Russians really freak me out. From a country that has more culture than the USA has horse burgers, business practices are not "word is my bond" but "my word means you lose your thumbs".
Russian business people don't do contracts. They are happy to execute them, and often the other counterparties if the contract works against them, but for many Russians a contract is just a one sided memo of understanding.
My rule and most of my mates is never to do business with Russians unless you have terminal cancer. Horror stories abound (hedgies gagged, lawyers slain, children kidnapped). Which is a shame because this sort of stereo typing means I too have to be careful of my thumbs. The reality is that I have benefitted hugely from the Russian rouble as have most Londoners and the owners of New Bond Street shops. They have revitalised life in debt ridden UK because we are so soft. We are happy to show our passports to ensure we can buy a loaf of bread and happy to let a VHNWI from the East spend hundreds of millions without anyone asking where the money came from (the answer being Cyprus of course).
Pre 2008 Iceland was the home of the Russian money launderer. Ex fisherman were empowered to buy up centuries old City brokers and money poured into London prime such that the small shed outside my house where I keep the trash is now worth USD5 million.
Post 2008 Cyprus began gobbling up the billions of deposits Iceland had failed to freeze to pay its fisherman. Despite Turkey's anger, Cyprus became a state of the ex USSR. Russian is the first language in Cyprus (a country once "owned" by the UK). Cyprus companies are cheap and easy to set up few dollars are used as holding companies because the corporate tax rate is only 10% (although you can negotiate this downwards if you are Russian). It is a safe haven for Russian assets.
Tiny Cyprus is officially the third largest foreign investor in the Russian economy. Wow. How is this possible?
But Cyprus is no Panama or Guatemala. It is a fully fledged EU country, unlike Iceland, and the Russians are over the moon. Middle ranking civil servants have moved their billions to this tiny island knowing that not only is the money nicely cleaned but their bank deposits are protected by the ECB! You couldn't make this up.
For those who can listen to the BBC's iPlayer, I suggest you listen to this ....(Radio 4). The premise is that London is one large laundry service. It was 2 years ago that fintag highlighted this fact (feb 2011). But for most Europeans, this is no big deal. Let's face it Luxembourg is the new Switzerland and its bang in the middle of Europe. The real crisis though is Cyprus. Unlike Luxembourg where the laundered money is from Europeans (MEP's mostly), Cyprus is full of dirty laundry from non Europeans. AIFMD technocrats can't do much about it now and its unlikely teams of techncrats will be challenging the Russians about the proceeds of their assets.
No wonder the Germans, who I am told dislike the Russians, are livid that they may soon by bailing in/out Cyprus. With Russia looking at bailing out Cyprus too, one wonders if the USA would ever bail out Cuba or Iran. You may say this aint possible but in this odd world of oddness, I wouldn't bet against it.
Cypriot comments (cm)
Norway bails out the USA (bloomberg)
Fintagski, fintag's Russian site, closed down due to a denial of service attack.