Russia to the Rescue?

Posted on 25 March 2013 at 1:16 pm by Admin No Comment

As the situation in Cyprus, the latest victim of Eurozone turmoil, drags on with no end in sight, the prospect of a Russian rescue for the island seems to have slipped away in recent days. This needn’t be the case if European leaders are willing to seize this as the moment to do what they inevitably must at some point in the next decade, and attempt to bring Russia closer to Europe.

A Russian bailout of Cyprus has two immediate advantages for the Eurozone; first, it shifts the cost of the latest bailout away from already disgruntled German taxpayers and onto a country with ample cash reserves. Second, an ad-hoc Russian solution avoids establishing any specific precedent for the Eurozone countries, allowing them more flexibility if they have to deal with another country such as Italy or Spain in the near future. The obvious advantage for Cyprus lies in the terms of a Russian bailout being less burdensome for ordinary, hardworking Cypriots than those measures, such as the proposed raid on savings, which would accompany a Eurozone solution; but depending on the details there could be other advantages down the line, not just for Cyprus but the EU as a whole and Britain in particular.

This all relies on Cyprus offering, and Europe permitting, a deal which at first glance seems hugely biased in favour of the Russians. The first part of such a deal has already been mentioned by many commentators, namely that Russia, with its titanic state-run energy empire, would gain the rights to swathes of Cyprus’ natural gas fields. While it may seem improper for Cyprus to sign away its natural resources, it certainly seems a fairer solution to sacrifice a shared national asset than to loot individual savers and earners. The second part of a deal with Russia is the more unorthodox; a sovereign military base, similar to those already held by Britain. This would again be a burden on the Cypriot government, not its people, and one which, given the established presence of British bases, should not prove overly onerous. For Russia, however, this could be a huge strategic coup, offering the open warm water port which has been a perennial Russian objective.

Bur what does Europe have to gain from letting the Russians into the Mediterranean? For a start, an easing of Russian support for Assad, as the Russian Navy finds a preferable alternative to the Syrian port of Tartus, presently its only port in the Mediterranean. The Cypriots themselves would be more secure against any future threat from the Northern Turkish-occupied half of the island, with Ankara likely to think twice before risking poking the Russian bear. But beyond military concerns, the beginning of cooperation between Europe and Russia, and a shift in Russian focus towards Europe, is vital to the future security and prosperity of the continent. By treating Russia as a partner and a responsible participant in European affairs, rather than with suspicion, EU countries can begin making progress toward opening up trade and investment with a market which offers huge demand for European goods and services and major growth for European investors, as well as securing the supply of Russian gas upon which much of Europe depends.

The final eventual benefit of closer cooperation between the EU and not just Russian, but other countries which stand outside the EU but share clear Europe interests, such as Turkey, European cooperation will be not only strengthened but simultaneously decentralised, weakening the power of Brussels and reinvigorating national governments as the decision makers about Europe’s future. For nations like Britain, instinctively sceptical of much of Brussels’ integrated initiatives, this would be no bad thing. By reaching out to Russia, Eurozone decision makers could potentially save not just Cyprus, but the entire European ideal.

by James Mottram

This piece was written prior to the announced bailout deal.

The views put forward in this and all other blog posts should not be taken as representative of CUCA’s views or the views of its members unless explicitly stated otherwise. Any CUCA member can contribute an article or blog post to CUCA’s website – just contact

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