The European Union is critical of the issuance of "golden passports" in Cyprus
Special correspondent RFI Elena Gabrielyan, together with independent journalist Pierre Setroy, prepared a report on how Cyprus sells passports to wealthy Russians.
EU citizenship in six months
Along the seafront of Limassol, on one of the longest streets in the city, there are parks, shopping centers and numerous hotels. The street is named "28 October." On this autumn day in 1940, Greece refused to open its borders to the troops of fascist Italy. Since then, every year on October 28, Greeks and Cypriots celebrate a national holiday – Ohi Day ("no" in Greek). Turning the dark pages of history, they became part of the large European family. Cyprus joined the European Union in 2004 and ceased to be an offshore zone.
On both sides of 28 October Street, there are advertising posters depicting a Cypriot passport against the background of the EU flag. Inscriptions in English and Russian. Numerous consulting companies, immigration operators, law firms attract clients with advertisements of the following content: "EU citizenship in six months. For the whole family. Opportunity to travel to 158 countries without visas."
Five years ago, the island experienced a deep financial crisis. To restore the country's economy, the authorities launched a number of programs, including granting citizenship in exchange for investments. An adult citizen of any country has the right to obtain it, provided they have no criminal record. To do this, it is necessary to invest a minimum of two million euros for a period of three years in residential or commercial real estate, government bonds, as well as in assets of local companies.
Among the advantages of Cyprus are not only the shortest processing times for citizenship, the absence of a requirement to move to the island for permanent residence, as well as mandatory knowledge of the language and history of the country. "Absence of double taxation in Cyprus, an instrument of international tax planning and financial confidentiality of holders of Cypriot passports," says the advertisement of one of the companies operating in the real estate sector.
Over four years, the program brought Cyprus 4.4 billion euros, and 3,000 foreigners received "golden passports." Half of them are from Russia. For many realtors and consultants, they have become the main clients, who are conditionally called "citizenship clients." Leading companies hire Russian-speaking employees and regularly travel to exhibitions in Russia to present the advantages of investing in Cyprus.
The luxury real estate sector on the island is experiencing an unprecedented boom. One after another, gleaming skyscrapers appear on 28 October Street. The country's Ministry of Internal Affairs has issued permits for the construction of 25 high-rises, with another 60 under consideration. Construction companies assure that the buildings are built using the latest technologies and will withstand a magnitude 9 earthquake – Cyprus is located in a seismically active zone.
Workers in lime-green vests are bustling about the construction of the ONE tower, valued at 80 million euros. The skyscraper is scheduled to be commissioned in February next year. "There is no residential building of this type yet in Limassol," says Aristos Eliades, director of the local office of Pafilia. Apartments here cost from 2 to 8 million euros. Of the 83, only five remain; the rest have been sold, mainly to Russian millionaires.
"A new era of skyscrapers has begun for the island. We must meet the demand of clients, which is increasing due to the citizenship program. But it would be wrong to advertise the passport on posters. We do not do that. We present the opportunity to obtain citizenship as a bonus," says Aristos Eliades. According to him, "citizenship clients" pay money immediately, which allows construction companies not to take loans from banks, but to build towers with their own money.
"Life on the sea"
For those who do not like life under the clouds, there is also "life on the sea." This is how the Limassol Marina district is presented, which appeared in 2014 near the Old Town. It was built by seven local companies. The district consists of a marina capable of accommodating 650 yachts up to 110 meters in length, private villas with their own berths, many shops and restaurants. Real estate prices here reach 15 million euros.
The construction boom also fits well with the project to build the largest casino in Europe, with a budget estimated at 550 million euros. It will appear in the western part of the city in 2021. A little more – and Limassol will turn into the "Monaco of the Eastern Mediterranean." However, local residents are already complaining that skyscrapers block the sea view, and over the past five years it has become increasingly difficult to find affordable housing. In some areas, real estate prices have doubled.
At the end of June, apartment tenants in Limassol held a protest against the rise in housing prices, which is linked, among other things, to the influx of foreigners and the lack of construction of apartments for the middle class.
Limassol Mayor Nikos Nicolaides urges not to panic and assures that the situation is under control. "Every fourth resident of Limassol is a foreigner, and we are proud that our city is multicultural. We have not been taken over by either Russians or Chinese. Everyone lives harmoniously here. We are trying to keep real estate prices attractive so that a bubble does not inflate, which will sooner or later burst," says the mayor.
Citizenship is not for sale
While the accessibility of European citizenship attracts more and more foreigners, critical voices are increasingly heard in Cyprus and beyond. Some consider this program ineffective, while others consider it downright dangerous.
“This is how a bubble inflates, on which only builders, consultants and lawyers make money. This money does not go toward creating enterprises or developing the island’s economy. It will end badly. With such a program, Limassol risks becoming a city of empty skyscrapers,” says Alexei Voloboev, a former entrepreneur and leader of the newly created party “I am a Citizen.”
Official Brussels also speaks critically about the issuance of “golden passports.” This practice exists not only in Cyprus but also in eight EU countries (Malta, Bulgaria, Hungary, Portugal, Austria, Latvia, Lithuania, Greece). The European Union insists that citizenship is granted based on ties to the country and cannot be sold for money.
Incidentally, to become a citizen of Cyprus through the ordinary “naturalization” procedure, one must live on the island for at least seven years. In addition to numerous documents, it is also necessary to publish two announcements in a daily newspaper costing €66.66 about the intention to apply for citizenship. And if any Cypriot considers that the candidate is not worthy of receiving a passport of their country, they can write a corresponding letter to the migration service. No such procedure exists when obtaining citizenship for investment. Cyprus does not disclose the names of investors who have received a passport under the current program.
The European Union views with concern the generous distribution of European citizenship to oligarchs from third countries. “The EU should not become a haven for corruption and dirty money,” said EU Justice Commissioner Vera Jourova.
In response to criticism from European authorities, in May of this year Cyprus tightened the rules, limiting the issuance of passports to 700 per year and extending the application review period from three to six months. In addition, the authorities promise stricter due diligence checks, particularly regarding the sources of funds of the new citizens. Nicosia has decided to create a new oversight and control committee, which will include officials from the Ministry of Interior, the Ministry of Finance, and the Investment Promotion Organization.
Nevertheless, these measures are considered insufficient in Brussels. The EU is preparing new standards for vetting applicants. They will be part of a package of measures prepared by the European Central Bank to combat money laundering.