Germany attacks Russia – run for the hills

The proposed raid on bank deposits in Cyprus is highway robbery, and only lazy commentators have failed to describe it as such.

The description is fair: from 6.75 to 9.9 percent of people’s money held in Cyprus will be summarily confiscated. And 100 percent of those deposits have been sequestered until the confiscation has taken place, which wise measure renders account holders unable to do anything about it. In parallel, and even industrious commentators mostly missed this, capital gains tax in Cyprus will be hiked 2.5 times, adding up to a crushing double whammy.

The question is why the ECB and IMF, which is to say Germany, made this raid a precondition for the bailout of Cyprus? After all, they were more lenient when bailing out Portugal, Ireland, Greece and Spain. Why single out Cyprus for rough treatment?

The answer is obvious: Cyprus is a floating refuge and laundromat for dirty Russian money. The exact amount of Russian cash held in Cypriot banks is hard to assess because much of the capital is fictitiously held by local proxies. Also, huge amounts come into Cyprus but only stay long enough to be rubbed clean before returning to their country of origin.

Of the available estimates the figure of around £40 billion sounds the most plausible. It’s thanks to this that Cypriot banks hold deposits equalling about eight times the country’s GDP.

Even more virtuous countries than Russia would translate economic domination into political leverage, and Russia has naturally done this. But it’s more than just about exerting influence on Cypriot politics – potentially the Russians hope to gain the elusive prize they’ve been pursuing since the late 16th century: a foothold on the Mediterranean.

To capture that prize Russia fought Turkey 13 times between 1568 and 1918, with Russia emerging victorious more often but never succeeding in achieving her historic aim. This pursuit was always in the back or even the forefront of the Russians’ mind in all their wars, those involving not just Turkey but also Britain, France – and Germany.

In the last 100 years Germany and Russia fought twice. The first time, in 1914-1918, both sides lost, and – more important – so did the rest of Europe. This regardless of which side offered or accepted surrender.

For as a result both countries fell to the most satanic regimes in history, with awful and predictable consequences for themselves and the world. Part of the reason Germany and Russia could inflict such damage the second time around is that initially they joined forces. Mutual hostility came later, but before they fell out on 22 June, 1941, the two totalitarian brothers had got on famously.

Their friendship was partly ideological, but mostly strategic. Germany wouldn’t have built up her military muscle without a steady supply of Russian raw materials, nor would Russia have created the most formidable military machine in history without German technology, know-how and credits.

While still friends, the two regimes signed several treaties, some publicised, some secret, effectively dividing Europe between themselves. It was as allies that they attacked Poland, with the Russians getting into the act when it was still touch and go.

The Poles had managed to regroup, with their army group forming a strong defensive perimeter on the Vistula. The Germans, after the initial success of their blitzkrieg, were getting bogged down, partly because their munitions, especially aircraft bombs, were running perilously low.

The Russians kindly replenished the stock of German bombs (a service they later provided during the Battle of Britain) and then, for good measure, attacked Poland from the east, ending the conflict. The two predators divided both Poland and the rest of Europe between them, a cosy relationship that lasted for about two years.

Germany then attacked Russia in what the Nazis claimed, and all serious historians now accept, was a preemptive strike – recently uncovered documents show that Hitler beat Stalin to the punch by only a few weeks. In the ensuing conflict the two countries lost about 40 million people between them, but this time both emerged as strategic winners: Russia gained half the world, and Germany was launched on the road to economic domination of Europe.

However, for all her de facto and de jure territorial gains, Russia still failed to get entrenched on the Mediterranean: this was where the suicidally obliging Roosevelt and Churchill drew the line.

The German raid on Russian money in Cyprus (to call a spade a spade) is ostensibly perceived in Russia as a direct attack. Putin immediately described it as  ‘unfair, unprofessional and dangerous’, but one can almost see his eyes light up.

For, unlike the previous German attack, this one can conceivably turn Russia into a Mediterranean power. Gazprom, the world’s biggest producer of natural gas, has already offered to restructure Cyprus’s debt in exchange for exclusive exploration rights on the island. The Russians are also prepared to underwrite the whole bailout for the right to use a naval base on the island.

I don’t know how this whole thing will end – only a handful of men do and they aren’t talking. It’s highly unlikely though that the Germans didn’t consider the Russian angle before launching their confiscatory raid. Yet they pressed ahead, which raises all sorts of possibilities.

Could it be that yet another deal between Germany and Russia has been struck? After all, historically the two countries have demonstrated their ability to conclude secret treaties whose ramifications become known only decades later. The 1922 Rapallo Treaty, the 1926 Treaty of Berlin, the 1939 Non-Aggression Pact and Treaty of Friendship all had their secret protocols that left the rest of the world none the wiser.

With the German federal election coming on 22 September, and Merkel’s victory far from guaranteed, it’s hard to imagine her government undertaking such a hugely controversial measure at this time. After all, a catastrophic run on banks in the entire eurozone is a very possible consequence.

It’s not unimaginable that the proposed raid is but a diversion manoeuvre. With the tensions reaching breaking point, Col. Putin will ride in on a white steed and save the day. Germany won’t have to pay up, Merkel will win another term – and Putin will achieve what the tsars and the commissars failed to do: establish Russia on the Mediterranean.

This is of course mere speculation. But the propensity for underhand, backstage dealing in both the EU and Russia leaves much room for educated guesses. Anyway, we’ll know for sure in a few days.





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