Cyprus counts the cost of weaker relations with Russia after the Kremlin invades Ukraine

The first Russian Orthodox Church in Cyprus is a sign of the huge Russian influence on the island © Eleni Varvitsioti/FT

Isaiah switches effortlessly from Greek to Russian as he welcomes visitors to his church in Tamassos, amid the orange groves of the Cypriot countryside.

With its five gleaming golden domes – brought from St. Petersburg – it is the first Russian Orthodox church in Cyprus, funded by the owner of a Russian construction company and a sign of the enormous Russian influence on the Mediterranean island.

Weeks after Russia invaded Ukraine, Isaiah – a Greek Cypriot who is the Metropolitan of Tamassos, south of Nicosia – insists the Russians should “not be demonized” for the assault on the Kremlin over Kyiv.

It is also trying to accommodate some of the thousands of Ukrainians who have arrived in Cyprus since the invasion, hosting some and organizing joint prayer groups with the island’s large Russian population.

“This attack [on Ukraine] shouldn’t have happened,” he said.

The priest’s efforts to deal with the aftermath of the war echo what is happening across Cyprus, long known as “Moscow on the Mediterranean” for its popularity with Russians. The country has had some of the closest political ties with Russia of any EU member state, but is trying to preserve EU unity towards Moscow.

Isaiah, the Metropolitan of Tamassos
Isaiah, the Metropolitan of Tamassos, says Russians on the island should not be demonized © Eleni Varvitsioti/FT

And while parts of the economy are feeling the impact of Western sanctions on Russia, the crisis is also showing the island’s continued ability to attract Russians.

Since Cyprus gained independence in the 1960s, “Russia has permeated the full spectrum of the country’s political life, economic activity, media and church,” said Makarios Drousiotis, a writer and journalist with investigation on the island.

The island’s low tax rates, flexible regulations and EU membership attracted Russian investors after the collapse of the Soviet Union. In 2012, the year before the financial crisis forced the island to seek an international bailout, bank deposits held by non-euro area residents amounted to 21.9 billion euros, according to data from the Central Bank of Cyprus.

They have fallen considerably but still amounted to 6.4 billion euros at the end of February. “Based on what the banks have said, 80% of this money is Russian money,” said Fiona Mullen, director of Sapienta Economics, a Nicosia-based consultancy.

Politically, Cyprus has long viewed Russia as a potentially useful ally in its long-running dispute with Turkey, which invaded northern Cyprus in 1974. The island remains divided, with northern Cyprus recognized only by Ankara .

However, after Moscow invaded Ukraine, Cyprus aligned itself with the line of EU sanctions against Moscow. “We had no choice,” said Ioannis Kasoulidis, Cyprus Foreign Minister. “Our decision was to support EU and union solidarity.”

And for some Cypriots, the war in Ukraine has parallels with their own experience. In a recent poll in Politis, one of the island’s leading newspapers, more than 80% of Cypriots said there were similarities between events in Ukraine and the Turkish invasion.

“From the moment Russia did to Ukraine what Turkey did to us, we had no choice but to stand up and talk like we did in our case,” he said. said Kasoulidis.

Cyprus is among the EU countries hardest hit by the sanctions. Russians make up more than 20% of visitors, and tourism should benefit this year from direct flights from Russian cities. Much of that will go away.

“We were expecting 800,000 visitors, mostly from Russia and some from Ukraine and Belarus,” said Savvas Perdios, deputy tourism minister.

In Limassol, historically the center of the Russian community in Cyprus, Michalis Constantinou, owner of a high-end jewelry business, is feeling the pinch. “We are a small island; if Russians and Ukrainians don’t visit, we’re finished,” he said.

The importance of the Russian market is such that Stanislav Osadchiy, Moscow’s ambassador to Cyprus, has harassed the government for its decision to back the sanctions. “You shot yourself in the foot,” he said on television days after the start of the invasion of Ukraine, suggesting that Russian tourists would go to Turkey instead. “Is that what you want? For them to spend their money there?

A construction site in Limassol
Limassol has always been the center of the Russian community in Cyprus © Antonis Theodoridis

Russians represent about 6% of the 800,000 inhabitants of Cyprus. In Limassol, Alexey Voloboev, owner of music station Russia Radio, said his advertising revenue had fallen by 70% as Cypriot customers feared being associated with a Russian broadcaster.

“They tell me either to change the name of the station or to make a statement against the war,” he said.

The Cypriot banking system also felt the fallout from the war. Three weeks ago, the European Central Bank appointed a temporary administrator to oversee the liquidation of RCB Bank, a lender set up as a subsidiary of Russian bank VTB. On the day of the invasion, RCB had announced the transfer of the majority stake in VTB to its management before being hit with sanctions. From now on, the 2.8 billion euros in deposits from RCB customers will be reimbursed or transferred to another bank.

Alexei Voloboev
Alexey Voloboev says advertising revenue for his Russian radio station has fallen sharply © Eleni Varvitsioti/FT

In Limassol, many Russians have invested in multimillion-euro beachfront apartments. Cyprus granted passports in exchange for an investment of more than 2 million euros in the country, but the disputed regime was abolished in 2020 after the Mediterranean island acquired thousands of new nationals.

Cypriot authorities have confirmed they are investigating four Russians, who have been under sanctions since the invasion of Ukraine, who are among those granted passports.

Nikolay Ivchikov, a former executive at Russian oil company Lukoil, who has lived in Cyprus since 2017, had built a thriving business developing apartments for incoming Russians. Since the invasion, he said he would have to change his business model.

“We are affected by the crisis. It will be difficult for people coming from Russia to buy houses,” he said.

But in a possible sign of Cyprus’s adaptability, Ivchikov said his business could benefit from a different influx. Since the start of the war, Russian-based tech companies have sent employees to Cyprus to evade Moscow’s sanctions and internet restrictions. Highly skilled professionals also came from Ukraine and Belarus, he said.

Pavlos Loizou, managing director of WIRE FS, a company that collects real estate data, said there had been a huge increase in rentals.

“Nowadays it is very difficult to find an apartment in Limassol,” he said. “Even if the war stops in the next few months, we will see an increase in the number of people coming to Cyprus and people are not coming back anytime soon. Nobody expects anyone to come back in the next three to five years.