Cyprus Financial Crisis - The Conspiracy Theory

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 for a national government to impose a levy on deposits was a surprising and deeply disturbing innovation. The pain for the government of the Greek Republic of Cyprus was lessened by their decision to penalise deposits in excess of 100,000 euros. This meant that most small depositors, that is, the majority of the electorate, would not suffer losses. Those depositors with funds in excess of 100,000 face a most uncertain future. Their accounts are frozen and they are likely to incur losses of up to 50%. Many of these depositors are Russians and they have made a major contribution to the economy of South Cyprus in recent years.

The conspiracy theory runs 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 re-united. Referenda took place in both parts of Cyprus. Voters in North Cyprus were in favour of reunification by a large majority, but voters in the South rejected the Annan plan. In the South, the government, church and most of the media publicly criticised the Annan plan and promoted its rejection. This was badly 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 severe strain on relations between the EU and Turkey. The increasing importance of Turkey as an economic power in the Middle East and its crucial role in a resolution of the conflict in Syria have led the US to broker better relations between Turkey and Israel. The US has been quietly working behind the scenes to smooth the path 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 source of ongoing irritation in both Washington and Brussels. The fact that President Christofias was a communist and publicly admired Fidel Castro brought him to the attention of the CIA. Both Presidents Bush and Obama refused to sanction CIA 'dirty tricks' aimed at discrediting President Christofias.

3 The response of the Greek Republic of Cyprus to mounting financial pressures was to seek and secure a 2.5bn euro 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, a decision was made to punish and humiliate Greek Cyprus. The proposal that all bank accounts should be levied emanated from the EU, who were well aware that the implementation of such a proposal would be political suicide for any government.

5 The EU expected the Greek Cypriot government to run to Moscow in order to secure further loans. The Greek Cypriots had several proposals for the Russians. They suggested that Russian investors buy out the Laiki or Cyprus Popular Bank and they were prepared to offer the security of the large and untapped natural gas fields surrounding Cyprus as long term collateral.

6 The natural gas resources of Cyprus are a contested resource by the Greek Republic of Cyprus and Turkey, who argues that both North and South Cyprus should share the benefits of the resource. Turkey was briefed by the EU on the impending financial crisis in South Cyprus and made several announcements concerning the natural gas fields and the likely routing of pipelines to Turkey. It was also made clear to Russia that any exploitation of the resource by Gazprom, the Russian energy giant, would require the active cooperation of Turkey.

7 Turkey has already demonstrated the seriousness of the Cyprus gas issue by suspending its deals with the Italian firm ENI. The Italian firm was working on the Samsun-Ceyhan pipeline that will deliver Russian and Kazakhstan oil to the coast of Turkey. 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 failure before the Greek Cypriots landed in Moscow, and this left them at the mercy of the EU.

9 The requirement for 5.8bn euros to be confiscated from Cypriot bank accounts in order to release a bailout of 10bn has devastated the banking and financial sector of the Greek Republic of Cyprus. The property sector, fuelled by demand from Russians, will shortly be in free fall.

10 Greek Cypriots have compared the financial disaster to the invasion of 1974 by Turkey. They are correct. The implications of the crisis will profoundly cripple South Cyprus for at least 5 years.

11 Turkey has now positioned itself as a saviour for the island of Cyprus. The Turks have made proposals for the exploitation of the natural gas resources - Firstly, the island becomes a united state of Cyprus and there is joint exploration of the resource. Secondly, Greek and Turkish Cypriots form a joint committee to exploit and market the resource, or thirdly, there becomes a permanent two state solution for the Cyprus problem.

12 The Greek Republic of Cyprus will have very few options left, other than that of becoming more accommodating towards Turkey and North Cyprus.

at 9:37 PM
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