OPINION

A European Bailout Unlike Any Other

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PARIS -- The European Union's $13 billion bailout plan for Cyprus has nothing to do with socialism but rather with much greater stakes. This is the EU attempting to outmaneuver an uncharacteristically flat-footed Vladimir Putin and Russia in a key battleground, over long-festering issues: transparency, corruption, and support of Syria and Iran. This is also a case of the EU calling out a Trojan-horse country embedded inside the Eurozone.

In exchange for the $13 billion from the EU, Cyprus would have to impose a one-time tax on bank deposits, increase corporate taxes from 10 percent to 12.5 percent, and submit to greater financial transparency. It's about time. But what a potential nightmare of transparency for Russia.

Cyprus accepted a 2.5 billion euro loan from Russia in 2011, with Russia denying a more recent loan request for 5 billion euros. Now, Russia is saying that it will be so generous as to, at the very least, ease conditions on the initial loan if Cyprus provides the Russian government with the identities of Russians sheltering money in Cyprus banks. And Russia isn't forking over any more cash because it isn't convinced that it has to (yet) in order to maintain Cyprus as an ally. The two nations are as thick as thieves, and both have been playing the EU for utter morons.

Foreigners hold an estimated 40 percent of the cash in Cyprus banks, most of it belonging to Russians. It's not hard to imagine why, when a 10 percent corporate tax rate is available to anyone willing to spend 300,000 euros on a Cyprus residence. As an added bonus, after five years you get Cypriot citizenship, an EU passport and zero taxation on your global income. Russia has also been trying to get Cyprus to lobby the EU to lift Russian visa requirements.

The World Bank lists the gross domestic product of Cyprus at $24.7 billion, yet Russians (including 80 oligarchs) hold an estimated $25.6 billion in Cyprus banks, according to German intelligence.

What's the nature of this cash, exactly? Seedy-to-filthy at best. In February, the EU's Financial Intelligence Unit launched an investigation into whether Russian mafia cash had been laundered through EU banks. And late last year, according to Russia's own RIA Novosti state media, Cyprus opened an investigation into whether $31 million in Russian tax-fraud cash uncovered by anti-corruption lawyer Sergei Magnitsky, who died while awaiting trial in a Russian jail after accusing Russian officials of $230 million worth of tax fraud, had been moved to five Cyprus banks.

Cypriot and Russian authorities have been playing the EU and the rest of the world for fools since the collapse of the Soviet Union. Both say they want to fight corruption, though they never seem to get around to actually doing anything about it. When American intelligence busted a Russian spy ring in 2010 -- which most famously included redheaded Anna Chapman -- the alleged money-man and SVR (Russian foreign intelligence) point man, Pavel Kapustin (alias: Christopher Metsos), was nabbed on an Interpol warrant in Cyprus and successfully fled because he was conveniently bailed by Cypriot authorities. Nice crime-fighting.

In early 2012, the Guardian reported that a Russian transport ship carrying 60 tons of ammunition purchased by the Syrian government from state-controlled Russian munitions exporter Rosoboronexport pulled into the Cypriot port in a storm and, despite being in clear violation of sanctions, was sent back on its way by Cyprus authorities.

Similarly, key Russian trade partner Iran has long circumvented sanctions through Cypriot front companies. Intelligence Online reported last year: "According to our sources, one of the traders supplying Syria is the small Cypriot company Q-One Energy Ltd, headquartered at Soboh House, Limassol, in the same building as fellow trader Soboh Pentroleum, headed by Aiman Soboh and which works closely with Russian traders. Q-One delivered two shipments of 30,000 tonnes of petrol to Syria on board the Breeze A on March 11 and the Voyager A on March 22."

Sounds cozy.

There are 19 Iranian front companies circumventing U.S. sanctions via Cyprus, according to the U.S. Office of Foreign Assets Control -- and those are just the ones identified so far.

If Russia does offer Cyprus another bailout, it will be because Russia fears the revelations and strategic losses that would result from the tiny nation moving squarely into the Western sphere of influence. No doubt Putin has been hoping to get the EU to pay the bill for propping up Russian business accounts, backed by Russian banks, in Cyprus. Any cash Russia offers will come under the guise of "fighting corruption," of course. "Don't worry, we'll take care of this cleanup. Nothing to see here, so please don't look."

Sure. Russia has done such a crack job with that so far. The EU is finally trying to do right.