Cyprus is closing its doors to Russian business

For Russian businesses, Cyprus just isn’t what it used to be. New Cypriot anti-money laundering rules are compounding the effects of US sanctions against Russia and its high-profile citizens, driving money away from the one-time haven. “Russians are downsizing in Cyprus,” says Kyriakos Iordanou, general manager of the Institute of Certified Public Accountants of Cyprus, whose members have clients from the country. The value of bank accounts at Cypriot lenders held by foreign nationals from outside the euro-area – mostly Russian – fell to 7.1 billion euros (Dh30.14bn) at the end of November, according to the Central Bank of Cyprus. That’s down from a peak of 21.5 billion euros at the end of 2012.

En+ Group said in November it plans to move to Russia from Jersey rather than to Cyprus as previously planned. En+ is the main shareholder of aluminum giant United Rusal, a company of billionaire Oleg Deripaska, who is on the US’s sanctions list. Relatively muted sanctions imposed in the US during the Obama era over the conflict in Ukraine have only widened in scope and severity since Donald Trump took office last year.

The outflow of Russian funds from the country marks the reversal of a trend that began after the fall of the Soviet Union and accelerated as Cyprus joined the European Union in 2004 and adopted the euro in 2008. Russian investors were attracted to Cyprus by its status as a low-tax regime within the EU and was seen as safe and stable.

“Cyprus’s economic model has already changed and has shifted to one that relies a lot less on shell companies and foreign deposits,” finance minister Harris Georgiades said in September. The island “has been focusing on bringing new business with substance, physical presence and real activity and employment,” he said.