New Russia sanctions catastrophic for Cyprus, minister says

Cyprus’s economic ties with Russia, which include about $100 billion in investments between the two countries, could be severed if the European Union applies a third round of sanctions over Russia’s role in the Ukrainian unrest, Cypriot Foreign Minister Ioannis Kasoulides said.

While EU and U.S. sanctions in response to Russia’s annexation of Crimea have so far had limited impact on Cyprus, a new set of measures “introduced in a blanket way, would have a catastrophic effect on Cyprus’s economy and many other EU states,” Kasoulides said in a June 2 interview in Nicosia.

Cyprus is the biggest foreign investor in Russia, with $69 billion accumulated through the end of last year, while the island is the second-biggest destination for Russian investment at $33 billion, according to the Moscow-based Federal Statistics Service. Low tax rates and a treaty to prevent double taxation have made Cyprus the conduit of choice for Russians moving money in and out of their country.

EU leaders last week put off further sanctions on Russia after President Vladimir Putin showed a willingness to work with Ukrainian President-elect Petro Poroshenko. The EU will continue preparing measures if events require further steps, they said.

While Cyprus’s Ukraine policy doesn’t diverge from the EU line, communication between the EU and Russia “must be kept open and the solution must be diplomatic,” Kasoulides said.

US President Barack Obama will attend a meeting of the G-7 countries in Brussels starting today, originally scheduled as a G-8 summit in Sochi, Russia, prior to the annexation of Crimea. Putin will meet French President Francois Hollande on June 5 before joining other world leaders, including Obama, on June 6 for the 70th anniversary of the...