Waving Cash, Putin Sows E.U. Divisions in an Effort to Break Sanctions

When Cyprus seized hundreds of millions of dollars from bank depositors, many of them Russians, as part of an internationally brokered deal two years ago to rescue its collapsing financial system, the Russian leader, Vladimir V. Putin, denounced the move as “dangerous” and “unfair,” warning of a sharp chill in relations.

But Mr. Putin was all smiles recently when he received Cyprus’s president, Nicos Anastasiades, in Moscow. He hailed relations with the Mediterranean nation as “always being truly friendly and mutually beneficial” and agreed to extend — on greatly improved terms for Cyprus — a $2.5 billion Russian loan.The shift from fury to declarations of eternal friendship displayed Mr. Putin’s well-known flair for tactical back flips. But it also showed his unbending determination to break out of sanctions imposed on Russia by the United States and the European Union for Moscow’s annexation of Crimea and support for armed rebels in eastern Ukraine.

Mr. Putin has methodically targeted, through charm, cash, and the fanning of historical and ideological embers, the European Union’s weakest links in a campaign to assert influence in some of Europe’s most troubled corners. One clear goal is to break fragile Western unity over the conflict in Ukraine.

On Wednesday, Greece’s new left-wing prime minister, Alexis Tsipras, will be the next to visit Moscow. Ahead of the trip, Mr. Tsipras declared himself opposed to sanctions on Russia, describing them as a “dead-end policy.”

On Sunday, Mr. Putin’s efforts to peel away supporters from the European Union opened a new rift, after the United States ambassador in Prague criticized a decision by the president of the Czech Republic, Milos Zeman, to attend a military parade in Moscow on May 9. And in February, Mr. Putin visited Hungary, the European Union’s autocratic backslider, peddling economic deals.

Russia has so far been unable to turn such hand-holding into something more concrete against sanctions that require the approval of all 28 European Union members. But pressure for a rupture is building.

Speaking in an interview last week here in Nicosia, the capital of Cyprus, Mr. Anastasiades said Cyprus had grave doubts about Europe’s policy toward Russia and was part of a “group of member states who have the same reservations.”

He ruled out breaking ranks with what for the moment remains a consensus in favor of keeping up economic pressure on Russia. But he said he expected a unanimous vote in favor of lifting sanctions when they come up for review this summer.

He said he was convinced that Mr. Putin “realizes the consequences of further military involvement” in Ukraine and “means business” in putting in place a cease-fire agreement reached in February.

The cracks opening up in Europe’s policy toward Russia have presented a difficult problem for Donald Tusk, the former prime minister of Poland who is now president of the European Council, a body in Brussels that represents the European Union’s 28 leaders.

“To keep Europe united is today the biggest challenge,” Mr. Tusk said last month, referring to “the very fragile and difficult consensus” reached by European countries after Moscow seized Crimea in March last year.

Moscow’s skill at prying open fissures in European unity has been on display in Cyprus, a tiny nation that, because of its tight historical, religious and economic ties with Russia, has taken on an oversize role as a pivotal player in the geopolitical struggle set off by the conflict in Ukraine.

Tugged in different directions by outside powers, Cyprus hosts British military bases and vast eavesdropping facilities, allows the United States Navy to use its ports and has been a member of the European Union since 2004.

Yet it still looks to Russia as a vitally important diplomatic protector, particularly in relation to Turkey’s military occupation of the north of the country, and as a crucial source of business for its financial services industry, still a pillar of the economy despite the 2013 meltdown.

An agreement sealed during Mr. Anastasiades’s visit to Moscow allows Russian warships to dock in Limassol, which is Cyprus’s commercial hub and heavily dependent on wealthy Russians who want to set up shell companies to shuffle their assets overseas.

Mr. Anastasiades insisted that military accords signed in Moscow merely extended a 1996 agreement and were “nothing new.” The terms of the agreements, however, are all secret, so it is impossible to know what Russia managed to gain.

Mr. Anatasiades, who traveled to Moscow after recovering from heart surgery in New York, denied tilting away from the West toward Russia. As the leader of a small country, divided since a Turkish invasion in 1974 and situated on a fault line between East and West, Mr. Anastasiades said he sought good relations with all sides and “even with the devil.” He added, “I do not have the luxury to choose my friends.”

He said Russia might also get a role in the search for and development of gas reserves off the coast of Cyprus, a venture until now monopolized by Western companies.

Russia’s ambassador to Cyprus, Stanislav Osadchi, told a Russian-language newspaper, one of several in Limassol serving the town’s large Russian-speaking population, that Mr. Anastasiades’s meeting with Mr. Putin “demonstrated that, despite attempts to isolate Russia and revive the Cold War, there are countries that do not want this.”

The Russian Embassy in Nicosia reacted with fury last year when Makarios Drousiotis, a part-time historian and presidential adviser, published a diplomatic history that detailed Russian duplicity in its relations with Cyprus. The embassy denounced the book as “politically unacceptable” and criticized Mr. Drousiotis, who lost his job as an adviser to Mr. Anatasiades.

The United States, in contrast, has struggled to get a hearing. When Russia won gushing praise on social media for restructuring its loan to Cyprus, the United States ambassador, John M. Koenig, tried to dampen the enthusiasm with messages posted on Twitter that were widely interpreted as implying a link between Mr. Anastasiades’s visit to Moscow and the killing a few days later of the Russian opposition politician Boris Nemtsov.

The Twitter posts set off an uproar, prompting the United States ambassador to issue a contrite statement that his comments had been “misunderstood.”

“For lots of people on this island, Russia is seen as a savior,” said Harry Tzimitras, director of PRIO Cyprus Center, a Norwegian-funded research group in Nicosia. This, he added, provides fertile ground for efforts by Moscow to “infiltrate the European Union” and “show that it can disrupt certain policies” promoted by Washington and Brussels.

Vasilis Zertalis, the head of Prospectacy, a financial service company, described Cyprus as a “small piece on a big chessboard.” Europe, he said, tried to advance its own position during the 2013 banking crisis by seeking to end Cyprus’s role as a haven for Russian money.

“They wanted to scare the Russians away,” he said. “But the money that left was from Britain, from other European countries and from America.”

Ordinary Cypriots and politicians, he said, “all gave up on the European Union” because of the harsh bailout terms in 2013 and “know that the United States will never take a stand against Turkey.”

“So,” he said, “the only allies Cyprus really has are Russia and maybe China.”