NICOSIA // The Russian president, Dmitry Medvedev, might well feel right at home when he arrives in Cyprus this morning.
He will be greeted in fluent Russian by the European Union's only communist head of state. Mr Medvedev's Cypriot counterpart, Demetris Christofias, has a doctorate in history from a Soviet-era university in Moscow and once jokingly described himself as the EU's "red sheep". He has better contacts with the Kremlin than with the White House or Downing Street.
Analysts say Mr Medvedev's visit is aimed at bolstering the economic and diplomatic ties that bind Russia, a world power with a population of 141 million to Cyprus, a small, divided Mediterranean island of 1 million people. "Cyprus is Russia's spokesman in the EU, just like Russia is Cyprus's spokesman at the UN Security Council," a European diplomat said.
Russia is also one of the largest investors in Cyprus - and vice versa. Investment from Cyprus into Russia totalled US$52.2 billion (Dh192bn) over the past five years, while Russian investment into Cyprus in the period amounted to $15.96bn, much of it pumped into prime, sea-view real estate.
Most of the money invested in Russia through Cyprus is Russian cash being repatriated, but Cyprus also serves as a low-tax gateway for large western companies investing in Russia. Cyprus might have a nominally communist leader, but it is an ardently capitalist and entrepreneurial country.
The economic relationship between Russia and Cyprus will be placed on a sounder basis today when the two presidents renew a treaty to avoid double taxation. Provisions for greater transparency in the new pact will help Russian authorities to track Russians dodging taxes on repatriated dividends from Cyprus-based companies.
Economic ties date back decades to when Cyprus swapped wine in bulk with the Soviet Union in return for tractors. Russian businessmen arrived in Cyprus in the early 1990s after the collapse of communism. The island provided a first step into the capitalist world and the path was smoothed by cultural, historical and Orthodox Christian ties. In those days when few Russians spoke English, a significant minority of Cypriots knew Russian.
Cyprus's thriving communist party, Akel, had close ties with the former Soviet Union and poorer Cypriot students received scholarships in the East bloc.
Many successful Cypriot communist lawyers and accountants prospered by establishing Russian companies and teaching Russians how to be good capitalists. The concentration and vitality of Russian business activity at the time raised suspicions that Cyprus was a favoured destination for the flight of Russian capital and attracting corrupt asset plunderers from the former Soviet Union. Western-finger pointing infuriated Cypriot officials who insisted most Russian capital was not basking in the island's sun, but flowing to other havens, such as London.
Cypriot officials still insist that Russia's super-rich expatriates live in London, not in Cyprus. A Cypriot economist said the island is home mostly to "middle- and upper-class Russians, not billionaire oligarchs". The Russian presence is obviously far more visible in a small country like Cyprus than in Britain. About 60,000 Russian-speakers - including both Russians and ex-Soviet citizens - live in Cyprus. Most are well-paid company employees and executives.
Every city in Cyprus hosts petrol stations owned by the Russian energy giant Lukoil as well as Russian DVD and grocery stores. The Russian presence is also reflected by its sprawling embassy compound in Nicosia, which faces the far more heavily fortified US Embassy along a road nicknamed Microwave Alley. And Russian tourists are big business. About 160,000 visit Cyprus annually, an more are expected. Only the UK, the island's former colonial master, provides more holidaymakers. But Russian tourists spend more and, according to hospitality workers, are bigger tippers than the British and less fussy than Germans.
Russian home-buyers are also shoring up the faltering property market here. Most have settled plush villas in Limassol, a resort on the island's southern coast called "Little Moscow". Many shop signs use the Cyrillic alphabet and a Russian Orthodox church was inaugurated this year.
"Russians feel very comfortable in Limassol," said Natalia Kardash, a publishers of a local weekly Russian newspaper, Vestnik Kipra. "There are Russian schools here, Russian hairdressing and beauty salons. The mayor of Limassol has described this city as the most Russian outside of Russia itself."