Most commentators agree that the Greek Republic of Cyrus has been unfairly treated by the troika of the European Commission, the European Central Bank and the International Monetary Fund. The requirement that a national government impose a levy on deposits was a surprising and deeply disturbing innovation. The pain for the government of the Greek Republic of Cyprus was mitigated by its decision to penalize deposits above €100,000. This meant that the majority of small depositors, that is, the majority of the electorate, would not suffer losses. Those depositors with funds above 100,000 face a very uncertain future. Their accounts are frozen and they are likely to incur losses of up to 50%. Many of these depositors are Russian and have made a significant contribution to the economy of South Cyprus in recent years.
The conspiracy theory is as follows:
1 The EU has been frustrated and angry with the Greek Republic of Cyprus since 1974. The EU was led to believe that both North and South Cyprus would agree to the terms of the Annan Plan and that the island would be reunified. Referendums were held in both parts of Cyprus. Voters in northern Cyprus were overwhelmingly in favor of reunification, but voters in the south rejected Annan’s plan. In the South, the government, the church and most of the media publicly criticized the Annan plan and promoted its rejection. This was poorly received in Brussels.
2 The ongoing and persistent hostility of the Greek Republic of Cyprus towards Turkey’s application to join the EU has been a major strain in EU-Turkish relations. Turkey’s growing importance as an economic power in the Middle East and its crucial role in resolving the conflict in Syria have prompted the US to negotiate better relations between Turkey and Israel. The United States has been working quietly behind the scenes to pave the way for Turkey’s accession to the EU. While the Obama administration can claim some success in the recent thawing of relations between Turkey and Israel, the predictable intransigence of the Greek Republic of Cyprus has been a constant source of irritation in both Washington and Brussels. The fact that President Christofias was a communist and publicly admired Fidel Castro caught the attention of the CIA. Both President Bush and Obama refused to sanction the CIA’s ‘dirty tricks’ designed to discredit President Christofias.
3 The Greek Republic of Cyprus’ response to mounting financial pressures was to seek and secure a €2.5 billion loan from Russia in 2011. This was an attempt by the government to circumvent the Troika and its financial disciplines.
4 Based on the above factors, the decision was made to punish and humiliate the Greek Cyprus. The proposal that all bank accounts should be leveraged emanated from the EU, who were well aware that implementing such a proposal would be political suicide for any government.
5 The EU expected the Greek Cypriot government to rush to Moscow for more loans. The Greek Cypriots had several proposals for the Russians. They suggested that Russian investors buy Laiki or the People’s Bank of Cyprus and were prepared to offer the security of the large untapped natural gas fields surrounding Cyprus as long-term collateral.
6 The natural gas resources of Cyprus are a disputed resource between the Greek Republic of Cyprus and Turkey, who argue that both North and South Cyprus should share in the benefits of the resource. The EU informed Turkey about the impending financial crisis in southern Cyprus and made several announcements about natural gas fields and the likely route of gas pipelines to Turkey. It was also made clear to Russia that any exploitation of the resource by Gazprom, the Russian energy giant, would require active cooperation from Turkey.
7 Turkey has already shown the seriousness of the Cyprus gas problem by suspending its agreements with the Italian firm ENI. The Italian firm was working on the Samsun-Ceyhan pipeline that will bring Russian and Kazakh oil to the Turkish coast. The contract was summarily suspended in mid-March 2013 due to ENI’s license agreement with the Greek Republic of Cyprus.
8 The mission to Moscow for more loans was doomed to fail before the Greek Cypriots landed in Moscow, leaving them at the mercy of the EU.
9 The requirement to confiscate €5.8 billion of Cypriot bank accounts to release a €10 billion ransom has devastated the banking and financial sector in the Greek Republic of Cyprus. The real estate sector, driven by demand from the Russians, will soon be in free fall.
10 Greek Cypriots have compared the financial disaster to Turkey’s 1974 invasion. are correct. The implications of the crisis will deeply cripple southern Cyprus for at least five years.
11 Turkey has now positioned itself as a flavor for the island of Cyprus. The Turks have made proposals for the exploitation of natural gas resources: first of all, the island becomes a united state of Cyprus and there is a joint exploration of the resource. Second, the Greek and Turkish Cypriots form a joint committee to exploit and market the resource, or third, it becomes a permanent two-state solution to the Cyprus problem.
12 The Greek Republic of Cyprus will have very few options left, apart from becoming more accommodating to Turkey and Northern Cyprus.
