WASHINGTON MERRY-GO-ROUND
Founded by Drew Pearson 1932
Czar Putin and his Cypriot pawns
By Douglas Cohn and Eleanor Clift
WASHINGTON – The question on the table now is what will Russian President Putin do next in the ongoing Cyprus financial crisis. He rebuffed a delegation seeking a bailout for the banks, sending it home empty handed, which must have infuriated the Russian oligarchs whose funds account for as much as 40 percent of Cyprus bank deposits. They are at the heart of the standoff.
The biggest bank in Cyprus has shut its doors, and deposits of more than 100,000 Euros will be cut 60 to 70 percent, a haircut of major proportions. Putin’s next moves will tell us a lot about whether he intends to govern as a president, or as an old-style czar, and whom he listens to.
Cyprus has become something of a satellite state for wealthy Russians. They take advantage of the island’s lax regulations and they vacation at its lush beaches in the Mediterranean. Now the party’s over and everyone is watching to see how far Putin will go to protect the interests of the oligarchs whose support he relies on to remain in power.
He could do nothing to stop what Russians view as outright theft by the Cypriots, but that wouldn’t be in character for him. Putin is a former head of the KGB, and it’s unlikely that he will take what’s happening with equanimity. Yet it’s equally unlikely that he would employ force of any kind. The days of gunboat diplomacy were left behind in the last century, even if Russia had gunboats in the Mediterranean to deploy.
After first saying he would consider restructuring an existing loan from Russia to Cyprus, Putin then changed his mind and said the 2.5 billion Euros loan would remain unchanged. What if Cyprus can’t make the payments? Will he let it go into default? That would suit the Cypriots just fine; why should they care?
That takes us back to the original question: What will Putin do next? Does he have a strategy? As a major supplier of oil and gas to Europe, he could exert pressure on Eurozone countries by using Russia’s rich natural resources as a weapon. He could become the new OPEC, elbowing aside the oil-rich Middle Eastern countries caught up in the unrest of the Arab Spring.
We’ll know soon to what extent Putin is in league with the oligarchs, and whether his alliance with these billionaires is what keeps him in power. Can he afford to sit back and let them lose billions of dollars, and why should we care anyway?
Why we should care is an easy question to answer. The financial meltdown in Cyprus and Russia’s refusal so far to bear any responsibility is deeply destabilizing in Europe, and to the Euro, which has been dropping relative to the dollar.
What Putin does next will also provide insight into the kind of leader we will be dealing with over the next several years. When President Obama took office, he made a show of re-setting relations with Russia. He had some modest success when President Medvedev held office, but Medvedev had no power as it turned out. He was Putin’s puppet.
Putin is the man to see, and he could easily prop up the banking system in Cyprus. The question here is why didn’t he? It would be a small price to pay to secure all those savings accounts that belong to his friends and backers. Tiny Cyprus is not the issue; this is about Putin and how he will exercise his power on an issue that is entangled with a segment of Russian society that borders on or is criminal.
Maybe some everyday Russians bank in Cyprus, and we shouldn’t tar them with innuendo, but some of the Russian oligarchs are almost synonymous with the Russian mafia, and Putin may not have much choice but to do their bidding.
© 2013 U.S. News Syndicate, Inc.
Distributed by U.S. News Syndicate, Inc.
END WASHINGTON MERRY-GO-ROUND