Most commentators agree that the Greek Republic of Cyrus has been treated unfairly by the troika of the European Commission, the European Central Bank and the International Monetary Fund. The requirement that a national government impose a tax on deposits was a startling and deeply disturbing innovation. The pain for the government of the Greek Republic of Cyprus was mitigated by its decision to penalize deposits over 100,000 euros. This meant that the majority of small depositors, that is, the majority of the electorate, would suffer no losses. Those depositors with funds greater than 100,000 face a very uncertain future. Their accounts are frozen and they are likely to incur losses of up to 50%. Many of these depositors are Russian and have made a significant contribution to the economy of South Cyprus in recent years.
The conspiracy theory is 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 northern and southern Cyprus would agree to the terms of the Annan Plan and that the island would be reunified. Referendums were held in both parts of Cyprus. Voters in northern Cyprus were in favor of reunification by a large majority, but voters in the south rejected Annan’s plan. In the South, the government, the church and most of the media publicly criticized the Annan plan and promoted its rejection. This was poorly 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 major strain on EU-Turkey relations. Turkey’s growing importance as an economic power in the Middle East and its crucial role in resolving the conflict in Syria have led the US to negotiate better relations between Turkey and Israel. The United States has been working quietly behind the scenes to pave the way for Turkey’s accession to the EU. While the Obama administration can claim some success in the recent thaw in Turkey-Israel relations, the predictable intransigence of the Greek Republic of Cyprus has been a source of constant irritation in both Washington and Brussels. The fact that President Christofias was a communist and publicly admired Fidel Castro drew the attention of the CIA. Both President Bush and Obama refused to sanction CIA ‘dirty tricks’ designed to discredit President Christofias.
3 The response of the Greek Republic of Cyprus to mounting financial pressures was to seek and secure a €2.5 billion 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, the decision was made to punish and humiliate the Greek Cyprus. The proposal that all bank accounts should be leveraged 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 rush to Moscow for more loans. The Greek Cypriots had several proposals for the Russians. They suggested that Russian investors buy Laiki or the People’s Bank of Cyprus and were prepared to offer the security of the large untapped natural gas fields surrounding Cyprus as long-term collateral.
6 The natural gas resources of Cyprus are a disputed resource between the Greek Republic of Cyprus and Turkey, who argue that both Northern and Southern Cyprus should share the benefits of the resource. The EU informed Turkey about the impending financial crisis in southern Cyprus and made several announcements about natural gas fields and the probable route of gas 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 problem by suspending its agreements with the Italian company ENI. The Italian firm was working on the Samsun-Ceyhan pipeline that will bring Russian and Kazakh oil to the Turkish coast. 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 before the Greek Cypriots landed in Moscow, leaving them at the mercy of the EU.
9 The requirement to seize €5.8 billion from Cypriot bank accounts to release a €10 billion bailout has devastated the banking and financial sector of the Greek Republic of Cyprus. The real estate sector, fueled by demand from the Russians, will soon be in free fall.
10 Greek Cypriots have compared the financial disaster to the 1974 invasion by Turkey. are correct. The implications of the crisis will deeply paralyze southern Cyprus for at least five years.
11 Turkey has now positioned itself as a flavor for the island of Cyprus. The Turks have made proposals for the exploitation of natural gas resources: firstly, the island becomes a united state of Cyprus and there is a joint exploration of the resource. Second, the Greek and Turkish Cypriots form a joint committee to exploit and commercialize the resource, or third, it becomes a permanent two-state solution to the Cyprus problem.
12 The Greek Republic of Cyprus will be left with very few options, other than to become more accommodating towards Turkey and Northern Cyprus.