Hellenic Antidote

Israel wary of Turkey gas role, while Russia steps up Eastern Mediterranean involvement

2013-05-20T15:52:00.000+01:00

A couple of interesting pieces in the Israeli press that I came across over the weekend, dealing with the pre-eminent issues currently facing the Eastern Mediterranean, namely the exploration for hydrocarbons in the Levantine basin and the war in Syria.

In an editorial for the Jerusalem Post, it was argued that Turkey’s recent willingness to patch things up with Israel are an ill-disguised attempt by the Turks to get their hands on Israeli gas and, through the building of a pipeline from Israel to Turkey, implicate Turkey in Israel’s economic interests.

The editorial strongly argues against allowing Turkish involvement in Israeli hydrocarbon exports, suggesting that Turkey is not a reliable business partner; warning that Turkey may in the future undergo ‘an even more extreme Islamic transformation’ that would inevitably jeopardise Israeli interests; and concluding that any arrangement Israel and Turkey make on hydrocarbons would be entirely dependent on Turkish goodwill, which is not something Israel can rely on.

The editorial also argues that an Israel-Turkey deal would mean Israel discarding its nascent hydrocarbon alliance with Cyprus, which the author suggests would be a poor decision by Israel:

‘A deal with Turkey would undermine cooperation already fostered with the Cypriot Greeks, whose own gas discoveries are anathema to Ankara which occupies the northern parts of the island. Do we really want to ditch Cyprus in favor of an unpredictable and hardly friendly business partner? Pipelines can also be built in the Cypriot direction and another possibility is liquefying the gas and transporting it to Europe by tankers. It may be more expensive but this would be offset by the removal of pipeline security concerns. Also, Cyprus has allocated land for a liquefaction plant, which would relieve Israel of another safety headache.’

(It’s also worth stressing that Israeli wariness of Turkish involvement in the region means that Israel now has an interest in any Cyprus settlement and would oppose a deal to reunite the island that would leave Turkey with a significant say in how Cyprus is run, particularly in relation to foreign relations and hydrocarbon exploration).

The other piece of interest is from Haaretz and looks at how and why Russia is continuing to back the Assad regime in Syria – particularly through the supply of sophisticated missile systems – and the implications of this for Israel and any potential intervention by external actors designed to precipitate Assad’s downfall. Anshel Pfeffer argues that Russia’s support for Assad stems from its determination to maintain a presence and influence in the Eastern Mediterranean:

‘The reports on possible missile shipments are part of a wider move by Russia to show its support for Assad. This includes a large naval exercise in which 11 Russian warships have converged in recent days in the eastern Mediterranean, not far from Syria's shore. It is the Russian Navy's largest maneuver in the Mediterranean since the fall of the Soviet Union more than two decades ago.

‘The Russians have a clear interest in Assad's survival. He is the last secular head of state in the Arab world who isn't considered an ally of the U.S. administration or a supporter of radical Islamist movements that are also threatening Russia's eastern provinces. Assad is the last recognizable agent of Russian influence in the Middle East, and despite his closeness to the Iranian-Shia axis over the past decade, his current dire situation puts him at Moscow's mercy.

‘The Russian Navy has a long-term lease for use of Syria's Tartus port and is the only Russian military presence currently in the Mediterranean basin. Even if the regime in Damascus falls, an Alawite rump state would probably remain for a while along the coast, with Tartus at its heart. Both Assad and the Russians have a joint strategic interest in defending that bit of coast.’

Indeed, as part of Russia’s recent show of force in the region, we note that over the weekend, three Russian warships docked in the port of Limassol and were visited by the island’s defence minister, Photis Photiou who, coincidentally, will be in Russia this week for meetings with his counterparts. Cypriot press has been reporting that Russia will be requesting that Cyprus allow other ships from Russia’s Mediterranean taskforce to use Cypriot port facilities.

Turkish Cypriot nationalism and its predication on violence

2013-05-18T15:18:00.001+01:00

There’s a lengthy interview (here) from 1996 with Turkish Cypriot leader Rauf Denktash (1924-2012), which is mostly worthless and embarrassingly conducted by some Greek Cypriot who instead of taking the opportunity to expose Denktash for the nationalist fanatic he was chooses to ask him questions such as ‘Who is the real Rauf Denktash?’ ‘How did you meet your wife?’ and ‘What are your hobbies?’ (I kid you not). Like a lot of Greek Cypriots, the interviewer just can’t get his head around the fact that the Turkish minority in Cyprus developed a political consciousness and will independent of Greek Cypriots; and that the Turks on the island were never prepared to passively accept Greek preponderance, or somehow be persuaded to become less Turkish.

Indeed, in the one or two interesting moments in the interview, Denktash paints an entirely different (and largely unknown to Greek Cypriots) picture of Turkish Cypriot political consciousness as it developed during British colonial rule. Denktash laughs at the often-repeated Greek Cypriot claim that in the enosis plebiscite of 1950, a majority of Turkish Cypriots voted for union with Greece and asserts that for Turkish Cypriots accepting Greek rule was tantamount to accepting colonisation.

Denktash states that just as Greek Cypriots ardently believed that Cyprus is Greek and belonged to Greece, the Turkish minority on the island held that Cyprus is Turkish and should be relinquished to Turkey. ‘We [the Turkish Cypriots],’ Denktash says, ‘were brought up to believe that Cyprus is Turkish and Cyprus has gone from Turkey temporarily and Turkey will come back’.

The axiom that Cyprus is Turkish was so deeply held by Turkish Cypriots, Denktash says, that he was disappointed by Turkey’s decision in 1956 to change its policy of demanding Britain cede to it the entire island in favour of a policy of partitioning Cyprus between Greece and Turkey. ‘Partition was chosen by Turkey as a policy’, Denktash says. ‘We [the Turkish Cypriots] were aggrieved here, because we felt Turkey was abandoning half of Cyprus to the Greeks.’

On the depth of militancy within the Turkish Cypriot community, Denktash reveals that seven years before Greeks took up arms in the campaign for enosis, Turkish Cypriots were prepared to use violence to thwart the political will of the Greek Cypriots, who constituted 80 percent of the island’s population. ‘In the event of enosis,’ Denktash recalls telling a Greek journalist in 1948, ‘we will take up guns and go to the mountains.’

I’m mentioning all this now because I’ve been reading Stella Soulioti’s excellent two-volume work – a must for all serious students of the Cyprus Question – Fettered Independence: Cyprus, 1878-1964, in which the author provides a remarkably detailed and coherent account of modern Cypriot political history, with particular emphasis on the various plans concocted by the British colonial authorities in the 1950s in response to Greek demands for enosis and Turkish insistence on partition; the machinations that led to the London-Zurich agreements in 1959; the period from independence in 1960 to the breakdown of the constitution and the insurrection of the Turkish Cypriots in 1963; and the increasing involvement in the island’s politics of the Americans, who wanted to avoid Cyprus sparking a war between Greece and Turkey, which the USA thought could best be done by partitioning Cyprus between the two NATO allies or offering all (or most) of Cyprus to Greece in exchange for Greek concessions in Thrace and/or the Aegean, such as the ceding of Chios or Kastelorizo to Turkey.

In upcoming posts, I will draw on Soulioti’s book to illustrate how the Turkish campaign for the partition of Cyprus was predicated on violence and stirring up enmity between Greek Cypriots and Turkish Cypriots. Unlike enosis – which was not directed at the Turkish minority on the island but at the British colonial authorities – taksim (partition) was specifically aimed at Greek Cypriots and could only be achieved through their violent expulsion from that part of Cyprus that Turkey proposed to annex.

Castoriadis on the objectivity of the Greeks

2013-05-15T17:57:00.000+01:00

Just to go back to a post I wrote a couple of weeks ago, Thermopylae, the Persian invasions and Greek triumphalism, in which I insisted that the pride and sense of superiority characteristic of Greek culture was tempered by self-criticism and objectivity, this idea is found in Cornelius Castoriadis’ essay, The Greek Polis and the Creation of Democracy (in Politics, Philosophy, Autonomy), from which the following is an excerpt:

‘Hannah Arendt has rightly said that impartiality enters this world through the Greeks. This is already fully apparent in Homer. Not only can one not find in the Homeric poems any disparagement of the “the enemy”, the Trojans, for example, but the truly central figure in the Iliad is Hector, not Achilles, and the most moving characters are Hector and Andromach. The same is true for Aeschylus’ Persians – a play performed in 472 BC, seven years after the battle at Plataea, with the war still going on. In this tragedy, there is not a single word of hatred or contempt for the Persians; the Persian queen, Atossa, is a majestic and venerable figure, and the defeat and ruin of the Persians is ascribed exclusively to the hubris of Xerxes. And in his Trojan Women (415 BC), Euripides presents the Greeks as the cruelest and most monstrous beasts – as if he were saying to the Athenians: this is what you are. Indeed, the play was performed a year after the horrible massacre of the Melians by the Athenians (416 BC).’

Turkey looks to exploit Cyprus’ economic weakness

2013-05-12T21:07:00.000+01:00

Cyprus’ foreign minister Ioannis Kasoulides was in the USA this week, where he met, among others, UN Secretary General Ban Ki Moon and US Secretary of State John Kerry. Discussed, obviously, were the latest developments in the Cyprus issue. Where we are at the moment regarding the Cyprus issue is that Turkey, having pulled out of the UN talks last June in protest at Cyprus taking over the rotating presidency of the EU, is now pressing for their immediate resumption.

Obviously, Ankara detects Cypriot weakness as a result of the economic crisis affecting the island and believes Cyprus is amenable to bullying and agreeing a solution compatible with Turkish aims on the island, a solution along the lines of the 2004 Annan plan.

As I’ve repeatedly stated, Turkey’s aim is to abolish the Republic of Cyprus and strip the Greek Cypriots of the sovereignty they currently exercise, which would deny them the ability to take decisions Turkey disapproves of or regards are against its regional interests; decisions, for example, that might exclude Turkey from the hydrocarbon game unfolding in the Eastern Mediterranean in which Cyprus wants to become a key player, not only for the economic benefits that would accrue but precisely as an assertion of sovereignty and independence.

It’s in this context that the US administration rather unexpectedly invited Kasoulides to Washington and it is the Cypriot perspective on developments in the Eastern Mediterranean that the Cypriot foreign minister confidently outlined in the talk he gave at the Brookings Institution on Thursday, the audio of which you can listen to in full here.

The Eastern Question is alive and well

2013-05-10T14:48:00.000+01:00

Below is a not entirely convincing analysis of Turkish Russophobia, which the author (Soner Cagaptay) claims is a result of Russia’s historical erosion and humiliation of the Ottoman empire and suggests explains Turkey’s contemporary reticence to over-extend itself in Syria. As I say, it’s not an entirely convincing analysis but one I found interesting inasmuch as it indicates that there is nothing new in today’s Eastern Mediterranean geopolitics – excepting, of course, the emergence of Israel – and that the Eastern Question, which began with Russia’s victory over the Ottoman empire in 1774 and came to convey the struggle for influence as Ottoman power declined, is alive and well.

Turkey Fears Russia Too Much to Intervene in Syria
Russian foreign minister Sergei Lavrov visited Ankara on April 17th, but the event went almost unnoticed. Despite deep differences between Ankara and Moscow over Syria, Turkey has refrained from rebuking Moscow. That’s because Turkey fears no country more than it fears Russia.

Ankara has nearly a dozen neighbors if you include its maritime neighbors across the Black Sea and the Mediterranean. Emboldened by its phenomenal economic growth in the past decade and rising political power, Turkey appears willing to square-off against any of them; Turkish Prime Minister Recep Tayyip Erdogan has publicly chided the leaders of Syria, Iran, and Iraq. In fact, none of the country’s neighbors can feel safe from Ankara's wrath – with the exception of Russia, that is.

The Turks suffer from a deep-rooted, historic reluctance to confront the Russians. The humming Turkish economy is woefully dependent on Russian energy exports: More than half of Turkey’s natural gas consumption comes from Russia. Consequently, Turkey is unlikely to confront Moscow even when Russia undermines Turkey’s interests, such as in Syria where Russia is supporting the Assad regime, even as Ankara tries to depose it.

Historically, the Turks have always feared the Russians. Between 1568, when the Ottomans and Russians first clashed, to the end of the Russian Empire in 1917, the Turks and Russians fought 17 wars. In each encounter, Russia was the instigator and the victor. In these defeats, the Ottomans lost vast, and often solidly Turkish and Muslim, territories spanning from the Crimea to Circassia to the Russians. The Russians killed many inhabitants of these Ottoman lands and expelled the rest to Turkey. So many Turks descend from refugees from Russia that the adage in Turkey is: ‘If you scratch a Turk, you find a Circassian persecuted by Russians underneath.’

Read the rest of the article here.

Author: Soner Cagaptay, senior fellow at the Washington Institute for Near East Policy.

Cyprus presses Israel on energy collaboration

2013-05-08T13:01:00.000+01:00

Cyprus’ president Nikos Anastasiades has been in Israel these last few days heading a delegation discussing closer commercial and political ties between Nicosia and Tel Aviv. Up until a few years ago, relations between Cyprus and Israel were poor, stemming from Israel’s perceived closeness to Turkey, which has been occupying 37 percent of Cypriot territory since it invaded the island in 1974. However, deteriorating relations between Turkey and Israel and massive hydrocarbon finds in the adjoining Israeli and Cypriot Exclusive Economic Zones have boosted ties between Cyprus and Israel, and although we remain cautious because the USA is acting determinedly to repair fences between Israel and Turkey and little of substance (certainly nothing irreversible) has so far materialised as a result of the improved Nicosia-Tel Aviv ties, it is obvious that Nicosia is investing a great deal of effort and hope in trying to win over the Israelis, as the article below from today’s Jerusalem Post makes clear.

Also worth pointing out is that Cyprus now seems to have decided that it will go ahead with an LNG plant to process and export its hydrocarbon resources. This nips in the bud ideas coming from certain quarters that envisage Cyprus (and Israel) building a pipeline to Turkey to traffic its hydrocarbons; a move that would have drawn Turkey into the Eastern Mediterranean gas game and provided an incentive, the thinking went, for Turkey to promote the reunification of Cyprus. However, for Cypriots, becoming Turkey’s economic satellite and trusting their natural resources to Turkey and becoming reliant on Turkish good-will would have been the height of stupidity and, fortunately, the LNG option is now being pursued determinedly.

‘Israel, Cyprus cooperation could impact gas market’
Only by combining their forces will Israel and Cyprus be able to make a significant dent in the global natural gas economy, the Cypriot energy minister stressed on Tuesday.

“We feel that through a close collaboration with Israel we will be able to be a major player in the world energy market, something that for each country individually might be too hard to achieve,” said Energy, Commerce, Industry and Tourism Minister Yiorgos Lakkotrypis.

Lakkotrypis was addressing a group of Israeli and Cypriot business leaders and government officials at a seminar entitled “Cyprus: An International and Professional Center,” held in Tel Aviv on Tuesday afternoon and hosted by the Cyprus Chamber of Commerce and Industry, the Cyprus Energy, Commerce, Industry and Tourism Ministry, in association with the Federation of Israeli Chambers of Commerce.

While the participants from approximately 100 Israeli companies and 30 Cypriot firms ranged in fields “from milk to gas,” the focus of leaders from both countries remained largely on the Mediterranean natural resource that each of the nations has come to enjoy.

The amounts of gas discovered in each country respectively might be considered small individually, but, by working together, Israel and Cyprus have the capability to “create the third pillar of energy routes” in the world, according to Lakkotrypis.

“What an unbelievable opportunity we have as two countries to play a role in the energy market that is shaping as we speak, worldwide,” he said.

Lakkotrypis and the Cypriot businessmen and women had arrived in Israel as part of a larger delegation that includes Cypriot President Nicos Anastasiades and officials from the country’s Foreign Affairs Ministry.

Echoing Lakkotrypis’s comments, Anastasiades likewise stressed during the seminar that natural gas “can become the driving force” for partnership between Israel and Cyprus.

Natural gas finds from the Tamar reservoir’s 250 billion cubic-meters are already flowing into Israel, to be used for domestic purposes only. The neighboring, more than double-sized Leviathan reservoir should be providing gas within the next few years, and will likely be doing so in both an export and domestic capacity – pending government approval of an export policy.

Cyprus’s first explored basin, the Aphrodite reservoir in Block 12 adjacent to Leviathan, is estimated to contain about 198 billion cu. m. of gas and is being drilled by some of the same partners working on the Israeli reservoirs – Houston-based Noble Energy and Israel-based Delek Drilling and Avner Oil Exploration.

There are two other clumps also slated for exploration in the Cypriot zone, under a combination of Italian, Korean and French firms.

Israel and Cyprus signed a delimitation agreement on their Exclusive Economic Zones in 2010, and a framework agreement is now underway concerning the development of cross-border hydrocarbon management, Lakkotrypis explained.

Anastasiades likewise confirmed that his administration would “remain dedicated to proceeding expeditiously with the conclusion of a framework agreement.”

At Aphrodite, the American and Israeli cohort should conclude drilling an appraisal well by October 2013, after which the team can determine for sure that its contents are proven reserves with commercial capacity, the minister said.

Gas flow from Aphrodite should start between 2020 and 2021, Lakkotrypis added.

Simultaneous to the exploration of Cypriot reservoirs, plans are unfolding to construct an onshore liquefied natural gas (LNG) generation plant, in order to facilitate the export of the country’s gas.

While “the decision to go for an LNG terminal was not taken lightly” and is considered very expensive, the plant will allow for the most flexibility in Cyprus’s export options, Lakkotrypis explained.

Unlike Israel, Cyprus is not facing much resistance among its citizens toward the idea of exporting gas, as the quantities likely found in the reservoirs are “very small compared to the needs of the country,” Lakkotrypis explained.

The Cypriot government is therefore working with Noble Energy on developing its future LNG plant, which will likely be completed by 2019 or 2020. As competition around the world for natural gas surges – particularly due to the United States’ massive shale gas discoveries – moving quickly with the plant’s construction “is super critical,” Lakkotrypis said.

Uriel Lynn, president of the Federation of Israeli Chambers of Commerce, emphasized that cooperation on natural gas and on other business ventures between the two countries would be beneficial “for our region as a whole.”

To further this growing partnership, an Israeli business delegation would be officially visiting Cyprus in June, Lynn said.

Christakis Papavasilious, president of the Israel-Cyprus Business Association, emphasized “the new historic era” that Cyprus and Israel are entering together, and that the two countries should rely on each other in order to push forward.

“The discovery of energy resources in our region has created a very strong impetus in our relations,” Papavasilious said. “There is no turning back.”

Gad Yardeni, president of the Israel- Cyprus Chamber of Commerce, called the gas discoveries a “gift from mother nature” and stressed the need for middlesized energy firms in both countries to pursue connections with one and other.

At a luncheon that the Cypriot president attended earlier that day in Jerusalem with President Shimon Peres, Anastasiades spoke of “inaugurating a new era” for the two countries due to the natural gas discoveries.

“We are both committed to working together and we have a common blessing in our seas,” he said. “God has blessed us with energy and it is our duty to see how we can secure each other.”

Anastasiades expressed his feeling that Cyprus truly “needs” Israel and that he did not expect Israel to need Cyprus to the same extent in return. That being said, he declared his country to be a “reliable and credible friend and brother,” and voiced the hope that both countries should enjoy stability, peace and prosperity.

Describing both countries as islands – Cyprus in the geographic sense and Israel in the political sense – Peres noted that the two nations share many similarities and reciprocal benefits.

“Without Cyprus, we would be far from Europe,” Peres said. “We see in Cyprus a friend – politically and geographically.”

In order to secure that European mainland connection, the two countries will need to work together by combining their resources to achieve a new route of energy, Lakkotrypis stressed back at the business seminar.

“None of our two countries individually can make a big difference,” Lakkotrypis said. “The quantities that we have are negligible compared to the total needs that Europe has and will have.”

“We are living in very important times, very exciting times for both countries,” he continued. “We have our fair share of challenges, but the prospects do remain excellent.”

Thermopylae, the Persian invasions and Greek triumphalism

2013-05-06T13:27:00.001+01:00

Above is a lecture from Jeremy McInerney of the University of Pennsylvania on the Battle of Thermopylae (480 BC) in which, famously, a small group of Greek warriors led by Leonidas’ 300 Spartans, resisted for three days a vastly superior force of invading Persians, dying heroically to the last. It’s a seminal moment in Greek and European history that McInerney provides a good introduction to, placing it within the wider context of the Persian invasions of Greece – the Ionian revolt, Marathon, Salamis, Plataea and so on – the repulsion of which is widely considered to have resulted in an upsurge of Greek self-confidence that paved the way for the flowering of Greek culture that continues to resonate to this day.

In the last 10 minutes of the lecture, however, McInerney claims that apart from the extraordinary vitalism of Greek culture that flowed in the aftermath of the defeat of the Persians, he also detects the emergence of an overweening and deplorable triumphalism in which Greeks developed a contempt for the East that has never been erased from Western discourse – and McInerney points to the war on Islamic terror and the recent cartoon film, 300, which purports to be about the Spartans at Thermopylae, as examples of this.

McInerney’s condemnation of the Greeks is nonsense.

Not only was swaggering pride not something the Greeks lacked before the Persian invasions, but it is also characteristic of Greek culture, beginning with Homer, that this conceit was tempered by self-criticism and objectivity. Aeschylus’ Persians is anything but patriotic tub-thumping and even Herodotus, in whose Histories the Persian invasions are documented, was censured, most notably by Plutarch in his Of Herodotus’ Malice, for favouring the barbarians and maligning the Greeks.

Scorsese on the genesis of Mean Streets

2013-05-01T21:57:00.000+01:00

Great interview with Martin Scorsese talking about the making of Mean Streets (1973). Scorsese talks interestingly about many things, including the impact of John Cassavetes’ Shadows on Mean Streets; how Cassavetes gave Scorsese work on Minnie and Moskowitz; and advised the younger man to keep his distance from Roger Corman, for whom Scorsese had made Boxcar Bertha, and who wanted Scorsese to work on exploitation flicks (Corman even suggested that Scorsese make Mean Streets with a black cast to cash in on the blaxploitation fad). Richard Romanus who plays Michael in Mean Streets (and also played Richard LaPenna in The Sopranos, a series indebted to Scorsese but whose gangsters, Scorsese reveals, he doesn’t understand) now lives on Skiathos and has written about relocating from Hollywood to Greece as well as penning a novel set during the Greek civil war.

No Cyprus settlement talks before October

2013-04-28T14:48:00.000+01:00

Above is the interview Ioannis Kasoulides gave this week to the BBC HARDtalk programme, in which Cyprus’ foreign minister talks about the ‘bitterness and disappointment’ Cypriots feel at the way they’ve been treated by their European ‘partners’. Kasoulides also discusses Turkey’s demand that the UN negotiations aimed at a Cyprus settlement be immediately resumed. Kasoulides makes clear that Turkey’s offer is malicious, designed to exploit Cyprus’ current weakness, and insists that no serious negotiations are possible before the Cypriot government stabilises the economic situation, which probably won’t be until October. Kasoulides also asserts, despite Turkey's protestations, Cyprus' sovereign right to explore and exploit the hydrocarbon reserves within its Exclusive Economic Zone.

Cyprus Czech-mated

2013-04-23T19:27:00.001+01:00

Marios Evriviades, who is professor of international relations at Panteion university in Athens, has written a piece (below) on the Eurozone’s bailout of the Cyprus economy, which compares the German-inspired ‘rescue’ of the island's economy to the Nazi occupation of Czechoslovakia in 1938. The article reflects the anger and outrage felt by Cypriots at the way they’ve been treated by their European partners, although Evriviades omits to mention that, unlike Czechoslovakia, it was actually the government of Cyprus that invited the troika to interfere in its affairs.

Above is an interview with Christine Lagarde, head of the IMF, that puts the blame for the brutality of the ‘rescue’ squarely on the shoulders of the Christofias government for repeatedly delaying the decisions that could have averted it. There is, of course, a lot of truth to Lagarde’s criticism of the previous administration in Cyprus, but she’s also being disingenuous since however incompetent and cowardly Christofias was, this does not explain or justify the particular form the bailout has taken and the browbeating of Cyprus.

Cyprus Czech-mated
What happened to Cyprus in the early hours of March 25 and in the lead up meeting of March 15 in Brussels, the headquarters of the European Union, was qualitatively no different from what happened to Czechoslovakia on September 29 1938 in Munich of Nazi-controlled Germany.

In both cases a small independent, sovereign state was bullied into accepting a diktat – in the case of Czechoslovakia the loss of about a third of its territory to Nazi Germany. And in the case of Cyprus the virtual destruction of its economy for the benefit of the German dominated eurozone.

In both cases Western Governments, democratic governments it should be emphasized, did not only stand by. They actually cheered the results and praised the bully in-chief.

The most important European democracies of 1938, England and France, welcomed the Munich abomination in spite of their treaty obligations and moral commitments to stand by Czechoslovakia against the Nazis. The leaders of England and France reported triumphantly back home that what transpired in Munich preserved peace and stability on the European continent. This is precisely what the sixteen members of the Eurogroup said of the Cyprus diktat – that it preserved stability in the eurozone.

Don’t take the word of official Cyprus about the bullying tactics of the German-dominated Eurogroup, namely that Cyprus was forced to capitulate at gunpoint by its partners. Here is how the Finance Minister of Malta, Edward Scicluna, a participant in the 15 March Eurogroup lead up meeting described, in the Times of Malta on March 19, the bullying that transpired: ‘All this was ‘agreed’ to by the Cypriot government representative who, with a pistol to the head, was naturally unusually co-operative. But it took 10 long hours before the Cypriot minister’s body and soul became exhausted enough for him to assent to the accord. As soon as that happened [the German] Schauble demanded that all wire transfers to and from Cyprus banks would cease forthwith.’

This is what passes for EU solidarity these days.

As a result the Cypriot economy, that topped the performance of the nine other candidates for EU membership in 2004 and performed on par or even better than most other European economies until the global crisis of 2008, now lies prostrate.

Except for the loss of life in the 1974 brutal military invasion of Cyprus by Turkey – when 1% of the Cypriot population was slaughtered by a NATO army – what the Cypriots are now going through is worse. Then, the Turkish army seized about a third of Cypriot territory, two-thirds of its wealth and ethnically cleansed the indigenous population of the conquered territory. But Cypriot resilience prevailed and in five years the lost wealth was regained.

This time however the Eurogroup’s decisions injected a cancerous cell in every Cypriot household. You can certainly fight cancer to a degree. But you can surely suffer for the rest of your life or die from it as well.

The Eurogroup has subjected Cypriots tο a double economic abomination. It ordered part of their savings confiscated and the rest frozen. In true Orwellian doublespeak this has been called a ‘tax’ on savings, or a ‘haircut’. It was in fact outright robbery. Thievery is also ‘freezing’ a person’s deposits and denying him/her the right to do whatever the heck he wants with them.

They did that too.

The inane bullies of Brussels had to have a good sounding excuse for their theft. So, they arbitrarily decided that the savings of Cypriots were ‘mafia’ money, stolen money from someone, somewhere. Perhaps some hard-working Russians. So they decided to punish the Cypriot ‘sinners’ by stealing their savings themselves. Is this the latest version of the ‘protestant ethic’ up in the European north?

The world does have a short memory. But some people do remember. Or read history. The outright confiscation of private property in the western world occurred twice before. In Nazi-Germany against German-Jews and other ‘sub-humans’. And in Nazi-sympathizing Turkey which in 1942 enacted legislation, the infamous Varlik Vergisi or ‘wealth tax’, enabling the Turkish state to confiscate the properties of Turkish citizens – Greeks, Armenians and Jews and sending those who could not pay to ‘exile’ in desert Anatolia from which most did not return.

The EU, obsequious to a resurgent Germany, is now acting as the enabler of econocide (destruction of an economy) and consequently of cratocide (destruction of a state) against the Republic of Cyprus – one of its smallest members.

Shame on the spineless, sinister and self-serving EU. And twice shame on the rest of the hypocritical Europeans who stand by and watch another destructive bullying of a defenceless state in their midst.

Kasoulides on Al Jazeera: natural gas and UN talks in the aftermath of the economic crash

2013-04-18T00:08:00.000+01:00

Good interview from Al Jazeera with Cyprus’ foreign minister Ioannis Kasoulides on the fallout from the economic crisis that is engulfing the island.

Kasoulides expresses ‘bitterness and disappointment’ at the ECB/IMF/EC rescue for Cyprus, which he condemns as an ‘experiment’ designed to find out if such a remedy can be applied to future banking failures in the Eurozone. He dismisses German allegations that Cyprus was a centre for money laundering and illicit Russian money, and points out that most of the wealth held in Cypriot banks and that will now be confiscated belongs to Cypriot businesses and Cypriot savers. Kasoulides insists that the allegations against the Cypriot economic model were propaganda to prepare the ground for the bail-in experiment, but concedes that Cyprus’ economy was over-reliant on banking and should have diversified. The foreign minister rejects calls for Cyprus to abandon the euro but admits uncertainty as to whether the programme agreed with the troika will work and accepts that it is possible that a further bailout will be required.

Kasoulides insists that those Cypriot bankers and other officials who made, for example, the calamitous decision to invest in Greek bonds are now being investigated and, if suspected of criminality, will face justice. He goes on that Cyprus will continue to promote itself as an international business centre, boost its tourist product and develop its hydrocarbon reserves in the seas south of the island.

The foreign minister rejects Turkey’s calls for an immediate resumption of UN talks on finding a solution to Turkey’s occupation of 37 percent of Cyprus. Kasoulides says negotiations will be resumed only when the Cypriot government has dealt with the immediate economic crisis facing the country, and predicts this will be by the end of this year. He dismisses Turkey’s suggestion that money from hydrocarbon reserves be shared with the occupation regime and says the Turkish Cypriots can only expect to feel the full benefits of any gas bonanza in a united Cyprus. Kasoulides argues that if Turkey was sincere about achieving a Cyprus settlement it would stop putting forwards proposals that rather than facilitating the reunification of Cyprus aim at two separate states on the island. Kasoulides also makes clear that Cyprus will not use a pipeline to Turkey to export its gas – allowing Turkey effective control of Cyprus’ gas exports – and will more likely build an LNG plant for this purpose.

Crass Cypriot bankers and crasser German politics

2013-04-16T14:46:00.000+01:00

Below is a good article by Louis Christofides, an economics professor at the University of Cyprus, which reflects prevailing views in Cyprus as to how the island’s economy collapsed. He emphasises the failure of Cypriots to manage their economy when strains began to show, which exposed Cyprus to hysterical and ill-informed accusations regarding money laundering and Russian oligarchs that reflected less Cypriot reality and more crass German politics – Christofides compares the money laundering rumours to the malicious conjecture surrounding Iraqi WMDs – and, once Cyprus sought recourse to its European partners, Christofides denounces the injustice of the remedy imposed, which he says will bring misery to Cyprus.

Bad luck in a ‘casino economy’
Pierre Moscovici said: ‘To all those who say we are strangling an entire people... Cyprus is a casino economy that was on the brink of bankruptcy.’

As late as 2011, the Republic of Cyprus (Cyprus) was still a good performer within the Eurozone: Its debt to GDP ratio was 71% (lower than many Eurozone members, including Germany and the UK), its fiscal deficit as a percent to GDP was 6.3%, its real growth rate was 0.5%, its unemployment rate was 7.9% and the rate of inflation was 3.3%. How did Cyprus come to the brink of bankruptcy within 12-18 months?

Responsibility rests with the previous government, Cyprus’s legislative and supervisory institutions, and, importantly, its senior bankers. Clouds on the horizon had been gathering for a while: The budget surplus for 2007 and 2008 turned to a deficit in 2009, the current account deficit reached 15.6% of GDP in 2008, nominal wage growth exceeded inflation until 2011 (with minimal productivity growth), the unemployment rate (5.3% in 2009) rose to 7.9% in 2011, and competitiveness slipped. Under full wage indexation, the broader public and banking sector pay gap (relative to the rest) remained substantial. The government ignored these signs, limping into the next election.

During 2011 and until February 2013, the political climate became polarized. Abroad, the Eurozone had decided that the banking system in Cyprus was too big. The German election campaign did not help. Rumours of money laundering reached hysteria, rivaled only by those on chemical weapons in Iraq, even though a US State Department report on money laundering placed Cyprus in the same category as Germany. Mr. Schäuble pronounced that the Cypriot model had failed, not distinguishing between the model and its application (sufficient ring-fencing, maturity matching, extensive diversification, risk awareness and eternal vigilance might have allowed the model to continue). Cypriot senior bankers had, of course, failed to meet these principles.

To the bad luck of election timing was added Basil III, the Eurozone’s PSI in Greek debt which cost the two largest Cypriot banks (the Bank of Cyprus and Laiki) dearly (25% of GDP), and the austerity ‘solution’ for Greece which increased the number of NPLs at Cypriot branches there. Yet, Cypriot banks did not reduce their exposure to Greek debt and NPLs. Mr. Moscovici’s statement should have been targeted at the banks’ leadership, not an entire country: The banking-related business and legal services sector does not exceed 20% of GDP – and there are no casinos in Cyprus!

The new president (March 1, 2013) and his party had supported severe austerity measures (December 2012) and wished to sign an MoU. This change in regime was not used by the Eurozone appropriately, surmising that this government would accept anything. By then, the Danish model, resolving two of its banks in 2011 through bailing in, had gained ground. Mr. Dijsselbloem refused to rule out a haircut on deposits, despite persistent questioning by journalists who warned of a bank run in Cyprus. On the Ides of March, the new president was faced with a take-it-or-leave-it choice involving a haircut on all deposits, including insured ones. A feature which played to crass German politics was that the haircut hit Russian ‘oligarchs’ in Cyprus, a group so numerous in Germany, the
UK, and other countries that the term ‘oligarch’ is a misnomer – polygarchs perhaps?

Read the rest of the article here.

Wikileaks: the Americans abandon Ioannides after shambolic coup against Makarios

2013-04-14T16:39:00.001+01:00

Below is an interesting Wikileaks cable (original here) sent from the US Embassy in Athens to the US State Department detailing a meeting on 16 July 1974, i.e. the day after the Athens-engineered coup that overthrew President Makarios in Cyprus, between Greece’s junta leader Dimitrios Ioannides and the US ambassador to Greece, Henry Tasca.

It’s clear from the cable that Ioannides believed he had American support for the coup and that he is infuriated when it becomes clear to him that, with Makarios alive and the coup a shambles, the Americans were now not prepared to defend Ioannides’ putsch in Cyprus, which meant, it must have been obvious to Ioannides, there was now nothing to stop a Turkish invasion of the island, that, indeed, the Americans were sympathetic to such a development. Ioannides desperately seeks to assure Tasca that the coup was in American interests, ranting about Makarios and the imminent prospect of Cyprus ‘falling into the hands of the communists’. The cable also confirms that, inasmuch as Ioannides had thought through the coup, his immediate aim was not annexation of Cyprus to Greece, but the removal of Makarios in order to facilitate an understanding with Turkey on the future of the island, i.e. partition of the island between Greece and Turkey.

FOR THE SECRETARY

1. I USED SECURE RELIABLE CHANNEL DIRECTLY TO GENERAL IOANNIDES TO DELIVER MESSAGE REFTEL [Reference Telegram]. HE BEGAN BY EXPLAINING HE HAD PERSONAL MESSAGE FROM USG [US government]. AFTER EMISSARY HAD READ TWO PARAGRAPHS, IOANNIDES COMMENTED MESSAGE MUST BE SAME AS THAT AMBASSADOR HAD GIVEN KYPREOS [Greece’s foreign minister],IN WHICH CASE EMISSARY WASTING HIS TIME SINCE HE WOULD RECEIVE MESSAGE ANYWAY. EMISSARY EXPLAINED HIS JOB WAS TO FINISH READING MESSAGE AND HAD IT TO HIM AND WOULD DO SO, TO WHICH GENERAL IOANNIDES SAID FINE.

2. AFTER EMISSARY COMPLETED MESSAGE, THE GENERAL LITERALLY BLEW UP, JUMPED UP, BACKED UP, KNOCKED OVER A TABLE, BROKE EMPTY GLASS AND UTTERED A STRONG OBSCENITY. HE CONTINUED THAT ONE DAY KISSINGER MAKES PUBLIC STATEMENTS REGARDING NON-INTERFERENCE IN GREEK INTERNAL AFFAIRS AND A FEW WEEKS LATER THE USG SAYS "CONSISTENT WITH THE ABOVE PRINCIPLES..." AND THREATENS INTERFERENCE. NO MATTER WHAT HAPPENED IN CYPUS I (IOANNIDES) WILL BE BLAMED. IF I HAD PULLED THE TROOPS OUT THE FORMER POLITICIANS WOULD HAVE BLAMED ME FOR TURNING THE ISLAND OVER TO THE COMMUNISTS. SOME DAY USG WILL REALIZE THAT ON 15 JULY 1974 CYPRUS WAS SAVED FROM FALLING INTO THE HANDS OF THE COMMUNISTS".

3. GENERAL THEN CALMED DOWN, CAME OVER TO WHERE EMISSARY WAS SITTING AND SAID HE KNEW HE UNDERSTOOD HIM: DIPLOMATIC TALK IS TIME-CONSUMING BUT HE WOULD ANSWER IN AS DIPLOMATIC FASHION AS POSSIBLE BECAUSE HE HAD DIPLOMATIC MISSION.

4. GENERAL STATED THAT GREECE ALSO BELIEVED IN NON-INTERFERENCE AND IN A FREE, INDEPENDENT, SOVEREIGN STATE OF CYPRUS; GREECE WOULD ABIDE BY THE DECISION OF THE MAJORITY OF THE GREEK CYPRIOTS, MOST OF WHOM WERE NATIONALISTS, AND THESE NATIONALISTS WERE THE ONES WHO HAD MOVED AGAINST MAKARIOS. IT WAS IMMATERIAL WHETHER THESE GREEK CYPRIOT NATIONALISTS MOVED WITH OR WITHOUT THE PRIOR BLESSING OF GREECE OR WHETHER GREEK OFFICERS SUBSEQUENTLY ASSISTED THEM. AT THIS POINT HE WENT OFF ON A TANGENT STATING THAT NEITHER GREECE NOR THE GREEK CYPRIOTS HAD ASKED FOR ENOSIS, THAT GOT [government of Turkey] HAD OBVIOUSLY ACCEPTED THESE DEVELOPMENTS IN CYPRUS, THAT TURKS UNDER STOOD THAT THE MATTER WAS AN INTERNAL GREEK CYPRIOT AFFAIR.

5. ACCORDING TO IOANNIDES ONLY REAL RESISTANCE LEFT ON CYPRUS WERE COMMUNIST SUPPORTS OF MAKARIOS IN PAPHOS;THESE SUPPORTERS WERE EVEN SINGING EAM/ELAS SONGS. MOST OF THE REST OF ISLAND WAS IN NATIONALIST HANDS. GENERAL IOANNIDES STATED THAT EVERYONE SHOULD FORGET THAT MAKARIOS WAS AN INTERNATIONAL FIGURE, THAT HE WAS A NATIONAL HERO, THAT HE HAD SERVED SEVERAL USEFUL FUNCTIONS AND THAT HE WAS A MAN OF THE CLOTH; MAKARIOS HAD BECOME A ROTTEN PRIEST HOMOSEXUAL; HE WAS PERVERTED, A TORTURER, A SEXUAL DEVIATE AND THE OWNER OF HALF THE HOTELS ON THE ISLAND. TO PRESERVE HIS POSITION AND TO CONTINUE HIS ACTIVITIES, MAKARIOS WAS WILLING TO SACRIFICE SEVENTY PER CENT OF THE GREEK CYPRIOT POPULATION (ONLY THIRTY PER CENT WERE AKEL) AND ENTIRE ANTI-COMMUNIST TURKISH CYPRIOT POPULATION. IOANNIDES ASSERTED GREEK CYPRIOTS IN NATIONAL GUARD REALIZED THESE FACTS AND HAD BEGGED MOTHERLAND FOR CHANCE TO ACT AGAINST MAKARIOS; GENERAL CLAIMED THAT HE ONLY ASSISTED AFTER BEING PRESENTED WITH A FAIT ACCOMPLI.

6. AT THIS POINT EMISSARY INTERJECTED AND TOLD IOANNIDES POINT-BLANK THAT, WITH COUP ONLY TWENTY-FOUR HOURS AFTER HIS REPORTING TO US REGARDING A POSSIBLE OVERTHROW OF MAKARIOS THIS WAS VERY DIFFICULT FOR ANYONE TO BELIEVE. AT THIS POINT THE GENERAL AGAIN BLEW UP WITH ARMS WAVING, KNOCKED OVER SAME TABLE, BROKE A SECOND GLASS AND, BETWEEN OBSCENITIES, STATED THAT HE DID NOT PLOT AND ARRANGE THE COUP; INITIAL PLAN AND APPROACH WAS FROM GREEK CYPRIOT NATIONALISTS ON 13 JULY, AFTER LATTER LEARNED THAT GOG [government of Greece] INTENDED TO ACCEDE TO MAKARIOS' DEMANDS TO REDUCE NUMBER OF GREEK OFFICERS IN NATIONAL GUARD.GENERAL STATED HE COULD NOT ACCEPT AT LEAST 85,000 GREEK CYPRIOT REFUGEES FROM MAKARIOS' TYRANNY. THIS COUPLED WITH MAKARIOS' ANTI-REGIME EFFORTS, MADE HIM DECIDE TO ASSIST GREEK CYPRIOT NATIONALISTS. THE GENERAL STATED THAT IF MAKARIOS SUCCEEDED IN KICKING GREEKS OUT OF CYPRUS WHAT COULD KEEP HIM FROM THINKING HE COULD NOT KICK JUNTA OUT OF GREECE. AFTER DECIDING TO ASSIST GREEK CYPRIOTS, THE GENERAL CLAIMED THAT HE DID NOT TELL THE ARMED FORCES LEADERSHIP NOR ANY GREEK OFFICIAL. HE LIMITED KNOWLEDGE OF HIS INTENTIONS TO FEW SELECT OFFICERS ON 13/14 JULY; NO ONE ELSE KNEW AND EVEN AFTER EVENTS UNFOLDED ON 15 JULY ONLY A HANDFUL OF PEOPLE WERE AWARE OF HIS ROLE. IOANNIDES JUSTIFIED THIS ACTION BY ASSERTING THAT IF HE HAD BRIEFED NUMEROUS PEOPLE THEY WOULD HAVE RAISED SUGGESTIONS, ADVICE, ALTERNATIVES, AND POSSIBLE PROBLEMS. HE ADDED THAT HE ACTED ON SPUR OF THE MOMENT.

7. IOANNIDES DECLARED THAT GAME WAS NOW OVER FOR MAKARIOS, THAT GREEK CYPRIOTS HAD BOOTED HIM OUT, THAT NATIONAL GUARD AND GREEK OFFICERS HAD ASSISTED NATIONALIST GREEK CYPRIOT BROTHERS, AND THAT ONLY RESISTANCE NOW WAS IN PAPHOS. IN REPLY TO EMISSARY'S DIRECT QUESTION IOANNIDES STATED THAT MAKARIOS WAS STILL ALIVE "BUT WHO CARES; HE NOW HAS NO POWER AND NO ONE, IF HE BELIEVES IN PRINCIPLE OF NON-INTERFERENCE IN INTERNAL AFFAIRS OF SOVEREIGN NATION WILL ASSIST HIM- NOT EVEN THE RUSSIANS UNLESS TURKS ASK THEM TO DO SO AND THE TURKS JUST DON'T CARE."

8. IN REPLY TO QUESTION WHETHER GREEKS WERE IN DIRECT TOUCH WITH TURKS, GENERAL STATED WE HAVE NOT BOTHERED THE TURKS; WE HAVE NOT DECLARED ENOSIS. TURKS AGREE THAT "THE PRINCIPAL THORN" (I.E., MAKARIOS) IS GONE AND, "I AM NOT IN TOUCH WITH THE TURKS." HE EXPRESSED VIEW THAT GREECE AND TURKEY COULD NOW PROCEED AT SOME FUTURE TIME TO SIT DOWN, TALK AND SOLVE THEIR DIFFERENCES. INDEED, ACCORDING TO IOANNIDES GREEKS MIGHT EVEN BE WILLING TO SHARE PROFITS OF PETROLEUM FINDS IN A JOINT EXPLORATION COMPANY; HOWEVER, GREECE WOULD NEVER SURRENDER AEGEAN CONTINENTAL SHELF BECAUSE THIS WOULD MEAN TURKISH CONTROL OF GREEK ISLANDS. HE ALSO EXPRESSED BELIEF THAT GREEK AND TURKISH CYPRIOTS COULD PROBABLY SOLVE THEIR DIFFICULTIES PEACEFULLY, QUIETLY AND AMICABLY. HE EVEN JOKED THAT IN A YEAR OR PERHAPS MORE REALISTICALLY TEN, THE TURKS MIGHT WANT TO SELL THEIR SHARE OF CYPRUS FOR INCREASED PERCENTAGE OF PETROLEUM RIGHTS. AGAIN IN REPLY TO DIRECT QUESTION, GENERAL IOANNIDES STATED THAT HE WAS NOT IN CONTACT WITH ANY TURKISH OFICIAL; HOWEVER, HE ADDED THAT TURKS WERE "OFFICIALLY AWARE" THAT ENOSIS WAS NOT THE OBJECTIVE AT THIS POINT AND THAT GREEK CYPRIOTS DID NOT INTEND ANY BLOODY ACTION AGAINST TURK CYPRIOTS.

9. WHEN ASKED FOR SPECIFICS ON MAKARIOS, IOANNIDES STATED THAT ACCORDING TO GREEK INFORMATION, MAKARIOS WAS ALIVE AND IN HANDS OF BRITISH AT EPISKOPI BASE, HE HAD GONE THERE WITH ASSISTANCE OF CANADIANS AND BRITISH ON ISLAND.

10. AT THIS POINT IOANNIDES SUMMED UP AS FOLLOWS:
A) HE STRESSED THAT HE TOO HAD A GOD; HE WAS DEFINITELY NOT ANTI-AMERICAN; "EVEN A JACKASS NEEDED A POST TO BE TIED TO" AND IN HIS CASE IT WAS THE U.S.

B) HIS HASTY DECISION ON 13 JULY MIGHT HAVE BEEN STUPID. INSTEAD OF ABANDONING CYPRUS AND LETTING U.S. WORRY ABOUT ITS FATE AND POUR MONEY DOWN ANOTHER RATHOLE, HE HAD ALLOWED LOVE OF COUNTRY, A MORAL OBLIGATION TO THE GREEK CYPRIOT NATIONALISTS AND HIS "PHILOTIMO" TO OVERRULE LOGIC AND TO ASSIST GREEK CYPRIOTS.

C) GREECE WOULD DO WHATEVER WAS NECESSARY TO PRESERVE ITS NATIONAL IDENTITY AND TO STAY ANTI-COMMUNIST. IF THIS MEANT KEEPING YIAROS OPEN IT WOULD STAY OPEN AS LONG AS IT WAS NECESSARY AND HE WOULD ACCEPT NO STATIC FROM ANYONE ON THIS SCORE. INDEED,HE HAD INSTRUCTED A GREEK OFFICIAL TO TELL BRITISH OFFICIALLY THAT WHENEVER THE BRITISH LET IRISH POLITICAL PRISONERS OUT OF BRITISH JAILS, HE WOULD FREE THE FORTY-TWO GREEK POLITICAL PRISONERS ON YIAROS.

D) HE PERSONALLY DIDN'T LIKE NIKOS SAMPSON, BUT THAT WAS GREEK CYPRIOT NATIONALIST DECISION. HE KNEW SAMPSON PERSONALLY AND IN HIS OPINION SAMPSON WAS "CRAZY." HE JOKINGLY REMARKED THAT NEW CYPRIOT MINISTER OF DEFENSE DIMITRIOU WAS VERY PRO-AMERICAN AND THAT OUR EMBASSY THERE WOULD SOON REALIZE THIS. HE ALSO KNEW DIMITRIOU PERSONALLY.

E) WHILE SHAKING HANDS AT CLOSE OF CONVERSATION IOANNIDES STATED "REMEMBER WE TOO BELIEVE IN A FREE, INDEPENDENT AND SOVEREIGN CYPRUS, WE TOO BELIEVE IN NON INTERFERENCE, ALONG WITH TURKS AND ESPECIALLY WITH KISSINGER. WE TOO BELIEVE THAT THE CYPRIOTS SHOULD BE FREE TO SOLVE THEIR OWN PROBLEMS, BE THEY GREEK CYPRIOTS, TURK CYPRIOTS OR BOTH."

Should Cyprus leave the euro?

2013-04-11T15:39:00.001+01:00

Good piece below jointly authored by Michalis Attalides, Antonis Polemitis and Stavros Zenios on how Cyprus reached its current dire economic situation and whether the bleak prospects of recovery merit the country abandoning the euro and returning to its own currency.

Cyprus: six reasons for staying within the euro and one question about whether it can

As in many arguments about a political and/or economic situation, in the argument about whether Cyprus should be in or out of the Euro, there is a tendency for the confusing and invalid conflation of a number of issues.

One issue is the cause of the crisis. The communist party, AKEL, which bears much responsibility for Cyprus reaching this state, tends towards arguments deceptively implying that the current condition of Cyprus is due to the Euro Group and the Troika. However, Cyprus has 14% unemployment, while still having experienced only a minor impact from Troika measures.

Herman van Rompuy referred to “years of mismanagement”, which every Cypriot knows is true. The main attribution of responsibility to the euro is that being in the euro area contributed to the attractiveness of Cyprus to foreign (including Russian) depositors. However the economic problems were the result of the world economic crisis combined with three other factors: The first was that, based on the foreign deposits, Cyprus bankers followed an expansionary policy of loans and investments, and (second factor), a profiteering attitude which verged on gambling. When the crisis came, the banks faced severe liquidity problems and the second largest bank of the island became insolvent. Policymakers and the regulating institutions, the Ministry of Finance, or the Central Bank of Cyprus, fell short in their job.

The second issue is the treatment of Cyprus by the Troika and the Euro Group, just two weeks after Nicos Anastasiades became president, after the end of the term of our previous, communist president, Demetris Christophias. The new president had committed himself to immediately negotiating, agreeing and signing a Memorandum of Understanding on the bailout.

The treatment he received from the Troika and the Euro Group has caused shock all over the world. Other Mediterranean and small members of the EU should be warned. After showing patience with anti-EU Christophias for months, they exposed Anastasiades to pressure and deadlines, threatening to suddenly cut off Emergency Liquidity Assistance funds to the banks, assistance which had been provided for over a year to one bank that many local analysts considered insolvent, by-passing ECB policies.

The reasons given both by the Euro Group president and the sole large power active in the EU now, Germany, for the harsh treatment of Cyprus are deceptive or straight-forwardly wrong. They are deceptive because they never mention that, though with many weaknesses, the Cyprus economic model, which is based on services, and not heavy industry, functioned and was not in danger of collapse, until the Euro Group decided the PSI to the Greek public debt, which landed the Cyprus banks with a 4.5 billion euro loss, equivalent to 25% of the country’s GDP. We are not aware of any other country suffering similar losses, since Finland was hit by similar proportionate loss of GDP with the collapse of the Soviet Union.

Read the rest here.

Thatcher on Papandreou: ‘a charming and agreeable man’

2013-04-09T16:13:00.000+01:00

Strange going through Margaret Thatcher’s autobiography, The Downing Street Years, and finding rather flattering references to Andreas Papandreou, whose tenure as Greece’s prime minister in the 1980s coincided with Thatcher’s leadership of the UK. Ideologically, Papandreou and Thatcher were as far apart as it’s possible to imagine.

Thatcher mentions Papandreou in reference to her battles in Europe to secure British interests and sovereignty. At one point, she describes him as ‘remarkably effective in gaining Community subsidies for Greece’, while, elsewhere, recalling discussions to expand the EEC to bring in Spain and Portugal, she calls him ‘a charming and agreeable man’ and reveals his hardball tactics aimed at securing more European funding for Greece.

‘At least on this occasion it was not Britain but Greece which was marked out as the villain of the piece – and with some justice. The two outstanding issues as regards the terms for Spain’s and Portugal’s entry had turned out to be wine and fish, on both of which the Iberian countries were heavily dependent. The negotiations seemed to be nearing a mutually satisfactory conclusion. It was at this point that Mr Papandreou, the left-wing Greek Prime Minister, suddenly treated us to some classical theatre.

‘A charming and agreeable man in private, his whole persona changed when it was a question of getting more money for Greece. He now intervened, effectively vetoing enlargement unless he received an undertaking that Greece should be given huge sums over the next six years. The occasion for this arose as a result of discussions which had been going on for some time about an “Integrated Mediterranean Programme” of assistance, from which Greece would be the main beneficiary. It seems that the Greeks’ appetite had been further whetted by unauthorized discussion of large sums within the Commission. Mr Papandreou’s statement threw the Council into disarray. Everyone resented not just the fact that Greece was holding us to ransom, nor even the particular tactics used, but still more the fact that, though Greece had been accepted into the Community precisely to entrench its restored democracy, the Greeks would not now allow the Community to do exactly the same for the former dictatorships of Spain and Portugal.’

How Marfin looted Laiki and propelled Cyprus towards economic meltdown

2013-04-06T03:18:00.000+01:00

Above is a report by Simon Cox from BBC World Service radio on the economic crash in Cyprus. Cox traces the collapse of Cyprus’ banking sector to 2006 when the second largest bank on the island, Laiki, was taken over by Marfin Investment Group, a Greek investment company run by Andreas Vgenopoulos who, it is alleged, with his cohorts, proceeded to loot the Cypriot bank.

In Cox’s report, Laiki employees describe having their doubts over the intentions and practices of the new regime from Greece assuaged by large, unwarranted bonuses or overridden by fear of being branded dead wood or trouble makers. Employees, it is claimed, were induced, and browbeaten, into buying and holding onto Marfin-Laiki shares as a demonstration of loyalty to the bank.

Cox also reports on the way Marfin siphoned money from Laiki’s Cypriot operations to finance unsecured loans to Vgenopoulos’ business associates, friends and family in Greece. These loans included one of €700m to a Greek shipping company; €500m to a Greek TV station; and €400m to Marfin-Laiki’s Greek directors.

Cyprus’ foreign policy after the flood

2013-04-03T21:26:00.000+01:00

Above is a very good interview aired last night on Cyprus TV with foreign minister Ioannis Kasoulides, who discusses the state of Cypriot diplomacy in the wake of the island’s economic crash.

Specifically, Kasoulides stresses that there has been no rupture in relations with Russia and argues that the recent rapprochement between Israel and Turkey is not necessarily a setback to energy co-operation between Tel Aviv and Lefkosia. (Kasoulides points out, in fact, that he’s off to Israel on Monday with energy minister Giorgos Lakkotrypis to discuss joint Israeli-Cypriot hydrocarbon projects).

Kasoulides also notes that Cyprus does not feel under pressure to agree the transfer of its hydrocarbon products through Turkey to facilitate a Cyprus solution and adds that such a pipeline would not, in any case, be the most profitable way to export Cypriot gas, with an LNG plant making more sense.

Kasoulides also reveals that Turkey is pressing for the immediate resumption of Cyprus negotiations in order to exploit the current political and economic weaknesses of the Greek side, and he strongly rebukes the UN’s special Cyprus adviser Alexander Downer for promoting Turkey’s agenda. Kasoulides also condemns Downer for the way he has handled the Cyprus talks since being appointed in 2008 and stresses that Lefkosia will insist that when negotiations resume, which may not be until September, the groundwork has been thoroughly prepared so that talks can be meaningful. Kasoulides says the Downer-led negotiations have become a pointless exercise, consisting of the Greek and Turkish sides meeting and reading out statements outlining their positions.

Two questions not posed to Kasoulides in the interview. 1. How have relations between Athens and Lefkosia been affected by recent Eurozone events? 2. Given the breakdown in relations between Cyprus and its European ‘partners’ how will this affect Cyprus’ ability to advance its policies in the EU regarding Turkey?

Who’s to blame for Cyprus’ economic crash?

2013-03-28T13:20:00.000Z

Here’s Hermes’ comment responding to the views Christophoros Pissarides has expressed in the international media (which I’ve posted on here, here and here) regarding the Cyprus ‘bailout’ deal, which Pissarides regards as outrageous and ignorant:

I understand Pissarides is angry at this stage of the crisis. However, when things being to settle a bit, I hope for the sake of Greek Cypriots and Greeks, that Pissarides will tell the truth. The best friends are the ones that are honest rather than the ones that tell you what you want to hear.

Putting aside for a second the brutality of the IMF, EU and German diktats, the fact that Cyprus developed very lax banking standards (even before the Greek PSI, Laiki was deteriorating fast), was very slow in responding by cutting government expenditure below revenues when it became obvious that the banks were very unhealthy, they did not have the wherewithal to recapitalize its banks; the responsibility of this should not wholly fall onto the German and northern European taxpayer. They were prepared to provide most of the funds but not all of them. Also, why would they really care if Cyprus has many accounting and finance graduates. If Germany suddenly priced itself out of exports markets, and thousands of engineers become unemployable, should Greece and Cyprus be expected to pay for that? The Greek Cypriots orientated its economy a certain way; and in turn, churned out certain skills, but did not get the basics right.

Here’s my response:

You’re missing the point, which is that the punishment being meted out to Cyprus does not fit the crime. And you’re also insulting the intelligence of Cypriots, since no one – apart perhaps from AKEL – denies that Cypriots got carried away, and wanted to create an Eastern Mediterranean Switzerland without the necessary standards, probity and professionalism. They got greedy, complacent. They put in charge of a liberal economy a bunch of idiotic and unreconstituted communists. Too many Cypriots, with relatively modest incomes, because of an ability to take out easy loans, lived millionaire lifestyles. The saga with Vgenopoulos is a perfect example of how Cypriot bankers and politicians succumbed to greed, leaving good sense at the door when he promised them he could make them even richer, when in fact his intention was to loot Laiki to support his dishonest dealings in Greece and for the enrichment of friends and family.

However, having got themselves into trouble, Cypriots did expect solidarity from the EU, not only because the trouble Cyprus found itself was due in part to the flawed way the euro was constructed and the incompetent way the eurozone crisis has been handled; but also because the EU is supposed to be moving towards a political as well as economic union, in which there are no northern European and southern European taxpayers, just like there is no distinction between taxpayers in NSW and those in Victoria. So Cypriots were entitled to expect reasonable treatment from the EU and not bullying, threats, prejudice, lies (about money laundering) and becoming an unwitting pawn in Germany’s forthcoming elections. And unlike Greece, Cypriots didn’t expect to take the money and carry on as before. They were prepared to make massive changes to their society and economy – which was not as rotten and corrupt as Greece’s (though Pissarides’ talk of impeccable or British standards of probity is optimistic) – but instead of being given this chance to reform their economic system, much of which was in good order, they will see it wrecked, with all the social and human consequences – thirty years of hard work, in which there was continuous growth and full employment – all done in the aftermath of the Turkish invasion, in which hundreds of thousand of people lost everything, becoming destitute overnight, and often worked two-three jobs to get on their feet again – down the drain.

And I would also stress that this is not simply an economic or standards of living issue. Because of the Turkish occupation and Turkey’s continuous threats, against which Cyprus’ only defence has been the legitimacy of the Republic of Cyprus and the strength of its economy, what is at stake is national survival – this is not an exaggeration. Indeed, since we know that the existence of the Republic of Cyprus is a thorn in the sides of powerful players in the region – who have sought for decades, and most recently through the Annan plan, to dismantle the Republic of Cyprus – we are entitled to suspect that what’s going on here is not a simple economic crisis, but a means to diminish the Cypriot state and make it vulnerable to the political and geopolitical machinations of unfriendly powers.

*Above and below are two interviews with Chris Pavlou, until recently vice president of Laiki Bank. The first interview, in English with Faisal Islam from Channel 4 news, describes the browbeating Cyprus was subjected to by the troika and the the corrupt dealings of the Greek units of Laiki, whose losses ended up being covered not by Greek but by Cypriot authorities; while the second interview is in Greek with Fanis Papathanasiou from Greek state TV network NET, in which Pavlou describes Laiki Bank as out of control and a political establishment not fit to reign it in.

Pissarides questions Cyprus’ future in the euro

2013-03-27T13:28:00.003Z

Above is another video clip of Christophoros Pissarides, the Cypriot Nobel prize-winning economist and head of the island’s Economic Policy Council, this time explaining to Bloomberg TV the ramifications of Cyprus’ bailout deal and wondering whether Cyprus should now abandon the euro. Pissarides is clearly furious and incredulous that Germany (essentially) has decided at a stroke, disdainfully, unnecessarily and unjustifiably, to terminate Cyprus as a financial services centre, without any apparent sensitivity to the fact that much of Cypriot society – particularly the education system – was oriented towards accommodating the economic model the country had developed over a period of 40 years.

Below are a couple of things Pissarides says in the interview:

‘The implications for the Cypriot economy will be a disaster. The only good thing about it is that the uncertainty has been resolved. But that’s like saying, “I’ve got a pain in my leg”, I go to the doctor, he cuts the leg off and we say “it’s good that you don’t have the uncertainty about that pain anymore”.’

‘Cyprus developed as a small economy with a highly educated labour force – the most highly educated labour force in Europe in terms of university degrees – and concentrated on business and financial services. And now the German finance minister and others are telling Cyprus, “This is not a good model of economic development for you. You have to think of something else”. Now, what do those qualified people do – all those people who have degrees in accounting, finance and banking studies from British universities? They become unemployed or leave the country.’

Pissarides blasts Cyprus bailout deal

2013-03-26T12:51:00.000Z

Above is audio of Christophoros Pissarides, Nobel prize-winning economist and head of Cyprus’ Economic Policy Council, speaking yesterday on BBC Radio 4’s Today programme about the Troika’s ‘rescue’ package for Cyprus. Richard Corbett, former Labour MEP and currently adviser to EC president Herman Van Rompuy, is the other speaker. The professor can barely contain his contempt and outrage at the decision reached on Cyprus.

Olli Rehn and Elena Panaritis on Cyprus economic crash

2013-03-25T13:32:00.000Z

The above video is of European Commission Vice President Olli Rehn speaking in the immediate aftermath of last night’s Cyprus bailout deal. I was struck by his ominous tone, promising tough times ahead for Cypriots and comparing the likely fallout to the impact on the island of the Turkish invasion in 1974. ‘Cyprus and the Cypriots,’ he said, ‘have gone through very difficult times before – and you know what I mean – and the Cypriots have overcome these difficult times. There will tough times ahead as well; but I’m sure that by working hard together, we shall overcome these difficulties.’

Below is Greek economist and former Pasok MP Elena Panaritis speaking on BBC Radio 5 just after news of the Cyprus bailout deal came through last night. She too expects the Cypriot economy to be devastated by the troika ‘rescue’ and draws particular attention to the fate of pension funds that will be hit by the levy on €100,000 plus deposits and the winding up of Laiki bank. Panaritis also blames Greece’s economic meltdown for precipitating the crisis in Cyprus. ‘Don’t forget,’ she said, ‘that Cyprus is being punished for something not originated by themselves. Thirty percent of their GDP – in other words, the capital that has been lost from the banking sector – is because of the PSI and the Greek crisis. We, the Greeks, exported this terrible tragedy to Cyprus. I feel very awkward about Cyprus right now, being Greek myself.’

Varoufakis, Orphanides and Pissarides on the Cyprus economic crisis

2013-03-23T11:33:00.000Z

Above are three takes on the Cyprus economic crisis, from Yanis Varoufakis, Athanasios Orphanides and Christophoros Pissarides.

Varoufakis, speaking last night on BBC Radio 4, suggests that the Cyprus economic model – which, according to him, entailed the island becoming the Switzerland of the Eastern Mediterranean – was a bad idea from the start and was now, thankfully, dead and buried. On the other hand, Athanasios Orphanides, professor at MIT, and former governor of the Cyprus Central Bank, before he was removed last year by the island’s former president, Dimitris Christofias, speaking to Bloomberg TV on 19 March, defends Cyprus’ economic model, asserting that it was functioning well and was basically sound. He also asserts that the treatment of Cyprus by the EU indicates to him that what we are witnessing now is the ‘slow death of the European project’. Nobel prize-winning economist Christophoros Pissarides, recently appointed head of Cyprus’ Economic Policy Council, being interviewed by Channel 4 News last night, can barely contain his outrage and disgust at the way the Troika has perfunctorily wreaked havoc on the Cyprus economy, which, like Orphanides, he suggests was fundamentally healthy. Pissarides asserts that the problems facing the banking sector in Cyprus could have been overcome without a wholesale repudiation of the island’s economic model.

Greece accused of abandoning Cyprus… again.

2013-03-22T14:31:00.002Z

Above is DISY MP Lefteris Christoforou speaking on Cypriot TV yesterday and accusing Greece’s Central Bank of turning down Cyprus’ request for a loan of €2bn out of the €50bn Greece has at its disposal to recapitalise its banks. Christoforou says Cyprus effectively gifted Greece €4bn when it agreed to the haircut of Greek debt in late 2011 and implied that Greece should now return the favour and show solidarity with Cyprus, especially since Greece had only used €41bn of the €50bn made available to it for its banks. The sense of Greece, again, abandoning Cyprus to its own fate is strong and has brought up memories of the Turkish invasion of the island in 1974, when Greece told Cyprus that it was ‘too far’ from Greece for it to help.

Cyprus turns down EU deal, and looks to Russia

2013-03-20T15:33:00.000Z

Well, as we all know by now the Cyprus parliament categorically rejected the Eurogroup/Troika deal put to it that would have involved haircuts to bank deposits in return for the securing of a €10bn loan. Obviously, I’ve been following this story very closely and below is my tweeting activity over the last couple of days, which agrees with the NO vote and draws attention to the broader issues for Cyprus and the dilemmas it still faces.

What is clear is that the EU’s intention was to decimate Cyprus as a financial centre. Cyprus accepted the need for a contraction of its banking sector, but it could not accept that this would be done in a chaotic and rushed fashion that would propel the country into economic turmoil and years and years of recession. Nor could Cyprus accept the spurious premise on which this would have been done, i.e. Cyprus was a haven for Russian mafia money. The German-inspired emphasis on dirty Russian money made Cypriots suspicious that they were being caught in a wider geopolitical game between the EU and Russia, in which Cyprus was being sacrificed to lessen the influence of Russia in the Eastern Mediterranean. But while it might suit the EU, the US and others that Russia is excluded from the Eastern Mediterranean, it does not suit Cyprus, which has an overriding political problem with Turkey that is not taken seriously by the EU but has garnered Cyprus, over a long period, support from Russia.


1. Currently reading Claire Palley’s book on Annan plan. Her description of UN shenanigans & bullying of Cyprus very similar to EU browbeating  .

2. Having said Cyprus can’t afford to alienate EU because of Turkish occupation, for same reason it needs to keep Russia on board. Dilemma.

3. @EnetEnglish. Story isn’t serious. It just wants to discredit & defame Cyprus & make out the occupation regime is legitimate & responsible.   

4. @EnetEnglish. Why are you reporting such a bullshit propaganda story as if it had any credibility or worth? Get your act together. (http://www.enetenglish.gr/?i=news.en.home&id=357)

5. Worth stressing that Cyprus membership of EU was a strategic not economic choice, designed to reverse Turkish occupation of 40% of island.   

6. @Hugodixon Cyprus bailout piece is v. good. Appreciates Turkish occupation context & why Cyprus can’t alienate EU. http://bit.ly/YqzkoL     

7. Please @cybc2012, fix your web stream. I’m having to watch TV stream from Greece for latest news on Cyprus, and it’s doing my head in.   

8. Putin invites Cypriot president Anastasiades to Moscow. ‘Come any time you like’, he tells him: http://www.kathimerini.gr/4dcgi/_w_articles_kathremote_1_20/03/2013_488705

9. Georgie Markides: ‏ Cyprus NO is a strong message not to its public but to the investor community that it fights to remain a financial hub . Retweeted by john akritas
  
10. Panikos Hadjipanayis:  Russia tries to ease concerns over Cyprus levy: http://news.yahoo.com/russia-gain-more-loses-cyprus-levy-russian-deputy-165928022--business.html Retweeted by john akritas    

11. Message to Greece from Cyprus: you don’t have to burn down country and hold general strike after general strike to get your message across   .

12. Cyprus NO is correct decision. Only when Andros Kyprianou was speaking did I think we might be making a mistake.   

13. Cypriots are very, very stubborn. That’s my explanation. When they think they’re right, they think they’re right. 

14. Danae Marga: ‏ Είναι Ρωσσία εναντίον Γερμανία απλά η Κύπρος είναι το μέσο δυστυχώς. Retweeted by john akritas    

15. One of the worst consequences of Cyprus haircut plan is that it’s put a spring back in the step of communist AKEL.   

16. Στράτος Μωραΐτης  RT @EfiEfthimiou: Cyprus DIKO leader: It is clear now, the problem isn’t economic, it’s political, it's geopolitical. Retweeted by john akritas    

17. Nul points to bailout plan. Not one Cyprus MP will vote for haircut deal. Up to 36 set to vote against, while remaining 20 will abstain.    

18. ‘Just a month into his new presidency, Nicos Anastasiades has been comprehensively discredited’. http://soa.li/86u8OhB     

19. Must be stressed: Cyprus can’t afford to alienate Russian money as Russia’s support against Turkish occupation is matter of life and death.
   
20. @achrisafis Can you stop referring to the ‘Turkish north’ in your pieces on Cyprus. This is a politically loaded term, which Turkey prefers.   

21. ‘The Cypriot govt was keener to protect its banking model, which turned out to be a disastrous political mistake.’ http://reut.rs/ZEcKus    

22. MRT @pdacosta @YanniKouts Correct. Anastasiades not Schaeuble hit small savers to keep Cyprus as financial centre. http://tinyurl.com/cr926tz    

23. Russians can’t complain too much about losing Cyprus as offshore haven. Christofias begged them for money to avoid precisely this scenario.    

24. What Cyprus is trying to do is preserve itself as financial centre, but the game is up, regardless of vote tomorrow. Russians are off.   

25. On revising deposit tax, wealthy Russians & Britons will take their money out of Cyprus anyway, so right to hit them harder before they go.   

26. MRT @TheCyprusWeekly: Pissarides accepts outcome of Cyprus bank levy deal will be mass exodus of foreign depositors. http://bit.ly/15dz3Zl
    
27. Should be stressed. There has been NO panic in Cyprus over bank deal and demonstration outside presidential palace was tiny – 150 people.  

28. Even if Cyprus parliament votes against haircut and there is some renegotiation with troika, country's financial system faces devastation.  

Cyprus bank bailout: the issues we must consider

2013-03-17T12:01:00.001Z

Below are some provisional thoughts I’ve been publishing on my Twitter account on the decision taken by the Eurogroup on Saturday morning regarding Cyprus’ request for a bank bailout. I won’t go into the details of the decision because you probably all know what’s being proposed, suffice it to say that we must think beyond what the immediate economic impact of the bail-in/out would be – it is not just a question of taking seven and 10 percent from people’s savings – and consider the wider political and geo-political implications.

As of 12:00 pm:

12. Melian dialgoue from Thucydides always comes to mind in circumstances in which Cyprus finds itself: http://bit.ly/RugF9n

11. Cyprus socialists announce they will vote against bail-in/out. Will demand renegotiation of terms.

10. In fact, what do Greece, Cyprus, Serbia, all devastated by the EU, have in common? They’re not quite ‘European’, are they.

9. Here’s an ugly truth. Cyprus has been hung out to dry because as Greeks and Orthodox Christians, Cypriots have no powerful allies in EU.

8. Everything Cyprus does must take into account Turkey’s occupation & continuing threats. As in 1974, Turkey sits there waiting for mistakes.

7. UK’s decision to compensate soldiers affected by Cyprus bank levy amounts to direct UK government contribution to Cyprus bail-in/out.

6. Anastasiades is a serial blinker. He blinked in 2004 and backed the Annan plan; and he has blinked again in 2013 over bail-in/out.

5. Given Anastasiades is fatally damaged, implications for Cyprus issue serious. UN, Turkey and others will have noted his capitulation.

4. Anastasiades, given no depositor haircut promises, barely 2 weeks into presidency, is politically finished. Five years of lame duck.

3. Geopolitics of driving Russians out of Cyprus has also to be considered. EU & others irked by Cyprus’ political & economic links to Russia.

2. Also correct. Troika hitting large (foreign) savers is designed to wreck Cyprus’ economic model as financial centre: http://bit.ly/XNX37W

1. @Frances_Coppola is correct. Anastasiades hit small savers in (futile) effort to preserve Cyprus as financial centre. http://coppolacomment.blogspot.co.uk/2013/03/sowing-wind.html?spref=tw