LIMASSOL, Cyprus — Sipping coffee at a beachside cafe, Alexey Voloboev scrolled down on a Telegram group chat titled “financial help in Cyprus.”
“This is now the Russian bank of Cyprus,” the Russian businessman laughed.
The group, which already has some 1,600 members, serves as a black market for swapping rubles and euros — a transaction that’s now increasingly difficult after Moscow sent its troops streaming into Ukraine. Not only has the EU heaped sanctions on Russia, but the Kremlin has imposed its own restrictions on foreign bank transactions.
Voloboev translated some of the Russian texts in the channel.
“I sell cash €3,200 for 74 rubles per euro,” reads one.
Another: “I sell €20,000.”
When the first EU sanctions hit the Russian financial system, they rebounded hard on Limassol. The tourist-heavy city nestled along the southern Cypriot coast — which has seen empires and occupiers come and go for centuries — has most recently become a haven for Russians abroad. Locals even refer to it as “Limassolgrad.”
Suddenly, the large Russian community in town was having its assets frozen. Many couldn’t access their bank accounts. Money transfers from Russia were limited.
Cypriots were thunderstruck. They may soon lose their favorite clients, they realized. Tour operators, hotel owners, accountants, lawyers, agents, contractors — nearly everyone was affected.
That’s when the Telegram groups started, an ad hoc effort to maintain daily life. But with the ever-volatile situation, new sanctions arriving regularly and the war battering its way into a fourth month, uncertainty reigns.
“There is suddenly a Russophobia in the Cypriot banking system,” said Voloboev, who once started a political party in Cyprus, but said he eventually grew disillusioned with the country’s corruption.
“I have a Cypriot passport and a Russian passport,” he added. “But the banks are not interested in my Cypriot passport, they say, ‘You are Russian, we can’t help you.’ Many of my friends have moved their money to Bulgaria or elsewhere outside the EU.”
A new wave of Russians, Ukrainians and Belarussians — either disaffected or displaced — are seeking to relocate businesses to Cyprus | Iakovos Hatzistavrou/AFP via Getty Images
The result is a city — and a country, Cyprus — left wondering what the future holds.
Many Cypriot companies working with Russians have shut down and some ex-pat Russians are eyeing a move off the island. Yet at the same time, a new wave of Russians, Ukrainians and Belarussians — either disaffected or displaced — are seeking to relocate businesses to Cyprus.
The outcome could well determine the next iteration of Limassol, and Cyprus.
The Russian presence is omnipresent in Limassol, where the sun shines unendingly and the temperature regularly exceeds 30°C these days.
Store signs offering manicures, clothes, lawyers, accountants — pretty much anything — are written in Russian and English. The large skyscrapers recently erected along the shoreline, more Dubai than ancient Mediterranean island, physically represent the influx of Russian money. Large billboards all over town advertise lavish apartments.
Hop on the bus, which the Russians here rarely do, and the stops are still announced first in Russian, then in Greek. Dotting the streets are fur shops and Russian restaurants. In the lush marina, Russian is as common as Greek.
“One of Limassol’s timeless characteristics is change,” said Limassol Mayor Nikos Nikolaidis. “It was never a static city, but was a port city, an open city, a city that was constantly receiving influences from the outside world.”
Back in the 1980s, when conflicts erupted in the Middle East, Lebanese businessmen flocked to the Mediterranean island. Locals still call one part of the town “Sheikh’s Hill.”
In the early 1990s, post-Soviet figures like Slobodan Milošević traveled with cash-filled suitcases to the island, which has long served as a banking home for Russian fortunes, from arms dealers to gambling firms and pornographic websites. And they favored Limassol, which now has a Russian-speaking community of around 50,000 in a city of 237,000.
“Cyprus is wronged by the way our European partners see us,” said Kornelios Korneliou, the general secretary of Cyprus’s Ministry of Foreign Affairs.
A woman walks past a Russian karaoke bar in Limassol | Sean Gallup/Getty Images
“Cyprus has not had the misfortune to have the bitter past experiences that our European partners had with the Soviet Union. It is in a completely different corner of the European continent in the Eastern Mediterranean and our biggest problem comes from a NATO country,” he added, referring to Turkey, which occupies the northern part of the island.
Korneliou stressed Cyprus has no second thoughts about supporting the EU’s bruising sanctions on Russia, but he cautioned that such punishments could eventually boomerang on Europe.
“If this war lasts, we could eventually reach a point where we will cause a reaction in public opinion and we won’t be able to take decisions,” he argued.
Nikolaidis, the Limassol mayor, brushed off the “Limassolgrad” nickname as an exaggeration: “The existence of Russian-speaking residents in Limassol on a business, social and cultural level has been an asset for the city, a positive presence, and we would certainly like to maintain it.”
The Russian community even stayed on the island after the 2013 Cypriot banking crisis, which prompted the country to start untying its financial knots with Russia itself.
Yet the ongoing presence wasn’t solely a lifestyle choice. In the wake of the financial calamity, the government gave many Russians ownership shares in Cypriot banks in exchange for their losses, effectively making them major stakeholders in the country’s banking system.
Tensions have mounted in recent years, though. The U.S. in 2018 pushed Cyprus to up its investigations into Russian money laundering. And in 2020, Cyprus suspended its controversial “Golden Visa” scheme, which gave foreigners a passport in exchange for massive local investments. The move drove a dagger into Limassol’s high-end construction sector, with several rising towers halting mid-build.
Then the war broke out.
In Limassol, thousands of Ukrainians have long intermingled in the Russian community. To Cypriots, they were essentially one group.
Now, co-existence is more complicated.
More than 10,000 additional Ukrainians have recently arrived, fleeing the war at home and placing them alongside thousands of Russians.
In Limassol, 2017, a sign in Russian advertises for Russian-owned RCB bank | Sean Gallup/Getty Images
“Limassol was a special society where, despite the large percentage of non-Cypriot residents, there was a very strong social cohesion and a good relationship between everyone and mutual respect,” said Nikolaidis, the mayor. “The war came as a shock to everyone.”
Katerina Kaluhina, 24, arrived from Ukraine four months ago, just as Moscow’s bellicose rhetoric was cresting. She found work as a waitress in a cafe owned by a Russian businessman. Then the war started.
“It is a little uncomfortable, currently being stuck in place with so many Russians, but now there are also a lot of Ukrainian refugees here,” she said. “I don’t like it when people start discussing the situation in Ukraine and I felt particularly bad when I saw Russia supporters with Russian flags.”
Souzana, from Greece, works at a clothing store. She said Russian clients recently mentioned getting chased down the street after people overheard them speaking Russian.
“The Cypriots are looking like, ‘What is this shit?’” said Voloboev, the Russian businessman. “Until two months ago, we were all Russians for them.”
Reforming, not receding
Local businessmen and authorities described a business exodus from Limassol in the days after the war started. Numerous companies working exclusively with Russians shut down; sanctions had made their operations untenable.
The ripples are still spreading. In late March, RCB Bank, a lender created as a subsidiary of Russia’s VTB Bank, announced it would wind down banking operations. Russian tanker operator Sovcomflot is also set to close its Cyprus business.
“Me and my husband didn’t really think of living permanently here, but we haven’t thought of leaving up to now,” said Kate, 31, a Russian working as an accountant, drinking coffee in a Russian-owned cafe in central Limassol. “Now we are thinking of it, we will see how it will go in the coming months.”
Artem Paleev, a marketing partner at Korpus Prava law firm, which operates in Russia, Cyprus, Hong Kong and Latvia, said the company lost 10 percent of its clients in one day — essentially everyone who didn’t have an EU passport.
“But there are also many liquidity risk clients who basically can’t make payments because of the sanctions,” he added. “This is an operational problem, it doesn’t mean we lost this business, but for now there is a liquidity issue.”
One sector with unequivocal fallout is tourism. Before the war, Russians accounted for 25 percent of total arrivals in Cyprus | Haro Chakmakjian/AFP via Getty Images
Korneliou, the foreign affairs ministry’s général secretary, said that while some firms are closing, there is also a growing number of Russian, Belarussian and Ukrainian entrepreneurs, mainly from the IT sector, interested in setting up business in cities like Limassol.
“In the short term, the balance will be for sure negative,” he conceded. “The economic ties with the Russian Federation and with Ukraine have certainly been very close. If we have to choose between economic interests and respect for international law, it is not a matter of choice. But we should also intensify our efforts to find other sources of income.”
Nikolaidis, the Limassol mayor, said there are no figures yet on how many companies have left town. And it remains to be seen whether the new companies will cover the inevitable gap.
“They are currently in an exploratory phase, but the volatility in Ukraine, Russia and Europe, in general, is a deterrent for them to make final decisions whether to stay in Cyprus or go to Dubai or elsewhere,” he said.
One sector with unequivocal fallout is tourism. Before the war, Russians accounted for 25 percent of total arrivals in Cyprus, with the most affluent spending their summers in Limassol and Paphos. Hotels are trying to target new markets, but such a change will take time.
“The occupancy rate in Limassol is currently at 30-35 percent, while in previous years it would already be around 70-75 percent. Russians were arriving early in the summer,” said Filokypros Rousounidis, head of the Cypriot federation of hoteliers.
While half-finished towers may dot downtown Limassol, a walk further inland will show that other construction is continuing unabated. Instead of luxury skyrises, more modest houses and offices are being built — suitable more for the upper-middle-class than oligarchs.
For real estate agents, prices continue to climb, especially on monthly rents. One of those agents, Petros Lazarou, said three companies have reached out to him in the last few months, asking about offices and housing for their employees, some 150 people each.
“Our sector will not die, it will be reconstituted and refolded,” says Kyriakos Iordanou, general manager of the Institute of Certified Public Accountants of Cyprus.
“It would be good to have big industries, like Germany or France, but we are a small country with sea and sun, so we go back to services,” he added. “Our minds have to change, not our business model.”
Iordanou says Cyprus is currently living the “de-Russianization doctrine.” But the problem, he argued, is not investors’ nationality, but the dubious nature of their business: “Our brand is problematic because the country and its political elite was identified with Russian oligarchs.”
Lawyers and accountants in town also want the EU to offer more specifics about exactly which sanctions apply to which companies. At a minimum, they wish the bloc would allow Russians to pay debts to Cypriot companies for services offered before the sanctions came down.
While they understand the reasons for punishing Russia and support the government’s decision to back EU sanctions, the local workers are worried that a near-blanket ban on doing business with Russians — regardless of where they live — is looming. Specifically, there’s fear of a prohibition on offering auditing or legal services to the Russians living in Limassol.
“We would then pass from financial to racist sanctions,” Iordanou says. “You would have carcasses without gravediggers everywhere.”