It’s Germany versus Russia again. The fate of Cyprus might seem a small matter but it is bringing on another round in that age-old struggle between the giants of the continent of Europe that has brought so much death and destruction. Cyprus is bankrupt in all but name, with debts it can never repay. The local banks have shut their doors and some may never open again. A member of the euro zone, the island scrapped its native currency, the Cyprus pound. Now it turns to Germany to bail it out. Germany could do so without much strain. Even back in Soviet days, Russians could enter Cyprus freely, without the visas other countries demanded. So first Communists and then Yeltsin oligarchs used Cyprus to launder their stolen billions. Suitcases of dollars came in. So Russians are the main depositors in Cypriot banks, and if Germany were to bail out such people Mrs. Merkel, the Chancellor, would almost certainly lose the next election.
In a difficult position, Mrs. Merkel agreed to a bail-out on condition the Cypriots also pay. She imposed the confiscation of up to 10 percent of all deposits, on small accounts and on Russian accounts too.
Simple robbery by government is not good policy. Desperate to have their money, Cypriots are rioting. That’s only the half of it. A Cyprus delegation is negotiating in Moscow a possible bail-out by Russia, and suddenly a geo-political crisis emerges. Russia could pay the missing billions in return for rights to gas deposits in Cyprus waters that are ready to be exploited. These gas fields are next to Israeli fields about to be exploited. The first Russian fleet in the Mediterranean was in the 1770s and the Russians have been trying to establish naval bases there ever since. It didn’t work out in Egypt, nor in Algeria, and they are almost certainly about to be forced out of their base at Tartus in Syria. Cyprus would be a splendid alternative.
The British garrisons could be made to leave, Russia could extend its powers of domination through control of energy, and at last secure a permanent presence in warm waters.
The European Union was designed to prevent national rivalries. Critics have always warned that it would in fact regenerate them by putting the strong in a position to bully the weak. So it proves. Mrs. Merkel no doubt meant well, but victimized and enraged Cypriots compare her to Hitler. She obliges them either to submit to robbery by government or to rebel, much as Hitler forced similar pre-war predicaments on Poles and Czechs. What a precedent!