The 2013 Cyprus Bailout and the Russian Foreign Direct Investment Platform
Baltic Rim Economies – Bimonthly Economic Review, № 3/2013, pp. 58-59
2 Pages Posted: 25 May 2013
Date Written: May 24, 2013
In March 2013, Eurozone members and the International Monetary Fund offered a €10 billion rescue loan for fellow member Cyprus – representing more than half of its gross domestic product. Bailout would come with conditions, which will weaken Cyprus’ traditional role as an offshore financial center within the European Union. Capital controls required to stabilize Cyprus in the short and medium term heralded the effective end of the offshore financial center of the island. These developments were bad news for Russian investors, which used the island as the most important platform for their trans-shipped and round-tripped foreign direct investment (FDI). While Russian investors could probably not foresee the degree of measures Cyprus would be forced to engage in, the financial crisis had prompted them to think of strategies not putting all eggs into the same basket. The most salient trend in this respect is the rise of other offshore financial centers in Russian inward and outward FDI, especially that of the British Virgin Islands. The Cyprus bailout package can be expected to accelerate the shift of Russian corporate strategies to new offshore financial centers.
Keywords: Russia, Cyprus, FDI, offshore
JEL Classification: F21, F23, F34, O16
Suggested Citation: Suggested Citation