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A recent study by the PACE think tank has underscored the profound transformation of Cyprus' economy amid Western sanctions and the aftermath of Russia's invasion of Ukraine, leading to significant changes in the presence of Russian and Russian-speaking nationals on the island.
Presented at an event hosted by the French embassy in Nicosia, the study focused on the Russian diaspora across several EU countries, including Cyprus, highlighting the island nation as the most heavily influenced by Russian presence within the EU, with nearly 6% of its population tracing their origins to Russia.
Since the early 1990s, Cyprus has been a favored destination for Russian individuals and businesses due to its favorable tax policies and offshore financial environment. However, recent geopolitical shifts have reshaped this landscape. Following Russia's military actions in Ukraine, there has been a notable shift towards Cyprus becoming a hub for technology and IT services, attracting a surge of professionals from Russia and Belarus. From 2016 to 2022, residence permits for Russians increased nearly fivefold and for Belarusians nearly fourfold.
According to PACE's findings, the influx of Russian professionals, particularly in sectors like IT and telecommunications, has significantly boosted Cyprus' service exports. Professionals in these fields command high salaries, with average monthly earnings for Russians in IT reaching €5,482 and for Belarusians €5,278.
The study also pointed out a shift from older Russian-owned companies linked to oligarchs or the Kremlin, which have either ceased operations or relocated to Russian-controlled offshore zones established after 2020. Companies such as FixPrice, United Medical Group, Etalon Group, and TCS Group Holding, once significant players in Cyprus, have withdrawn, making way for a new wave of tech-focused enterprises.
"This transition marks a departure from traditional sectors to cleaner, technology-driven industries," noted the report, highlighting over 10,500 newly established companies in Cyprus by Russian or Belarusian owners as of January 1st this year.
The report attributed this shift partly to changes in Russia's economic conditions and the impact of EU sanctions targeting Russian entities. It emphasized Cyprus' role in providing an attractive environment for tech entrepreneurs, facilitated not through controversial "golden passports" but through incentives like low-tax structures tailored for specialized sectors such as software development.
Cyprus has seen tangible economic gains from this transformation, with GDP growth reaching 5.1% in 2022 and maintaining robust expansion at 2.5% in 2023, outpacing many Eurozone counterparts. Prospects for 2024 appear optimistic, driven by continued investment in technology and innovation.
In conclusion, PACE's research underscores Cyprus' evolving role as a magnet for Russian technological talent amid shifting geopolitical dynamics, positioning the island for sustained economic growth in the years ahead.
[Summary of Yiannis Ioannou's original story in Greek published in Kathimerini's Cyprus edition]
