When Brexit Hits Cyprus, Isle Of Offshore Banking And British Expats

Britain's decision to leave the EU is having a ripple effect on the island nation of Cyprus, where ex-pats and tourism operators are already feeling the pinch. But there may be a more long-term windfall in the finance industry.

Cyprus landscape
Cyprus landscape
Fabrice Nodé-Langlois

TALA â€" Cathi Delaney chooses a shady spot on the terrace to sip a refreshing cup of iced coffee. It's October, but with temperatures well above 30°C (86°F), the nearly 60-year-old British woman is perfectly comfortable wearing just a floral dress. This, after all, is what brought her to Cyprus: the sun, the sea, the sweet life.

But in recent months, back in her country of origin, a majority of voters opted for Brexit, that will force the UK to leave the European Union â€" adding a major element of anxiety to her otherwise trouble-free existence. "Brexit raises a lot of uncertainties," she says, noting the various legal and bureaucratic issues. "Will I get my state pension in six years? Will my husband benefit from the General Hospital Scheme that gives affordable access to health care?"

Delaney is one of an estimated 80,000 subjects of Her Majesty the Queen currently residing in Cyprus, an EU member for the past 12 years. Together they represent about 10% of the small republic's population. Around half of these ex-pats are retired. The rest work in finance, tourism or in the military. Cyprus has two British bases.

A former insurance agent, she retired early with her husband, at 45, to move here to this house they had built in the village of Tala, where half of the population is foreign. That was 14 years ago. "We'd fallen in love with this quiet, cool place in the hills, 10 minutes from the Coral Bay beach," she says.

The couple has lived on their savings. But like many Brits, they now fear they might need private insurance to cover their health care costs. Delaney, who serves as a town councilor (as allowed under EU rules), also worries about the impact Brexit may have on local commerce.

"If the British lose purchasing power, they'll consume less," she says. "The typical ex-pat goes out to a restaurant once or twice a week. If they were forced to leave, the consequences would be catastrophic for businesses and real estate."

The equation is simple: pensioners who are paid in pound sterling have lost 15% of their purchasing power since June 22.

A toll on tourism

Ex-pats aren't the only ones concerned over Brexit. For the 12,000 Cypriots who are studying in the UK, it could mean losing the European rate and having to pay tuition fees of 20,000 pounds ($30,000) per year instead of 9,000. There's are also government grants and subsidized loans specific to EU citizens that could disappear. Many hope that Cyprus' status as a member of the Commonwealth will guarantee them a better deal than other EU students, but nobody knows for sure.

With regards to the economy, the big concern is tourism, which represent more than a quarter of Cyprus' GDP, according to Angelos Loizou of the Cyprus Tourism Organization. True, more and more Russians are visiting the island, which includes several Orthodox Christian destinations. But of the record-high three million foreign visitors expected this year, 40% of them are likely to be British.

Cyprus bankscape â€" Photo: Leonid Mamchenkov

For the 2016 summer season, most British tourists had booked before the referendum, meaning it's too early to assess a "Brexit effect." But in the long run, the sector risks paying a hefty price for a strategy that focused too much on the downmarket and all inclusive holidays. "The British only come here to get drunk," laments a senior official.

To remedy the situation and prevent potential Brexit-related effects, Angelos Loizou hopes to bring back the upmarket clientele that used to visit the island in the 1980s. But the Tourism Board chairman doesn't control all levers. "If Ryanair or easyJet are impacted by the Brexit, then so are we."

Seeking silver linings

On a diplomatic level, the exit from the EU of the ancient colonial power means, for Cyprus, losing an important ally inside the European institutions. "We shared the same views in Brussels on trade, market liberalization, taxation," says a British diplomat who already talks in the past tense.

Are there any positive elements to this otherwise gloomy picture? Perhaps. Deputy Minister to the President Constantinos Petrides believes there may be opportunities in the finance sector. John Patrick Hourican, an Irishman who heads the Bank of Cyprus, agrees. "The current uncertainty around the "divorce" could provide us with an opportunity," he says.

Marios Tannousis, deputy chairman of the Cyprus Investment Promotion Agency, notes that since the referendum, several meetings have taken place to promote the island as a potential landing point for financial organizations. Another conference will take place next month in London.

All things considered, Harris Georgiades, the young finance minister who's been successful over the past three years in pulling his country out of the banking crisis, minimizes the impact of Brexit. "I'm not worried about our economy," he says. "Still, I'm very disappointed by the result of the British vote and very concerned by the direction the European Union has taken."

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"The Truest Hypocrisy" - The Russia-NATO Clash Seen From Moscow

Russia has decided to cut off relations with the Western military alliance. But Moscow says it was NATO who really wanted the break based on its own internal rationale.

NATO chief Stoltenberg and Russian Foregin Minister Lavrov

Russian Foreign Ministry/TASS via ZUMA
Pavel Tarasenko and Sergei Strokan

MOSCOW — The Russian Foreign Ministry's announcement that the country's permanent representation to NATO would be shut down for an indefinite period is a major development. But from Moscow's viewpoint, there was little alternative.

These measures were taken in response to the decision of NATO on Oct. 6 to cut the number of personnel allowed in the Russian mission to the Western alliance by half. NATO Secretary-General Jens Stoltenberg said the removal of accreditations was from eight employees of the Russian mission to NATO who were identified as undeclared employees of Russian intelligence." We have seen an increase in Russian malicious activity for some time now," Stoltenberg said.

The Russian Foreign Ministry called NATO's expulsion of Russian personnel a "ridiculous stunt," and Stoltenberg's words "the truest hypocrisy."

In announcing the complete shutdown in diplomacy between Moscow and NATO, the Russian Foreign Ministry added: "The 'Russian threat' is being hyped in strengthen the alliance's internal unity and create the appearance of its 'relevance' in modern geopolitical conditions."

The number of Russian diplomatic missions in Brussels has been reduced twice unilaterally by NATO in 2015 and 2018 - after the alliance's decision of April 1, 2014 to suspend all practical civilian and military cooperation between Russia and NATO in the wake of Russia's annexation of Crimea. Diplomats' access to the alliance headquarters and communications with its international secretariat was restricted, military contacts have frozen.

Yet the new closure of all diplomatic contacts is a perilous new low. Kommersant sources said that the changes will affect the military liaison mission of the North Atlantic alliance in Moscow, aimed at promoting the expansion of the dialogue between Russia and NATO. However, in recent years there has been no de facto cooperation. And now, as Foreign Minister Sergey Lavrov has announced, the activities of the military liaison mission will be suspended. The accreditation of its personnel will be canceled on November 1.

NATO told RIA Novosti news service on Monday that it regretted Moscow's move. Meanwhile, among Western countries, Germany was the first to respond. "It would complicate the already difficult situation in which we are now and prolong the "ice age," German Foreign Minister Heiko Maas told reporters.

"Lavrov said on Monday, commenting on the present and future of relations between Moscow and the North Atlantic Alliance, "If this is the case, then we see no great need to continue pretending that any changes will be possible in the foreseeable future because NATO has already announced that such changes are impossible.

The suspension of activities of the Russian Permanent Mission to NATO, as well as the military liaison and information mission in Russia, means that Moscow and Brussels have decided to "draw a final line under the partnership relations of previous decades," explained Andrei Kortunov, director-general of the Russian Council on Foreign Affairs, "These relations began to form in the 1990s, opening channels for cooperation between the sides … but they have continued to steadily deteriorate over recent years."

Kortunov believes the current rupture was promoted by Brussels. "A new strategy for NATO is being prepared, which will be adopted at the next summit of the alliance, and the previous partnership with Russia does not fit into its concept anymore."

The existence and expansion of NATO after the end of the Cold War was the main reason for the destruction of the whole complex of relations between Russia and the West. Today, Russia is paying particular attention to marking red lines related to the further steps of Ukraine's integration into NATO. Vladimir Putin's spokesman Dmitry Peskov previously stated this, warning that in response to the alliance's activity in the Ukrainian direction, Moscow would take "active steps" to ensure its security.

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