Cyprus To Accept 5 bln Euro loan from Moscow - But Turkey & West Not Pleased

Caviar and pelmeni line the supermarket shelves in the seaside Cypriot city of Limassol – so pervasively Russian these days, it’s been dubbed “Limassolgrad” by the locals. As a backlash against austerity spreads across Europe, Cypriot officials say they are determined to avoid the kind of severe budget cuts that sank the Greek economy, and guess what? Smiling Uncle Vlad in the Kremlin has been willing to lend big time to help them evade capture by the Terrible Troika of Tosh.

The Russian government last year gave Cyprus a three-year loan of 2.5 billion euros at a below-market rate of 4.5 percent to help it service its debt. Cyprus now needs another 1.8 billion euros by the end of this month to buttress its ailing banking sector. Brussels has said this will be forthcoming, but there is now a question-mark over whether the Cypriots want it. The key, unique element in this situation is that President Demetris Christofias is a communist, and a keen ally of the Russian president, Vladimir Putin.

As the only communist leader in the union, there should be some fun and games when Cyprus takes over stewardship of the EU bloc next month. The humor will be soured for the Eurocrats, however, by the reality that a new loan from Moscow should be agreed within the next few days. A report from the Slog says that it could be as high as 5 billion euros and Moscow is the favored option even for non-Communist Cypriots because it would come with fewer conditions than a European Union bailout – and help ensure that Cyprus’s 10% corporate tax rate carries on attracting the estimated 50,000 Russian-speakers in Cyprus.

Three individuals will be wrestling with the consequences of that: the head of the CIA, the head of Mossad, and Turkish Prime Minister Recep Erdogan. Once again, it’s mainly about energy….but for the Russians, it’s about power-politics as well.

The last thing the Americans want is a Cuba slap bang in the middle of the Mediterranean theater and  the Israelis feel similarly: they have a pipeline project due to begin with both Greece and Cyprus. Also let us not forget that the Kremlin is very pro-Syria and happy to stir up as much instability in the Middle East as possible.

Interrupted supplies of oil and gas (and gas is rapidly becoming the main game in town) are exactly what Putin needs to keep his prices high, and his bargaining power with the West at full weight.

Erdogan has been rattling his somewhat rusty sabres at Cyprus for over a year now and would dearly love the opportunity created by euro meltdown to invent some spurious reason to annex Cyprus. He never had much chance of doing that at the best of times. With a growing Russian influence on the island, he has none whatsoever.

In short, while the EU’s circular standstill continues even far away in Mexico, the Mediterranean east and south from Cyprus is turning into a Major Powers’ playground. But some of these diplomatic ploys are playing with fire, on the electric railway lines, with a train coming, in the dark. Somebody needs to get a handle on this and soon – otherwise we’ll be dealing with a military mess that could make the demise of the eurozone look like a Sunday afternoon stroll