CYPRUS: THE CENTRE OF THE RUSSIAN SPIDER’S WEB

For over forty years, Cyprus has been the gateway to Europe for Russian citizens and power groups wishing to save taxes at home and hide the ownership of major industrial and financial assets, as Nicosia grants tax exemption to Russian-owned assets[1] . A bond born out of the common membership of the Orthodox religion, born in the 1970s, when roubles were secretly exchanged in the great Orthodox cathedral in Limassol[2] (see photo), and which prompted Cypriot trustees to offer their services to the new kleptocracy, born from the ashes of the Soviet Union, but which already existed previously, and was used by the Soviet government to secretly increase its stock of precious currency[3] .

After the end of the USSR, the movement of capital ($31 billion in 2013[4] ) was so massive that new companies were set up and trustees with more tradition were persuaded to open an office only for Russian clients[5] . This created discussions in the global financial centre long before Putin gave the order to invade Ukraine, so much so that, in 2015, the Cypriot government changed the law, forced all clients to accept transparency rules and placed restrictions on the entry and transit of Russian capital for the first time[6] . A decision that simply shifted capital from Cypriot banks to those in other financial centres.

The Russian wave in Nicosia began during the years of Boris Yeltsin’s presidency, when the Russian Federation was highly unstable, the rouble had no real value, and public indebtedness was making Moscow subservient to the International Monetary Fund – and thus to the United States[7] . From then on, the bulk of Russian investments in the West went through Nicosia, so as to have a safe haven in case, one day, Moscow claimed money or the West decided to strike at the illicit activities of the oligarchs[8] . Something that punctually happened in the hours following the invasion of Ukraine[9] .

At the end of February 2022, wealthy Russians started to move their money from Cyprus[10] , in order to escape the yoke of sanctions imposed by the West on Moscow after the start of the Ukrainian conflict – a fact that has put the local financial centre in crisis, but not the national economy[11] : Cyprus imports from Russia goods and services worth about USD 102 million[12] (most of them in the military sector[13] ), and exports about USD 231 million[14] . This means that, apart from guaranteed jobs in law firms, Russian money does not stay on the island, but takes advantage of legal facilities and goes elsewhere[15] .

As was obvious, the moment the sanctions were triggered, the government of Cyprus fell into line with that of its EU partners: the sanctions were enforced and the first reports of Russian assets hidden in Cyprus – especially at the local branch of one of Moscow’s largest banks, VTB, despite the fact that the bank, in advance of the invasion, had sold its shares in RCB Russian Commercial Bank: they were seized on[16] . Nothing Putin’s government did not know, so much so that, instead of trying to control the dozens of Cypriot trustees specialising in offshore finance, it took care to create a second, parallel network, secret and not exposed to free market pressure.

The patient construction of the parallel network

The Russian consulate office in Limassol[17]

The historical ties between the Russian Orthodox Church and the Cypriot Orthodox Church are tens of centuries old, and during the years of the Soviet Union this took the form of the use of the Limassol Cathedral for currency exchange, and the organisation of three Russian associations, the Romashka Cultural and Educational Society (founded in 1980 by Russians living on the island), the Horizon Association (a club of Russian-speaking Cypriots), and the Russian Orthodox Education Centre (an officially religious organisation)[18] . Due to the presence of these organisations, by the end of the 20th century, Limassol became the main location for the development of business related to the Russian government, and not to individual oligarchs. Diplomatic relations between the two governments are celebrated in the round tables of the Cyprus Ladies’ Club, which meets periodically in Limassol and, since 2009, enjoys the patronage of Elsie Christofia, who was the Cypriot First Lady at the time[19] .

When, in 2014, Moscow restructures its international payments system and, through Goznak, builds an alternative clearing network to the Western one[20] , the Cypriot operational centre resides in Limassol. For this position, not a lawyer, banker or accountant is sought, but a manager bound by historical ties of alliance with Moscow. The choice fell on Georgios Prodromou, who on 5 December 2013 was appointed honorary consul of the Russian Federation in Limassol – a Russian-educated, honorary professor at the Baltic Academy in St. Petersburg, since 1989 a Russian professional civilian pilot[21] , and then between 1991 and 1995 a captain in the air force of the Cypriot police, vice-president of the Lithuanian national airline, and finally, between 1995 and 2006, president of Aerotrans Airlines, the attempt (wrecked in debt in 2002) to establish a Russian low-cost airline within the European Union[22] .

In 2009, Prodromou founded (with his sons) the law firm G. Prodromou Associates LLC[23] , which also has a branch office in Pahos[24] , dealing with real estate brokerage. In addition to normal business practices, Prodromou focuses on the services of nominees, immigration practices and international civil law[25] . Among the employees is a girl, Marina Matsoukidou, who heads the real estate division[26] . Matsoukidou is also Business Development Executive[27] of FA Island Blue (Cyprus) Management Ltd Paphos, a company that deals in luxury real estate in Paphos and Limassol[28] . A section of Island Blue’s website is expressly dedicated to applications for permanent residence in Cyprus: to obtain it – and to become eligible to apply for Cypriot, i.e. European, citizenship – one needs an investment of at least EUR 300,000 (from abroad) after tax, a tax return and a spotless criminal record[29] .

Matsoukidou is in contact with Nazarov & Partner, the real estate company of Alexander Nazarov, which deals with the commercial and luxury market; founded in Novosibirsk in 1999, the company opened an office in Cyprus in 2016, where Elena Mikhailova[30] and wife of Nazarov has since resided[31] . In 2018 Paphos and Limassol accounted for over 90 per cent of the company’s luxury property sales[32] . The clientele, of course, comes from the countries of the former Soviet Union.

The Exante Group

The Exante group scheme, which includes several companies managed by Georgios Prodromou[33]

Georgios Prodromou administers more than a hundred companies, but none of them belong to oligarchs: his clients are people from the apparatus, as in the case of Volentra Ltd[34] , which is based at the Prodromou law firm[35] and is headed by Janis Kivkulis[36] . A cryptocurrency expert in Russia[37] , Kivkulis is since February 2018 sales director[38] and leading strategist[39] at the investment company Exante[40] , originally controlled by XNT Ltd (Malta)[41] . This is Russia’s first attempt to coordinate the wild world of cryptocurrencies, defining the value of each, and to exclude those invisible to Moscow – achieving initial success in 2017, when it became a guarantee instrument for Kazakhstan’s currency[42] .

But these are only the visible successes. The most important one, and a secret one, is the agreement signed with Gregory Klumov of Stasis (STSS), who is the American banker coordinating a similar project across the Atlantic, and doing so in Euro[43] : together, Stasis and XNT dictate the borders, values and rules for the exchange of cryptocurrencies worldwide, without any control by any international or national agency[44] . It only takes this system, which no sanctions are going to hit, to manage hidden assets, collected with bitcoins, to the tune of 100 million a year – they do it from Malta, nobody cares that it is a Russian company[45] . Since 2017, they have been working with a state-of-the-art digital system, owned exclusively by a German company, the Comino Group, whose ownership is concealed behind the façade of a Malta-based offshore company[46] .

The lack of transparency of the entire conglomerate is such that it even managed to obtain a fine from the Maltese financial authorities, in 2022, for breach of money laundering laws[47] . Over the years, the Exante group has been investigated not only in Malta, but also in Russia and the United States. Volentra Ltd served to protect the group’s financial assets at the most critical time, in 2021, when it seemed that pressure from the FBI would lead to the closure of Exante[48] .

The money arrived in Singapore, where Anatoly Kuznayev, one of the owners of the Exante group, works, and was deposited in the accounts of three companies in the British Virgin Islands[49] . These, in turn, founded two new London companies, Lancelor Ltd[50] and Viridian Holdings Ltd[51] , which are completely outside the focus of the investigators[52] . In Singapore, there is another Russian consul, connected to Prodromou Associates, Vadim Savin, who has no commercial assignments but is responsible for the organisation of the Russian presence in the Lion City and defends the interests not of private clients, but of companies defended by the Russian government. The payment of those working in this network is made in local currency, printed by the Russian mint Goznak[53] , and transported first from Moscow to Limassol[54] , and then from there around the world. In this way, Russian officials abroad, such as Alex Trenin in Luanda[55] , have a continuous supply of cash for their political operations. Only in one case, among those known (Guatemala, Angola, Yemen and many others), the banknotes printed by Goznak, without violating international sanctions, being immediately recognised by the Indonesian national bank[56] , are transported directly from Moscow to the country of arrival: in the case of Indonesia[57] .

Sergey Lavrov, on his trip to Africa, stops in Eritrea[58]

On the island of Bali, an iconic figure has been active since 2009, namely Nuku Kamka, who died, elderly and still in office, in 2019[59] . In his office in Denpansar, he coordinated major Russian investments in tourism, and then took care of all bureaucratic matters for the Russians who settled in Indonesia[60] , answering directly and personally to Foreign Minister Sergey Lavrov – something Nuku Kamka was extremely proud of[61] . As Russian Affairs Consultant in Bali, his activities included providing Russian visas, legalising documents and facilitating the issuing of Indonesian passports[62] . Like that of his successor, the Lebanese (naturalised Indonesian) Mohammed Fouaizi who, like the whole of today’s network of these bureaucrats of sanctions circumvention against Russia, has no presence whatsoever on the internet.

On his trip to Africa in January 2023, Russian Foreign Minister Sergey Lavrov met several members of this parallel and secret network, and was also able to meet candidates for membership from other countries, such as Eritrea, Sudan and South Africa. Knowing their names is as complex as it is necessary, if one wants to understand how Russia has prepared itself to survive a near-global embargo without any time limits: transforming Russian assets into European or African assets, printing banknotes of different countries and delivering them in a sometimes larger amount than stipulated[63] .

Traces of large customers

Tyumen Oil Group Refinery[64]

The Tyumen Oil Company (TNK)[65] is one of Russia’s largest oil companies, bought in 2003 by BP jointly with a consortium of Russian businessmen called AAR (Alfa Group, Access Industries and Renova); the company was sold in 2013 to Rosneft Oil Company[66] , Russia’s largest oil company, owned by the state[67] . Shortly before its sale, in 2012, the Paphos-based Tyumen Oil Group Ltd was created in Cyprus, with Prodromou[68] and Lithuanian lawyer Edgars Mačucks[69] as directors. After the start of the 2014 war in Ukraine, this company is being used to circumvent possible sanctions. From February 2022, with the start of the Russian invasion of Ukrainian territory, Tyumen Oil Group Ltd Cyprus puts Rosneft in a position to continue working by circumventing the sanctions system imposed by the West on Russian companies.

This is only the most conspicuous of the names on our first superficial investigation. Here are some other examples: a) on 6 March 2020 Prodromou registered the ‘Russian Community in Cyprus Ltd. Co-directors of the company are Alexander Bushmakin and Igor Kravchuk, Olga Gritsenko appears as secretary[70] . On 28 June 2004 Gritsenko joined the board of Yustibank[71] together with the current chairman of the board Dmitry Ivanovich Khomyakov[72] ; b) in 2010 Prodromou founded Petroleumgas Logistics Ltd in Paphos together with Anatolii Mazurenko[73] . After the closure of the company in 2016, Mazurenko became a Cypriot citizen and today heads the Czech company Identity Consulting Sro (Prague)[74] and Tagekom Doo (Belgrade)[75] .

Many other companies need further investigation, such as the Panamanian Geva Limited[76] , Treanor SA[77] , Privilege Corp.[78] and M.R.K. Alliance SA[79] . Others in the United States (Seabillow Holdings Ltd and Somers Business Ltd in Nevada)[80] have been liquidated from the register because they have been tax-defaulted for more than five years[81] . Compared to any other major trustee, not only in Cyprus, this is not much – but a necessary measure. Prodromou cannot and must not enter public lists like the Panama Papers – he must remain unknown. Only in this way can he continue to be the coordinator of the network of Russian consuls in developing countries, paid in cash with money printed by the Goznak mint – people whom no one knows, no one would think of looking for, and therefore work without being disturbed, no matter how long the sanctions may last.

RUS030

[1] https://cyprus-mail.com/2022/04/12/another-blow-for-the-services-sector/

[2] https://www.reuters.com/article/uk-cyprus-russia-idUKBRE91M0AB20130223

[3] file:///C:/Users/Asus/Downloads/Trusts-Trustees-2015-Neocleous-610-3.pdf

[4] https://www.bbc.com/news/business-21831943 ; https://apnews.com/article/russia-government-european-union-europe-cyprus-business-9b16d8ef062281a65698979aec6f8de5

[5] https://gsl.org/en/offers/cyprus-international-trust-cit/

[6] file:///C:/Users/Asus/Downloads/Trusts-Trustees-2015-Neocleous-610-3.pdf

[7] https://www.reuters.com/article/us-russian-putin-yeltsin/russias-past-and-present-collide-at-ceremony-to-honor-former-leader-idUSKBN0TE2MY20151125

[8] https://www.forbes.com/sites/giacomotognini/2022/03/05/a-guide-to-all-the-outrageous-mansions-and-estates-owned-by-sanctioned-russian-billionaires/?sh=1646c14b2e0f ;

[9] https://www.theguardian.com/world/2023/jan/06/roman-abramovich-trusts-transfer-leak-russia-sanctions

[10] https://www.politico.eu/article/cyprus-is-losing-its-russia-and-confronting-existential-questions-about-its-economy/

[11] https://www.harneys.com/our-blogs/regulatory/guidance-issued-by-cyprus-authorities-on-prohibition-of-certain-trust-services-under-fifth-wave-of-eu-sanctions-on-russia/ ; https://www.ifcreview.com/news/2022/april/cyprus-finmin-informs-banks-new-eu-sanctions-also-freeze-trusts-owned-by-russians/ ; https://www.taxjournal.com/articles/eu-sanctions-on-trusts-corporate-services-for-russians- ; https://www.bakermckenzie.com/-/media/files/people/gregory-walsh/clientalerteusanctionsontrustsconnectedtorussianpe.pdf

[12] https://tradingeconomics.com/cyprus/imports/russia

[13] https://oec.world/en/profile/bilateral-country/cyp/partner/rus

[14] https://tradingeconomics.com/russia/exports-to-cyprus

[15] https://www.politico.eu/article/cyprus-is-losing-its-russia-and-confronting-existential-questions-about-its-economy/

[16] https://www.occrp.org/en/investigations/the-kremlin-connections-behind-cypruss-rcb-bank

[17] https://knews.kathimerini.com.cy/en/news/cypriot-drives-car-into-russian-consulate-gate

[18] https://russkiymir.ru/en/publications/139489/

[19] https://russkiymir.ru/en/publications/139489/

[20] EUROPE HAS ONLY ENEMIES | IBI World UK ; HAFTAR, THE SPY WHO CAME IN FROM THE COLD | IBI World UK