Vladimir Putin could restore Russia’s great power status and maybe go down in history as the country’s most visionary leader since Peter the Great. He could win respect from Beijing and Washington for averting a second global financial crisis and he could prove that Russia understands market economics better than the EU. His miraculous opportunity to do all this started with the Mafia-style “offer you can’t refuse” presented by the EU to Cyprus on Sunday. It will end on Tuesday morning, if Cyprus banks then re-open under the conditions imposed by the European Troika, as currently planned.
One of the mysteries of the Cyprus crisis has been the lack of response from Russia, despite the obvious strategic opportunities, not just to protect its offshore deposits, but also to exploit the island’s strategic location and its military and energy potential. A possible explanation is that Europe’s indecision also paralyzed Russia - until last night.
As long as Europe’s policy on Cyprus kept shifting, it was impossible for Russia to intervene, since any help it offered could be rejected or outbid by the EU. As a chess player, Putin probably understood that his best strategy was to wait for Cyprus to get weaker and more desperate, while the EU, and especially Germany, became more impatient and obstinate. The moment to make his move would be when Europe presented an ultimatum too painful or humiliating for Cyprus to accept. That moment arrived last night.
With the EU’s final offer declared, Putin can now make his bid for Cyprus without fearing an auction with richer EU countries who could easily outbid Russia. But will Putin make such a bid? This depends on his answers to three questions: Could Russia afford to offer enough help to save the Cypriot banking system? Would saving Cyprus be useful to Russia? And would it promote Putin’s own interests?
As always in Russian history, we must start with the leader’s personal interests. If Putin could block the Cyprus deposit levy, he would protect assets still stranded there by his oligarch associates, as well as boosting his popularity among the middle-class Russians likely to be the levy’s main victims. But much more important for Putin would be the personal prestige of helping to avert a global financial crisis and outwitting EU leaders to secure Cyprus as a geopolitical prize and a grateful client state within the EU.