In Cyprus, the Golden Passports Scheme Shows Us How Capitalism and Corruption Go Hand in Hand

Al Jazeera’s Cyprus Papers have exposed a corrupt trade that sells citizenship on the Mediterranean island. But Cyprus is no rogue state: its “golden passport” scheme is firmly rooted in the logic of global capitalism, which makes everything — including citizenship — a commodity.

A protester holds a placard during an anti-corruption demonstration on October 14, 2020 in Nicosia, Cyprus. (Alexis Mitas / Getty Images)

In April 2019, a Cypriot taxi driver picked up a wealthy Moscow-based couple from Larnaca airport, where they had landed with their Learjet. He brought them to the naturalization department of Nicosia’s Immigration Office, and then back to their jet for a return flight to Moscow. Their whole sojourn in Cyprus had lasted five hours — all the time needed for the process of acquiring two “golden passports” to be put on track.

The following year, Al Jazeera published leaked documents, dubbed the “Cyprus Papers,” revealing that around 2,500 investors, some of whom were convicted criminals, had received citizenship through the island’s notorious “golden passport” program. The program, which had been significantly expanded in 2013, conferred Cypriot (and thus EU) citizenship on those willing to invest €2.5 million by acquiring real estate on the island.

State of Denial

The government of Nicos Anastasiades — whose law firm processes “golden passport” applications, and whose son-in-law is a major property developer — was quick to denounce the story, claiming that Al Jazeera was acting as a propaganda tool of its owner, Qatar, a close ally of Turkey. Cypriot government officials vowed to track down the whistleblowers who had provided the documents to Al Jazeera, instead of investigating the revelations. Accusations of treachery came with cosmetic assurances that the authorities would tighten up the screening process.

The volatile state of tension enveloping Cyprus made it easier for Anastasiades and his allies to put forward such arguments. Since 1974, the island has been divided between the internationally recognized Republic of Cyprus and the unrecognized Turkish Republic of Northern Cyprus. Disputes over gas-drilling rights in the Eastern Mediterranean periodically threaten to bring NATO allies Greece and Turkey — and, by extension, Cyprus — to war.

Cyprus president Nicos Anastasiades in 2013. European Council

Two months later, however, an undercover report by Al Jazeera’s investigative reporting unit left little room for doubt: the “golden passport” program is an elaborate scam involving high-ranking politicians, major property developers, and law firms. Posing as agents of a fictitious Chinese businessman indicted for corruption, “Mr X,” undercover reporters found themselves introduced to a network whose members included property agents, developers, lawyers, and politicians — even the parliamentary speaker.

All of these players made it clear that possession of a criminal record need not be a deal-breaker, just as long as prospective citizens are willing to pay the right amount. We’re clearly not talking about “a few rotten apples”: the program’s entire structure is meant to entice customers that really need an EU passport (with a new name, if so desired).

While Al Jazeera invented Mr X’s case, some emphatically real individuals of questionable repute have acquired citizenship in recent years. They include Russian and Ukrainian businessmen, Saudi royals, and even Cambodia’s chief of police, accused of human rights abuses.

Sven Giegold, a Green member of the European Parliament, has decried Cyprus’s citizenship-by-investment program as both immoral and a threat to European security. The European Commission echoed this language when it announced the opening of infringement procedures against Cyprus and Malta on October 20 because of their golden passport programs.

The Limits of “Anti-Corruption”

Journalistic features on Cyprus in outlets such as the Wall Street Journal or the Financial Times follow a pattern that has become familiar. The reports usually start with a vignette of Limassol — the island’s second-largest city and the center of its Russian community (dubbed “Limassolgrad”) — to emphasize the dangerous financial influence that Moscow allegedly wields through deposits and shares in the bloated Cypriot banking sector.

Critics of the “golden passports” apply a similar perspective, speaking of “rogue states” that enable shady dealings and even jeopardize Europe’s security. Organizations such as Transparency International can be seen in the Al Jazeera documentary, commenting on what they consider “obviously corruption” as practiced by Cypriot officials. Such interpretations rely upon a specific reading of corruption, as something primarily located within the state: in Transparency International’s own definition, it is the abuse of public power for private gain.

“Fighting corruption” has become a mantra for global institutions like the IMF and the World Bank, especially when they demand “structural adjustment” measures from developing countries in return for loans. Corruption in this sense is equated with underdevelopment, the unwarranted influence of ideology, favoritism, or simply a refusal to join the world of modern governance regulated by technocratic institutions.

This ideological framework clearly has a distorting effect in the case of Cyprus. The current president ironically rose to power in 2013 by emphasizing his meritocratic credentials, summed up in his promise that the “best of the best” (oi aristoi ton ariston) shall rule. Anastasiades offered this slogan as a contrast to his left-wing predecessor, who had allegedly driven the country to bankruptcy by liberally handing out checkouthkia (“little checks”) — social allowances — in search of popularity.

The Cypriot right hammered home this message relentlessly. It blended seamlessly with a narrative that absolved capital and the banks of any culpability for the economic crisis that had driven Cyprus into the arms of the Troika.

“Anti-corruption” is a convenient way of targeting the excesses of capitalism without bringing the economic system into question. While this approach may help personalize the unacceptable features of the status quo, making those features tangible to people who are less politicized, it is usually unable to tackle the root causes of corruption, and can even lend itself to the most reactionary interpretations.

This is not to say that corruption scandals such as the one exposed by the Cyprus Papers should not be denounced. However, there are serious issues with the standard deployment of “anti-corruption.” Corruption is not really a symptom of underdevelopment or cultural backwardness. In order to put the Cyprus Papers scandal in its proper perspective, we need to break with the “anti-corruption” orthodoxy and look instead at specific features of Cyprus as a state and economy that is integrated into the capitalist world system.

Offshoring by Other Means

Like Malta, Cyprus is a one-time British colony with a legal system based on the UK model. It is a formerly non-aligned country, a “flag of convenience” in the shipping industry, and — most important — a borderland region with close economic and cultural links to both Europe and the Middle East (or North Africa, in Malta’s case).

A centrist government initiated the Cypriot citizenship-by-investment program in 2007, before the Cypriot banking crisis of 2012–13 paved the way for its massive expansion. Cypriot officials argued that economic recovery depended on selling citizenship, and the program has indeed boosted the country’s GDP. However, this form of development has largely been unsustainable.

The luxury high-rises that sprawl throughout Limassol, or the villas built on top of nature reserves, fly in the face of environmental protection laws. Instead of trickling down, the wealth generated by the construction boom has had the opposite effect, fattening the pockets of a developer-lawyer-industrial complex.

Meanwhile, it costs as much to rent an apartment in Limassol as in Berlin — perhaps even more. Cyprus is traditionally a country of homeowners, but the crisis has brought an end to the liberal availability of housing finance.

However, the philosophy underlying the “golden passports” scandal predates the crisis. It is part of an economic model oriented toward services that seeks to capitalize on the island’s geographical location. The origins of that model date back to the formation of the Cypriot state, the product of a compromise between two irreconcilable visions mediated by the British colonial power.

Greek nationalists wanted to unite the island with Greece (enosis), while Turkish nationalists demanded partition (taksim). In 1963, three years after independence, the Greeks, representing four-fifths of the population, gained the upper hand, driving Turkish Cypriots into isolated, self-ruling enclaves, while the Greek Cypriot ruling class monopolized the state.

That ruling class was itself divided between those who were satisfied with independence and a minority of die-hard anti-communist enosis supporters. In 1974, the second faction engineered a short-lived coup with tacit US approval. Turkey — also tacitly supported by the United States — responded with a full-scale invasion, enforcing taksim and ethnically cleansing about 200,000 Greeks from northern Cyprus.

This turn of events was a disaster for the Greek Cypriot ruling class. With a military solution off the table, the Republic of Cyprus initiated what its leaders called a “long-term struggle,” seeking a return to the status quo ante through international diplomacy and economic strength, while accepting a bicommunal federal solution for a new Cypriot state. The launch of an offshore service sector in the late 1970s was part of this strategy.

Cyprus became the site for thousands of “letterbox entities” — companies registered on the island due to its low tax rates. To this day, the Cypriot flag can be seen flying on countless ships across the globe, thanks to ship owners registering their assets in a state with lower levels of regulation and protection for workers’ rights.

The Limassol Launderette

Those who arrange the golden passports in Cyprus — known as “enablers” — are usually real-estate agents, accountants, and lawyers, with bankers and politicians operating at one remove. Take one example, Yannis, a “passport lawyer” with whom one of us, Theo, spoke for his ethnographic fieldwork. By his own account, he is “always on the hunt” for clients — Russian entrepreneurs who want to buy a villa in the vicinity of Limassol and obtain an EU passport. Yannis is thirty-five, well dressed, and sleek; he studied shipping law in Britain and speaks fairly good Russian.

The legal firm where Yannis works has a reputation as the “largest launderette in Cyprus.” He tells us that the firm receives all the “hard cases,” considered “too hot or dangerous or slippery” for the auditor to work with. His clients enjoy the anonymity of their life on the island: “Here, nobody knows them; they roam around without their bodyguards. And they enjoy Cyprus more than we do.” Yannis compares it to his previous work in the shipping industry: “The way ships need flags of convenience, some people need flags of convenience, too.”

Since the late 1980s, two imperatives have guided Cypriot immigration policy: a desire to keep wealthy “expats” and their money in the country for as long as possible, while at the same time making sure that low-skilled migrant workers are only there on a temporary basis. Just as it grants citizenship to those with criminal records, the government is engaged in “pushbacks” of migrant boats, which are illegal under international humanitarian law. It keeps the citizenship status of Turkish Cypriots living in the North precarious, and denies it altogether to migrants who have lived on the island for years.

Having already attracted offshore riches from Lebanon’s wealthy elite as they sought a safe location during the civil war of the 1980s, Cypriot policymakers decided to repeat the trick when the Soviet Union imploded. The post-Soviet territories were full of oligarchs engaged in robbing public assets and in search of places to stash their loot. The Russian-Cypriot financial nexus does not stem from any supposed local anti-Western bias: its origins lie in the disastrous “shock therapies” that Western states and institutions imposed on Russia through the Yeltsin government.

As Russia stabilized from the late 1990s and Cyprus joined the EU, this relationship was put on an institutional footing. According to official figures, Cyprus is the largest foreign direct investor in Russia (and one of the biggest in “pro-Western” Ukraine). This is because post-Soviet economic elites need arrangements to keep their assets beyond the reach of any potential state interference, while assuring their political counterparts that money will be invested back home.

Russia’s historical standing as a Greek Cypriot ally bolstered this arrangement. Moscow refused to support the Western-backed Annan Plan to reunify the island in 2004 (in separate referenda, Greek Cypriots rejected the plan while Turkish Cypriots approved it). For Western observers, the Cypriot offshore sector only became the subject of controversy within the context of the “new Cold War.” In recent years, Trump administration officials have pressured Cypriot banks to freeze the assets of individuals with close ties to the Kremlin.

Easy Money

The expansion of the banking sector with the help of foreign money made credit easily available, providing the Cypriot middle and upper-middle classes with a high standard of living. The golden passport “enablers” come from this social milieu. The popular classes also benefited: during the boom of the 1990s and 2000s, Cypriot families could easily obtain loans for building houses, buying cars, or studying abroad.

The contagion of Cypriot banks by the Greek crisis put an end to these (very mild) forms of redistribution. After bailing out the banks in 2012, the state found itself saddled with public debt. Following his election in 2013, Nicos Anastasiades went along with an EU-imposed levy, or “haircut,” on bank deposits in excess of €100,000 (EU sources suggested that the haircut was his own proposal).

Although this affected Russian deposits, those deposit holders received compensation through becoming major shareholders in the island’s remaining “systemic bank.” Since then, however, Western sanctions on individuals and firms linked to Putin’s government have precipitated a slow exodus of Russian money from the Cypriot banking sector.

The golden passports continue the tradition whereby Cyprus serves as a hub for privileged mobility between Europe and the world beyond. This time, though, there are no trickle-down effects for the Cypriot people. Cities on the island are being transformed to accommodate its freshly naturalized offshore citizens — or, rather, their empty luxury apartments. This has raised rents to astronomical levels and driven residents to protest. The latest round of economic growth, unlike the pre-crisis boom, has been combined with privatizations, job insecurity, and the slashing of social benefits.

So far, opposition to the passport scheme has been rather muted. Top government officials — including the president himself — felt no shame about flaunting their intimate connections with big money. Expressions of anger have come from a diffuse milieu that is generally younger, left-leaning, active online, and not affiliated with political parties.

Where Is the Left?

The main opposition party, the nominally communist Progressive Party of Working People (AKEL), demanded a thorough investigation of the passport scheme in the light of Al Jazeera’s report. AKEL worked with an earlier version of that program, more modest in scope, while it was in power between 2008 and 2013. A leading AKEL MP and former minister told us that there were approximately thirty to forty naturalizations a year when the party held office. Under the conservative Democratic Rally administration, that figure has soared, to the region of seven hundred.

However, one AKEL MP featured in the Al Jazeera investigation as a major property developer wielding substantial influence, on good terms with the parliamentary speaker from the other end of the political spectrum, who was also implicated. Even though that MP immediately resigned from all public and party positions, such cases damage the credibility of the Cypriot left, reinforcing the anti-political perception of all politicians being the same.

This case was the exception rather than the rule for AKEL, but the party remains in thrall to an ideology of cross-class collaboration and “development” (anaptyxi), according to which Cyprus is a small island, partly under Turkish occupation, where everyone needs to pull together for the greater good. AKEL’s experience in government still weighs upon the party: its handling of the banking crash did not live up to the most minimal standards of radicalism, as it presided over the bank bailout, while still not going far enough for the Cypriot right or the EU, due to a pronounced opposition to privatizations.

AKEL’s political strategy is hampered by electoralism and the need to cut deals with parties to its right, and by its willingness to defer contested social issues until a solution to the division of Cyprus can be found — to be fair, AKEL is the only Greek Cypriot political force that is actively promoting policies of accommodation and peaceful coexistence with Turkish Cypriots. There is a looming danger of irreversible partition, especially after the recent election of a right-wing nationalist to the Turkish Cypriot leadership, in a tight electoral race that was marked by Ankara’s open hostility to the incumbent Mustafa Akıncı, a left-wing, pro-peace candidate.

Al Jazeera’s latest revelations also came in the midst of a North Cyprus scandal that has been traumatic for Greek Cypriots: the opening of Varosha, a part of Famagusta that had been closed to the public ever since the 1974 invasion. Greek Cypriot Famagustians watched with desperation as the prospect of ever returning to their homes in the North appeared to vanish, just as corruption scandals were unfolding in the South.

Rogue State or Rogue System?

Critics of the golden-passport scheme in Cyprus itself have emphasized its negative impact on the country’s image abroad. International media outlets have painted a bleak picture of Levantine corruption, often counterpoised to the “European values” invoked by Ursula von der Leyen and other EU officials.

The hypocrisy of those officials is startling. The EU has been relentless in its efforts to block conventional migration channels into the Union, especially since the 2016 agreement with Turkey. Moreover, the Union has remained officially agnostic on the question of what EU citizenship means, preferring to grant it to anyone who holds the citizenship of one of its member-states, precisely in order to avoid having to establish a real protective framework for common rights shared equally across the continent.

In order to defeat the vested interests that have enabled the passport scheme, we need more than a moralistic condemnation of corruption. For many ordinary Cypriots, the Cyprus Papers are just one part of a general malaise, rooted in the structural forces of austerity capitalism. We stand a much better chance of tackling the lawyers, developers and other “enablers” if we do so from the standpoint of material interests, stressing the need of Cypriots for affordable housing, public space, and a clean environment.

Cyprus is not a “rogue state” that defies and deforms an otherwise benign EU. Capitalism is a global system whose smooth functioning requires grey zones between formal legality and illegality, from Cyprus and Malta to Bermuda and the Cayman Islands. The Cyprus Papers, unlike the Panama Papers or the Paradise Papers of 2016, have not yet inspired a systemic critique of these grey zones and the essential role they play in the reproduction of global capitalism.

The monetization of citizenship rights is not an aberration: it is the logical conclusion of what Wolfgang Streeck has termed “market citizenship,” citizenship stripped of the democratic content with which social struggles have endowed it. And as the example of Cyprus shows, the flip side of this process is the denial of rights to countless noncitizens who have been residing on the island for much longer than five hours. Our priorities should be equality rather than legality, social justice rather than “Europeanism.”

End Mark

About the Author

Theodoros Rakopoulos is associate professor of social anthropology at the University of Oslo. He is the author of From Clans to Co-Ops: Confiscated Mafia Land in Sicily, and is currently completing a new book, Offshore Citizens: Selling Passports at the EU Margins.

Leandros Fischer is a postdoctoral researcher in migration studies at Aalborg University. He has previously taught at the University of Cyprus in Nicosia and conducted fieldwork among migrants to Cyprus from the Middle East. He is active in movements for the right to the city in Limassol.

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