The writer is CEO of Invest Cyprus, the country’s investment promotion agency.

When Cyprus’s former president Nicos Anastasiades condemned the illegal invasion of Ukraine, many questioned if it was possible for the island to sever the financial — and cultural — ties that had bound it with Russia for decades.

Cyprus had historically relied on Russian investment to support its economy in everything from banking to tourism. However, the island met its obligation to unequivocally enforce EU and US wartime sanctions within its territory, and has now come to terms with losing its Russian businesses and residents. 

This shift away from Russia actually began as part of an anti-money laundering clampdown in the wake of the 2013 Cypriot financial crisis. Since 2018, the central bank has terminated 42,728 shell companies and closed 126,000 bank accounts — including those emanating from Russia — official figures show. Those departing Russian bank deposits are now being offset by new international business. In 2022, more than 1600 international companies registered in Cyprus — mostly operating in tech — including 47 multinationals. These have helped create 36,854 direct and indirect jobs, up 42% from 2021.

Tech take-off

New investors in recent years have arrived from the US, France, Israel, Egypt, Lebanon, the UK, Canada, China, South Africa, Jordan, India, Greece and Germany. Sectors attracting the highest FDI in 2023 were software development (22%), investment holding and financing (also 22%), real estate (9%), aviation services (8%) and trading and ecommerce (7%).

This has been supported by Cyprus’s aggressive courtship of FDI through tax incentives, a fast-track resident scheme for people bringing tech expertise — aligning with its ambition to become a European tech centre — plus some welcome credit rating upgrades. These efforts have been buoyed by industry-based developments. The ICT sector’s annual turnover has steadily grown since 2012, and government statistics show that in 2022 it was the third biggest contributor to Cyprus’s GDP. Meanwhile, the banking sector’s profitability in 2023 jumped 644% to reach €1.28bn, central banking data shows. 

Companies from countries once wary of Cyprus’s reputation have started to return. Japanese financial services and fund firm  Mitsubishi UFJ Financial Group started operating in the country in June 2022 with an initial team of just 10 people. It has since expanded to 185 employees and aims to reach 350 by the end of 2025. The fact that 80% of the people it hired come from the local population shows the highly educated, tech-savvy talent pool Cyprus has to offer, and reflects the government’s vision to make it one of the best places to live, work and do business. 

In the tech space, companies to recently establish a local presence include the Czech Republic’s JetBrains, France’s Murex and the US’s Phoenix International. Many are using specialist training programmes for Stem graduates to establish a career here, a vital component of a thriving tech sector. Greenfield investment tracker fDi Markets shows that FDI in software and IT in Cyprus averaged $153m between 2021 and 2023, more than double any previous year on record.

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Commitment to change

The publication last November of the Cyprus Confidential papers, showing the offshore finance sector’s work to protect Russian assets, was an undeniable setback to efforts to move away from our past reputation as ‘Moscow on the Med’. And yet Cyprus’s image as a haven for Russian funds and shell companies is outdated. Most of the allegations are firmly in our past, and there is no going back.

Cyprus’s commitment to change can be found in successive positive reviews from Moneyval and the Financial Action Task Force, and praise of its reforms from the US, UK and EU. Cyprus’s government is now launching a new sanctions unit to combat illegal finance.

As the US Ambassador to Cyprus Julie Fisher told local news website In-Cyprus in May 2023: “Whether it’s [replacement of] tourists or assets, [or] deposits from Russia, I would say that Cyprus has shown itself to be incredibly agile and really quick to evolve.”

Our island has also become a security enabler for the Middle East, with our maritime corridor initiative helping to deliver vital humanitarian aid to Gaza.

Ultimately, the recent upheaval has proved to be an opportunity in disguise.

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