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. Last Updated: 07/27/2016

EDITORIAL: Cyprus Has A Party on Russia's Tab




In Russia, the Education Ministry announced this week that some of the nation's sorely underpaid teachers have not been paid in months.


In Cyprus, the Education Ministry is formally reprimanding teachers - because they have been crassly interrupting class to check their portfolios in a stock market up a dizzying 700 percent over the past year. The market is dominated by the island's ascendant commercial banks - and these have grown on a steady diet of Russian cash.


Here is food for thought indeed. Other people are having the party that Russians should be having. And take note - they are little people, the much-sought middle class the Kremlin can't seem to ever figure out how to nurture.


Cyprus has long been the destination of choice for Russian capital flight.


When the United Financial Group was preparing for worst-case Y2K scenarios, it set up a brokerage office-in-exile in Cyprus for its Russian clients. A Cyprus-based company holds 40 percent of the Sidanko oil company. A few months ago, one obscure Cyprus-based company defeated another obscure Cyprus-based company in bidding for 9 percent of LUKoil, Russia's largest oil company. Yukos, Russia's No. 2 oil company, has channeled ownership control of its oil producing subsidiaries through Cyprus-based vehicles.


Last year, a temporary administrator for bankrupt Inkombank told a court that "most" of the bank's property was in Cyprus, and a temporary administrator for equally failed Bank Menatep raised questions about Menatep's Cyprus-based subsidiary. A year before that, the financial autopsy of failed Tokobank saw legitimate foreign investors in angry court wrangles with up to five murky Cyprus-based vehicles. And a Cyprus-based vehicle under the control of MFK Renaissance bought 14.84 percent of the Novolipetsk Metallurgical Combine.


And so on. Is it any wonder that the Russian Central Bank has a Cyprus subsidiary? Or that when a Cyprus-based shell company purchased control of the Vyborg Pulp and Paper Mill, it set off a chain reaction of violence and labor truculence?


Billions of dollars of dubious Russian origin churn through the Bank of New York, and Russian-language menus were squeezing out those in Japanese and Arabic all up and down the French Riviera in 1999. In Russia, most teachers have never owned a cell phone, or much of anything else for that matter; in Cyprus, teachers use their cell phones to trade on an exchange awash with Russian cash, and then do the happy stock dance all about the classroom until the national government has to step in and tell them to stop.


And so far, Vladimir Putin's solution is ... more defense spending?