It has been said that history repeats itself, first as tragedy and then as farce. The interminable European economic/financial crisis neatly illustrates that saying. Mishandled from the beginning by a clueless set of politicians and bureaucrats, as chronicled in earlier columns in this series, the most recent episode descends into a melancholy comedy of intentional and unintentional errors.
Respected American analyst Criton Zoakos, author of LETO MARKET INSIGHT, says in his report "Cyprus, Gazprom and the Clowns of Europe": "Nobody will ever know what psychotropic substance the Eurogroup and the IMF were consuming last Saturday, March 16, when they decided to light a fuse under the solemn commitment to small depositor insurance...." The witches' brew stirred up by the requirement that Cyprus confiscate private bank deposits, large and small, includes the following elements:
The measure is manifestly unfair, not only to the owners of deposits under 100,000 Euros, but to all depositors. They were not responsible for the fact that Cyprus overborrowed and now can't pay under the contractual terms. It is purely and simply official theft.
European deposit insurance, solemnly adopted at the height of the crisis in 2008 to avoid a run on the banks, has been rendered worthless, thereby ENSURING a run on the banks, once the Cypriot banks are opened again for business (which has now been postponed twice). It also ensures that the public at large will no longer believe that they are protected anywhere else in the Eurozone.
Cyprus is a major money-laundering and tax-evasion center for Russian politicians and oligarchs. Confiscating (stealing) a sizeable percentage of the large accounts will guarantee the collapse of the major Cypriot banks as these accounts are withdrawn. In an attempt to avoid that, the Russian natural gas giant Gazprom rushed a delegation to Nicosia, offering to assume the Cypriot debt in return for one or both of the two major Cypriot banks, rights to explore and develop the huge offshore natural gas deposits that Cyprus shares with Israel, and a license to build a liquified natural gas (LNG) plant in Cyprus. The offer was rejected by the Cypriot government. The purpose of the Russian offer was not only to protect their depositors but to ensure continued European dependence on Russian or Russian-controlled, gas.
With all of this, the Cypriot president is now saying that he was forced to agree to the arrangement against his will; and the Cypriot parliament has unanimously rejected the agreement (the governing party deputies abstained). Apparently the Russians are preparing to renew their offers.
The Eurozone finance ministers, in a conference call, are now saying that they would accept the exclusion of the small depositors from the confiscation, in return for increasing the percentage of larger deposits to be taken. Thus, having caused a completely unnecessary crisis, they are now already repudiating parts of it, thereby creating even more uncertainty.
All of this incredible buffoonery is creating a significant opportunity for Israel, which, unfortunately, it is unlikely to take advantage of it because of concentration on forming a new government and preparing for the visit of president Obama. Israel could and should immediately offer a comprehensive collaboration and cooperation agreement to Cyprus to develop the gas fields jointly, dedicating a portion of eventual proceeds to repay the bailout funds pledged by the IMF, the European Central Bank and the European Union. A collateral benefit for Cyprus would be the tacit protection from Turkish military, economic and diplomatic pressure. afforded by such a Cyprus-Israel alliance.
The benefits for Israel of such an arrangement are obvious--consolidation of ties to one of the few friendly countries in the region and access to an even greater reservoir of natural gas for consumption and export. Governments are formed and unformed; US presidents come and go, but opportunities like this, created by the monumental stupidity of criminally incompetent "leaders" and international bureaucrats, are rare. Make the calculation for yourselves.
Norman A. Bailey, Ph.D., is Adjunct Professor of Economic Statecraft at The Institute of World Politics, Washington, DC, and a researcher at the Center for National Security Studies, University of Haifa.
Published by Globes [online], Israel business news - www.globes-online.com - on March 21, 2013
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