VZCZCXYZ0007
RR RUEHWEB

DE RUEHNC #0205/01 0820703
ZNR UUUUU ZZH
R 230703Z MAR 09
FM AMEMBASSY NICOSIA
TO RUEHC/SECSTATE WASHDC 9732
INFO RUEHBS/USEU BRUSSELS

UNCLAS NICOSIA 000205 
 
SENSITIVE 
 
SIPDIS 
 
DEPT FOR EUR/SE 
 
E.O. 12958: N/A 
TAGS: EINV ECON ETRD CY
SUBJECT: CYPRUS: INVESTMENT AGREEMENT WITH IRAN AND GOC GENERAL 
INVESTMENT POLICY 
 
 (U) This cable is sensitive but unclassified.  Please protect 
accordingly. 
 
¶1. (SBU) Summary.  On March 2, 2009, Cyprus and Iran signed an 
Agreement on the reciprocal promotion and protection of investments. 
 The agreement was the outcome of a recent trade mission to Iran. 
It falls under the GOC's ongoing business outreach efforts towards 
"non-traditional" markets such as Russia, Eurasia, and the Middle 
East as part of the GOC's strategy to deal with the global financial 
crisis. Most observers have strong doubts as to the practical worth 
of this agreement for Cyprus: UN sanctions against Iran will 
probably block many initiatives; GOC bureaucracy in handling 
residency and employment permits will discourage others.  End 
Summary. 
 
Investment Agreement with Iran 
------------------------------ 
 
¶2. (SBU) On March 2, 2009 Cyprus and Iran signed an Agreement on the 
reciprocal promotion and protection of investments.  The text of the 
agreement (faxed to EUR/SE) is quite general, borrowing heavily from 
standard OECD "canned language" for such agreements.   Ninos 
Savvides, 
Director of Coordination at the Planning Bureau who negotiated the 
Agreement, assured us that no special privileges were accorded Iran 
beyond those routinely provided to the many other countries with 
which Cyprus has similar agreements.  Savvides also stressed that 
this agreement in no way lends itself to by-passing or circumventing 
existing UN sanctions against Iran.  The agreement is applicable and 
enforceable only to the extent that it does not violate UN Security 
Council Resolutions against Iran, and/or any other standing legal 
obligations of Cyprus vis-`-vis the international community. 
 
¶3. (U) The agreement was signed in Iran during an official visit by 
Minister of Commerce, Industry and Tourism Antonis Paschalides, who 
was leading a delegation of Cypriot businessmen.  The delegation, 
comprising representatives from 30 Cypriot companies (18 of which 
are in real estate development) explored ways of promoting business 
and investment ties between the two countries.  After the 
delegation's return to Cyprus, Paschalides announced that Iranian 
businessmen had expressed an interest in various activities in 
Cyprus including tourism, manufacturing (especially, to explore the 
prospect of establishing factories in the Larnaca Free Zone, whether 
in partnership with Cypriot businessmen or on their own - no 
particular industries specified), and real estate (particularly, in 
buying holiday homes in Cyprus). 
 
¶4. (SBU) Paschalides also noted that the GOC is willing to grant 
residency permits to eligible Iranians buying property in Cyprus, 
provided their income originated from abroad, and that the purchase 
price of their residence in Cyprus exceeded a certain limit.  The 
press has quoted this minimum limit as Euros 350,000 (apprx. USD 
458,000) - although this figure has not been confirmed officially. 
This policy falls under a planned revision/review of existing 
Cypriot regulations concerning residency and employment applications 
by foreign investors (from all non-EU countries, not just from 
Iran).  The existing procedures are exceedingly arduous. 
 
Cyprus' Business Outreach Strategy 
---------------------------------- 
 
¶5. (U) Cyprus' business outreach towards Iran falls under a more 
general GOC strategy to boost inward investment and tourism during 
this difficult period for the economy.  The government, in 
cooperation with the Cyprus Chamber of Commerce and Industry, is 
organizing 27 trade missions to 18 countries.  Trade missions to 
UAE, Bahrain, UK, Russia, Serbia, and twice to Iran have already 
taken place.  Plans for the near future include trade missions to 
Denmark, Norway, Egypt, Switzerland, China, Russia, Romania, 
Germany, Kazakhstan, Czech Republic, Lebanon, Jordan, France, and 
Israel.  Additionally, Cyprus intends to participate in 21 
specialized exhibitions abroad, including the International Business 
Gateway in New York, and Medic Expo 2009 in Athens. 
 
¶6. (U) Paschalides noted that Russia was a priority country for 
Cyprus during this business outreach effort. Chamber of Commerce 
President Mavrommatis also commented that he was confident that 
Russia, despite its problems, would be among the first countries to 
recover from the present crisis, thus helping neighboring countries 
as well.  Other priority regions for Cyprus include the Middle East, 
and Eurasia (Ukraine, Belarus, Moldova, and Kazakhstan). 
 
¶7. (SBU) Cyprus Chamber of Commerce and Industry officials have 
commented that, following a similar delegation to Iran last year, 
three Iranian companies already set up shop in Cyprus, using the 
island as a base for their international activities (basically, 
acting as holding companies for their EU operations).  It has also 
been announced that on March 21, Iranian new year's day, around 
 
1,000 Iranian tourists will visit Cyprus using chartered flights. 
The mayor of Laranca will host a celebration and expects 2000-3000 
Iranian guests (we suspect they will mostly be students from private 
universities on the island). 
 
GOC General Investment Policy 
----------------------------- 
 
¶8. (U) Since joining the EU in 2004, the GOC has lifted most 
investment restrictions concerning non-EU residents. Specifically, 
the GOC has eliminated most capital restrictions and limits on 
foreign equity participation or ownership, thereby granting national 
treatment to investors outside the EU.  Non-EU investors (both 
natural and legal persons) may invest freely in Cyprus in most 
sectors, either directly or indirectly (including all types of 
portfolio investment in the Cyprus Stock Exchange).  The only 
exceptions concern the acquisition of property and, to a lesser 
extent, ownership restrictions on investment in the sectors of 
tertiary education, mass media, banking and construction. 
 
¶9. (U) There is no mandatory screening of foreign investment. 
Foreign investors can register a company directly at the Registrar 
of Companies through qualified accountants or lawyers, a procedure 
identical to that for local residents.  Similarly, foreign investors 
may acquire shares in an existing Cypriot company directly, without 
previous authorization by the Central Bank.  They are expected, 
however, to inform the Registrar of Companies about any change in 
ownership status. 
 
¶10. (SBU) We have frequently discussed Iranian efforts to circumvent 
UN sanctions with Cypriot anti-money laundering officials. They have 
been extremely cooperative and quickly disseminate requested 
advisories to the Cypriot financial services community. That said, 
the possibility of front companies operating for Iranian interests 
is a distinct possibility. 
 
 
Residency and Employment Permits 
-------------------------------- 
 
¶11. (U) Non-EU residents wishing to establish a company in Cyprus 
need to obtain a residence and employment permit from the Civil 
Registry and Migration Department.  The process of applying for and 
obtaining such permits can be quite arduous.  Even a simple 
Temporary Residency application (without the right to work in 
Cyprus) requires a bank guarantee and a full medical insurance 
certificate, valid for one year, along with many forms that need to 
be filled out.  Applying for an employment permit is considerably 
more complicated.  It involves, for example, a requirement on the 
part of the employer to place an ad in local media, as well on EURES 
(the EU's seasonal employment portal) for the specific position. 
Only if there are no other applicants from Cyprus or the rest of the 
EU after six weeks can the GOC consider a non-EU applicant. 
Applying for permanent residency is more complicated still, 
requiring continued presence in Cyprus for over 10 years and many 
other requirements, including being over the age of 30 and having a 
clean police record.  Such applications are reviewed on a 
case-by-case basis by an inter-agency committee, comprised of 
Ministry of Commerce, Ministry of Interior, Ministry of Labor and 
other officials. 
 
¶12. (U) Exceptionally wealthy investors may apply to the GOC for 
permanent residency status, provided they meet the following 
criteria (approved in November 2007).  These criteria are as follows 
for the various classes of applicants: 
 
-- Direct investor applicants must have in Cyprus direct investments 
(e.g. real estate, factories) in excess of Euros 26 million. 
 
-- Business applicants must have established in Cyprus companies 
with a total turnover of over Euros 86 million the year preceding 
the application. 
 
-- Bank depositor applicants must have bank deposits in Cyprus in 
excess of Euros 17 million for a minimum five-year term. 
 
-- Alternatively, over Euros 26 million invested in a combination of 
the above. 
 
¶13. (SBU) The Commerce Minister has said that Iranians (and 
presumably other investors from non-EU nations) will be eligible for 
multi-year, multiple entry visas rather than the single entry visas 
which they now receive if they fulfill the necessary investment and 
income criteria. Our efforts to find someone in the Immigration 
Department who knew about the proposed revisions, or had even heard 
of such proposals, were unsuccessful. The 200 or so Iranians who 
currently own homes in Cyprus (mainly in and around Larnaca) 
typically receive only single entry visas. 
 
 
¶14. (SBU) Comment.  The investment agreement with Iran is unlikely 
to produce significant financial results any time soon, especially 
given the current limitations on doing business with Iran due to UN 
sanctions.   Cyprus' existing and very complicated procedures for 
obtaining residency and employment permits will probably deter all 
but the most determined of applicants, despite the Commerce 
Minister's spin to potential Iranian customers looking to buy 
themselves a vacation house (or safe-haven) within the EU. 
 
¶15. (SBU) Comment continued. The bilateral Agreement should be seen 
in the context of the Cypriot Government's effort to be seen by the 
electorate as dealing with the economic crisis as best it can, 
leaving no stone unturned. But perhaps more importantly, it is as an 
effort to further position Cyprus politically as a bridge between 
East and West. From the Iranian point of view, obtaining a visa for 
Cyprus has always been a difficult endeavor. End comment 
 
URBANCIC