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What their reaction to the Cyprus bank tax says about Russia’s government – and the opposition

same coin

They said it couldn’t be done. But at last, the Kremlin and some of its fiercest liberal critics have found themselves on the same team. The fact that the issue in question is their opposition to the proposed Cypriot bank levies says as much about the regime as the opposition.

Try to guess who said the following:

Such “confiscation of someone else’s money…unfortunately, was well known and familiar in the Soviet period”.

And this?

“European civilisation, which was once based on the sanctity of private property, has now become based on socialism. And socialism always ends in confiscations”.

The first was Russian prime minister Dmitry Medvedev. The second was the histrionically anti-Kremlin Yulia Latynina, writing in the opposition newspaper Novaya Gazeta.

Of course, a crackdown on Cypriot bank accounts could cause a shock for the Russian economy. After all, according to Moody’s estimates:

  • Russian banks’ cross-board loans to Cypriot-based Russian companies totaled $30-40 billion at the end of 2012 – that is equal to 15-20 percent of Russian banks’ capital base in Russia, and 5-6 percent of their gross corporate loans.
  • Russian corporate deposits in Cyprus totaled an estimated $19 billion at the end of August – an amount that is equal to 7 percent of all the corporate deposits in Russia, excluding current accounts.

And there are certainly many sound moral reasons to oppose Cypriot plans for a punitive tithe on banking deposits, as well as creative ideas for a political response from the Kremlin.

Yet the fury of Russia’s elites, whether in government or in the opposition, to the proposed move seems disproportionate and out of step with public opinion. Even among the relatively educated and affluent readers of Novaya Gazeta, the largest response to a poll asking whether the tax is fair was a resounding 41 percent that agreed with the statement “Serves them right. Honest people don’t keep their money in Cyprus”.

What’s happening in Cyprus doesn’t concern the average Russian, even the average Russian liberal, who can only dream of having the $100,000 required to get taxed at 9 percent, let alone of opening an offshore account to keep it in. Yet for many in both the government and the opposition, it hits close to home. After all, there are just as many millionaires in ranks of the opposition — Nemtsov, Sobchak, Lebedev, etc. —  as there are in the United Russia party they criticize. Maybe some of them have even had heated political debates about Russian democracy while queuing to check their bank accounts in Nicosia. In recent years, the ferocity of the struggle between the Kremlin and its establishment critics has obscured the fact that both are privileged, unrepresentative, pro-capitalist elites.

More than anything, the reactions to this episode remind us that in many ways, the Russian government and the mainstream opposition are two sides of the same coin: They may be divided on many things but see eye to eye on the fundamentals.



Vadim Nikitin

Vadim Nikitin was born in Murmansk, Russia and grew up there and in Britain. He graduated from Harvard University with a thesis on American democracy promotion in Russia. Vadim's articles about Russia have appeared in The Nation, Dissent Magazine, and The Moscow Times. He is currently researching a comparative study of post-Soviet and post-Apartheid nostalgia.
Areas of Focus:
USSR; US-Russia Relations; Culture and Society; Media; Civil Society; Politics; Espionage; Oligarchs