Putin's henchmen now getting a taste of their own medicine
The New Russian Mob
By JOE NOCERA, NYT
I realize this is a somewhat irresponsible thought, but I keep wondering why anyone should care if some Russian oligarchs and businesses — and corrupt officials — lose a bundle in Cyprus.
Yes, I know, the European Union’s original, ham-handed proposal — a tax on every bank deposit in Cyprus — was potentially destabilizing to the world’s financial system. It raised the specter of bank runs not just in Cyprus but all over Europe. It served as a jolting reminder that the European crisis is still with us. Yada, yada.
But it also turns out that much of the hot money held in the Cypriot banking system is Russian. Russian companies like the low taxes that come with having entities in Cyprus. Because of the wink, wink, nod, nod relationship between Cyprus and Russia, rubles deposited in Cypriot banks are as untraceable as dollars once were in Swiss bank accounts, according to Dmitry Gudkov, an opposition politician (about whom more in a moment). Corrupt officials who embezzle money have long found Cyprus to be a friendly haven. Bloomberg Businessweek reported earlier this week that a substantial amount of the $230 million fraud perpetrated in 2007 against Hermitage Capital — a crime unearthed by Sergei Magnitsky, the brave lawyer who died in prison after he exposed the fraud — can be traced to Cyprus.
To put it another way, the henchmen of Russia’s president, Vladimir Putin, who have gotten rich by trampling over the rule of law, are now getting a taste of their own medicine. In Cyprus, with no warning, the rules changed, and deposits larger than 100,000 euros may now face “haircuts” of as much as 40 percent. Though the purpose of the tax is to save the country’s banking system, the outcome is the same as when Russian officials create phony tax charges to steal a businessman’s assets. People feel they are being robbed. And they become extremely upset.
(More here.)
I realize this is a somewhat irresponsible thought, but I keep wondering why anyone should care if some Russian oligarchs and businesses — and corrupt officials — lose a bundle in Cyprus.
Yes, I know, the European Union’s original, ham-handed proposal — a tax on every bank deposit in Cyprus — was potentially destabilizing to the world’s financial system. It raised the specter of bank runs not just in Cyprus but all over Europe. It served as a jolting reminder that the European crisis is still with us. Yada, yada.
But it also turns out that much of the hot money held in the Cypriot banking system is Russian. Russian companies like the low taxes that come with having entities in Cyprus. Because of the wink, wink, nod, nod relationship between Cyprus and Russia, rubles deposited in Cypriot banks are as untraceable as dollars once were in Swiss bank accounts, according to Dmitry Gudkov, an opposition politician (about whom more in a moment). Corrupt officials who embezzle money have long found Cyprus to be a friendly haven. Bloomberg Businessweek reported earlier this week that a substantial amount of the $230 million fraud perpetrated in 2007 against Hermitage Capital — a crime unearthed by Sergei Magnitsky, the brave lawyer who died in prison after he exposed the fraud — can be traced to Cyprus.
To put it another way, the henchmen of Russia’s president, Vladimir Putin, who have gotten rich by trampling over the rule of law, are now getting a taste of their own medicine. In Cyprus, with no warning, the rules changed, and deposits larger than 100,000 euros may now face “haircuts” of as much as 40 percent. Though the purpose of the tax is to save the country’s banking system, the outcome is the same as when Russian officials create phony tax charges to steal a businessman’s assets. People feel they are being robbed. And they become extremely upset.
(More here.)
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