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WASHINGTON – The ongoing financial crisis in Cyprus has significantly altered Russia's foreign policy strategy toward Europe, especially Germany, as Moscow also lets relations with Washington go cold and cozies up to Beijing, according to Joseph Farah's G2 Bulletin.
This is the assessment of analysts who see that the Cypriot financial meltdown has prompted a fundamental rethinking by President Vladimir Putin toward Europe, since Cyprus was a major financial banking center for Russia outside the country.
Cyprus also was a linchpin in an overall strategy Moscow was pursuing in seeking closer political and economic ties to Europe, especially Germany and France.
The goal was to undermine the European Union's relationship ultimately with the United States.
"Moscow's most important foreign policy objective since the Cold War was to undermine the transatlantic tie between the United States and its European allies, effectively neutralizing the North Atlantic Treaty Organization," according to Russian expert Pavel Felgenhauer of the Washington think-tank Jamestown Foundation.
"The Russian concept of a 'multi-polar world' envisaged Moscow as the center of Eurasia, connecting an emerging China with a Russia-friendly, neutral Europe, opposed to an isolated U.S.," he said.
Felgenhauer pointed out that Putin, during his re-election campaign last year, rejected the idea that the U.S. and Europe were the "same unfriendly entities" and that Russia needed to "ally against them with China."
This grandiose, long-term scheme seems to have exploded in Putin's face. Russians had thought their business interests and capital were safe in the EU. However, Germany and France especially had declared these holdings to be "dirty," and for good reason.
Cyprus had become the banking haven for many wealthy Russians – the "oligarchs" – who sought to avoid high corporate taxes, legalize their billions in kickbacks, or launder their money obtained from graft and corruption.
However, high Russian officials, including Prime Minister Dmitry Medvedev, regarded what the EU decided to do to savings depositors in Cypriot banks as "robbery."
Medvedev's judgment might also might be an indication that some Russian officials' own offshore funds similarly were affected.
In exchange for bailout money for Cyprus in the billions of dollars, the EU demanded that up to 65 percent of depositors' savings be confiscated. Some of the largest holders of savings in Cypriot banks were the Russians.
Now, the Russians are considering other offshore alternatives, either on some of Russia's own islands or in Latvia, Malta or Lichtenstein.
Sources estimate that the losses to the Russians could add up to 2 percent of Russian Gross Domestic Product for 2013 due to the cutback in investment which previously had been channeled through Cyprus.
As an indication of Moscow's anger, Russian authorities have gone after international human rights groups that are European based, claiming interference in Russian internal affairs. There are a number of human rights groups and non-governmental organizations that are being subjected to harassment by law enforcement and tax authorities.
For the rest of this report and other Intelligence Briefs, please go to Joseph Farah's G2 Bulletin:
- China/Russia: Becoming close bedfellows
- China: Debt 'bomb' about to go 'bang'
- Iraq: CIA to manage Middle East counter-terror activities
- Syria/Chechnya: Practice run for fight with Russia
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