system”. 

The presidential palace in Nicosia is pocked with bullet holes, reflecting events that have shaped the island’s modern history
The presidential palace in Nicosia is pocked with bullet holes, reflecting events that have shaped the island’s modern history © Antonis Theodoridis

Cyprus is far from alone in the EU in facing such criticisms, and Anastasiades disputes the idea that the Moneyval assessment is a wake-up call. “What they are reporting is that there is progress in all fields,” he says. “Of course, there are still some further steps we have to take.”

Another source of questions is Anastasiades’s former law firm, which has processed golden passport applications. He says he handed over his shares in it when he became president, although they are held by his daughters and the firm still includes his name. He denies there was any conflict of interest, real or perceived, saying that only 42 golden passport applications granted by the Cyprus government had been submitted through his ex-office. He adds he would be happy to see those awards investigated to confirm there was no “privileged treatment” offered to those clients.

As the interview ends to allow Anastasiades to sign a condolence book for the late Egyptian dictator Hosni Mubarak, he stresses his opposition to corruption and insists his previous high-profile legal career is not a source of concern but a kind of safeguard. “I have done so well when I was a lawyer that I have a lot of savings,” he says. “I’m not in need to be corrupted.”


Afterwards, I describe my encounter with Anastasiades at lunch with Marios Zachariadis, a professor who served between 2013 and 2015 on an economic advisory council set up by the president. I tell him about Anastasiades’s denial that his family’s continued connection to his former law firm raises any concerns. “He doesn’t really see the problem,” Zachariadis says. “That’s the tragedy of it.” 

We talk about Cyprus’s Russian connections and the EU’s concerns. Some diplomats from countries critical of Russia see the island as a potential conduit of information to and from Moscow, knowingly or otherwise. Those fears were heightened by the news in late 2018 that hackers allegedly linked to the Chinese People’s Liberation Army were able to download years’ worth of EU diplomatic cables via an entry point in the Cyprus foreign ministry.

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I ask Zachariadis if he thinks these worries about Nicosia’s reliability reflect a problem or paranoia. “Probably both,” he replies. “Would Putin ever come to rescue Cyprus — that’s a joke, right? But a lot of Cypriots probably trust Russia more than the US and the UK. They think Europe will never come to the rescue if there’s ever a military incident with Turkey. That’s the bottom line.” 


What will follow the traditional establishment represented by Anastasiades when he leaves office is as uncertain in Cyprus as it is in many other EU countries. The island’s house of representatives is split between eight parties, with none having more than the 18 seats held by the president’s Democratic Rally party.

One intriguing entrant to the country’s political scene has also given a fresh dimension to Cyprus’s Russia links. The I The Citizen party was founded in 2017 by Alexey Voloboev, a Russian-born businessman, and Ivan Mikhnevich, an online entrepreneur and naturalised Cypriot originally from Belarus. Leading figures from the party agree to meet me in Nicosia one afternoon in a nondescript office above a boutique. A large banner on one wall shows the party’s logo of a silhouette of Cyprus enclosed in the body of a soaring bird of prey.

Key members of the new I, Citizen party, from left: Alvinos Vassiliades, frontman Yiorgos Kountouris and founders Alexey Voloboev and Ivan Mikhnevich
Key members of the new I, Citizen party, from left: Alvinos Vassiliades, frontman Yiorgos Kountouris and founders Alexey Voloboev and Ivan Mikhnevich © Antonis Theodoridis

The party’s main frontman is Yiorgos Kountouris, a conductor for the Cyprus Youth Symphony Orchestra who studied in St Petersburg and California. He denies speculation that I The Citizen has links with the Russian state, arguing that the party is not mainly driven by — or even aimed at — Russian speakers, which is why island-born Cypriots like himself are now prominent. “What we are trying to do as a new party is gather healthy and fresh minds,” he says.

The softer-spoken Mikhnevich says he helped launch the party partly because he wanted to assert the equal rights of all Cypriots to participate in national life, whatever their origins. While the Soviet Union in which he grew up had failed, he was still “a kind of union person”, and a federal European to boot. “I want the European Union to be as strong as the Soviet Union was — for its army to be powerful, and so on.”

The Nicosia offices of the I The Citizen Party. The party is for everyone with ‘a fresh mind’, says Yiorgos Kountouris, an island-born Cypriot.
The Nicosia offices of the I The Citizen Party. The party is for everyone with ‘a fresh mind’, says Yiorgos Kountouris, an island-born Cypriot. © Antonis Theodoridis

Voloboev, his fellow founder, who has interests ranging from tourism on the island to oil trading in Russia, calls for “a renovation of Cyprus”, yet the party’s vision for achieving this seems almost anarchic. It has no members and doesn’t even register interested people because it doesn’t “consider them our property”, according to Kountouris. Its inspirations — in tactical if not political terms — are presidents Volodymyr Zelensky of Ukraine and Emmanuel Macron of France, outsiders who came from nowhere or set up new party structures to win.

Also present is music teacher Alvinos Vassiliades, who points to another reason why the party is far too heterodox to be a Kremlin front: “We don’t agree among ourselves, never mind with foreign powers.”


In her red Mercedes, Victoria Maltabar drives me to the Limassol Marina, which has been marketed with the golden-passport scheme in mind. The marina’s website points out that buying its properties offers a path to citizenship and visa-free travel to “at least 163 countries”, with no obligation to live in Cyprus either before or after acquiring nationality. Maltabar says she wants to stay in Cyprus but the Russian community is less tight since the golden passport scheme allowed an influx of absentee wealth. “I would never live here,” she says, gesturing across the darkening waters of the marina. “No matter how much money I had.”

The currents of Russian influence are just one of many forces roiling Cyprus as it tries to stake a place as a secure and solvent small state in a tough neighbourhood. The island adds another dimension to the EU’s struggles to shore up fraying solidarity and prevent a free-for-all in which member states build alliances with powers outside the bloc. The friction puts Cyprus in an uncomfortable spot and means it may be “forced to choose sides”, says veteran economist Marios Clerides. “Cyprus doesn’t want to fit into one sphere.” 

The coronavirus pandemic will also change priorities in ways that may be profound. This tiny country typifies the precariousness of those entrepots scattered around the world that have come to rely on the free movement of people, from package tourists to the super-rich. Shortly after the FT’s visit in early March, the government imposed a strict lockdown that it has only just begun slowly to lift. If an age of globetrotting wealth and mass holidaymaking is now seen to have stalled, the island will be severely tested. 

Back in Limassol, Michalis Constantinou’s main jewellery shop reopened last week after nearly six weeks. In the first few days back, many of the customers were Russians. “Most of the people here in Cyprus have the feeling that Russians come back very quickly compared with others,” Constantinou told me. “This is what they have done in the past. Hopefully, they will repeat it now.” 

Michael Peel is the FT’s European diplomatic correspondent. Additional reporting by Kerin Hope in Athens and Henry Foy in Moscow

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