ussian Business Is Alive And Well ... in Cyprus.

APRIL 28-MAY 4, 1997
By Zhores Medvedev
Zhores Medvedev is a physicist and author of "Soviet Science," "Nuclear Disaster in the Urals" and the "Legacy of Chernobyl."

FOR the first time in six years, my wife and I decided to vacation somewhere on the sea. When we were younger, we spent our holidays with our children by the Black Sea or the Baltic Sea. And now we wanted to return to familiar places, even though they were now found abroad.

But as it turned out, there was no regular transport, either by land or air, to Georgia or Abkhazia. The Baltic countries required visas. You couldn't go to the Crimea, where we always spent our holidays near Yalta, without being subjected to a humiliating customs inspection. The only sea resort left in Russia, Sochi, which we avoided in the past, had kept its nomenklatura character. The best beaches there were still fenced off and the vacation homes and sanatoriums were now reserved for the exclusive use of the new elite.

Our only choice now if we still wanted to swim in the ocean was Cyprus. I looked at the map to choose the place where we would stay. Some 15 kilometers to the north of the ancient city of Paphos were two small bays called collectively Coral Bay, facing south and protected from northern winds.

Coral Bay was indeed a marvelous place to take a rest. We spent the first half of the day at the sea and after lunch walked through the valleys, with their banana plantations, orange and olive groves and vineyards. There clearly weren't enough hands to work the holdings, and several groves were covered with fallen oranges that no one had managed to gather. A local farmer told me that for the past seven years the vines had decreased by half, since the tourist industry required more and more workers.

Cyprus lives on tourism. The ratio of tourists who visit Cyprus to inhabitants of the island is the highest in Europe. Every year, tourists spend about $1 billion in Cyprus.

As far as tourists go, Russians come in only third place. In 1995, for example, only 75,000 of the 2 million visitors were Russians. But Russians are moving in in other ways.

The main activity of the Cypriots on Coral Bay is construction of new hotels and villas for sale to foreigners. Anywhere you go, you can see large signs on the roadside with the addresses, phone and fax numbers of the construction companies. The texts of the announcements were very simple: "Luxury villas for sale." These announcements were not in Greek but in English and Russian. Russians have become the main buyers of Cypriot villas and cottages.

The Russians in Cyprus are now the subject of legends, which were never heard about the traditional resort dwellers - the English and Germans - who still make up the main contingent of vacationers on Cypriot beaches. Villas costing millions of dollars are not beyond their means. The least expensive villas cost between $150,000 and $200,000, and the Russians who buy them, according to Cypriots, do not bother to bargain.

But the reason for such fast development in the Cypriot economy, according to the Britannica Book of the Year, 1995, is the growing flow of capital from Russia and eastern European countries. According to data published in the Encyclopedia Britannica, the flow of money from Russia to Cypriot banks at the end of 1994 had reached $1 billion per month. During this time, the Republic of Cyprus registered 2,000 Russian companies, including branches of many banks like Inkombank, Menatep, Agrostroiprombank, Avtovazbank and others. In 1995, after Cypriot visas were no longer required for Russian citizens, this process accelerated considerably. In 1996, the number of Russian companies in Cyprus grew to 16,000. But Russia leads all other countries in the amount of capital that flows into the Cypriot economy.

The growth in Russian businesses was accompanied by the change in registration of Russia's trading and passenger fleets. A large share of Russia's civilian ships now sail under Cypriot flags and are registered in the port of Limassol. The general tonnage of its fleet by 1995 had reached 36 million tons, three times that of Russia and six times that of Germany.

In 1995, $20 billion from Russia passed through the Bank of Cyprus, three times as much as the island's gross domestic product and 10 times its annual budget. Cyprus has become a tax haven for foreigners, with taxes on profits of foreign citizens and companies coming to 3 percent.

For the Republic of Cyprus, the appearance of thousands of Russian companies meant the end of unemployment, a balanced budget and unusual stability of the local currency, the Cypriot pound. One can estimate that no fewer than 40,000 to 50,000 Russians live and work there.

The circulation of four Russian newspapers - Vestnik Kipra, Vesti Kipra, Russky Kurier and Immigrant - and hundreds of classified advertisements for real estate, automobiles and various services in Russian testify to the great number of Russians living and working on the island. The government of Cyprus and its real estate agents are now leading an active propaganda campaign in favor of Russian immigration, promising the emigres a variety of privileges.

When a Cypriot barber learned that I was Russian, but from London, he asked me about the enormous villas that are bought on the island: "Where do Russians get such money?" In response, I only smiled and recalled a saying: "You won't live in a stone mansion through a hard day's work." How could I explain to this young Greek man that in all these luxurious villas was concentrated the unpaid wages that workers, teachers, scholars and doctors in Russia itself have not received for months? Cyprus is without a doubt flourishing at the expense of declining old Russian cities.