From Moscow to Limassol: The Financial Pathways of Russian Migrants

In this episode, out host Filip Brokes interviews Aron Ouzilevski, a journalist with expertise in Russian studies and post-Soviet affairs. Aron shares insights from his two-year fellowship with the Institute of Current World Affairs, where he focused on Russian wartime immigration following the Ukraine invasion. Based primarily in Tbilisi, Georgia, Aron has reported on the dynamics behind Russian migration to countries like Armenia, Kazakhstan, Serbia, and Cyprus, investigating the factors that motivated these relocations, from political opposition to career preservation amidst sanctions.

Key Discussion Points:

1. Introduction to Aron's Fellowship:
   • Background in journalism and Russia studies.
   • Fellowship at the Institute of Current World Affairs focused on Russian wartime immigration.
2. Russian Migration Since 2022:
   • Overview of the three main groups of Russian immigrants since the Ukraine invasion:
     • Political dissidents opposing the war and Putin’s regime.
     • Professionals seeking to avoid career isolation due to sanctions.
     • Men avoiding mobilization after Russia's 2022 draft orders.
3. Cyprus as a Hub for Russian Immigrants:
   • The historical attraction of Cyprus for Russian oligarchs and business elites.
   • Impact of the discontinued "golden passport" scheme.
   • Post-2022 immigration trends, including tech employees from companies like InDrive relocating to Cyprus for stability.
4. Financial Movement and Real Estate Transactions in Cyprus:
   • Aron discusses a complex process Russians use to transfer assets via cryptocurrency, bypassing direct bank transfers due to international sanctions.
   • Example of "Misha," a cryptocurrency money mover who assists clients in transferring rubles from Russia to Cyprus through Telegram.
   • The practice of partial crypto payments for real estate and its implications for financial transparency.
5. Challenges and Observations on European Regulations:
   • Cyprus under scrutiny from the EU for money laundering risks.
   • The persistence of Russian entrepreneurs on the island despite regulatory crackdowns.
6. Future of Russian Exile in Europe:
   • Insights into the adaptability of Russian entrepreneurs facing sanctions.
   • Speculation on future destinations for Russian immigrants facing restrictions in Cyprus.
7. Upcoming Projects:
   • Aron shares that he’s nearing the end of his fellowship, with his final dispatch covering the Russian exile movement in France, a nation historically significant for Russian dissidents.

Related Links:

• https://www.icwa.org/russians-exiles-cyprus/
• https://www.icwa.org/current-fellows/aron-ouzilevski/

Connect with Us:

• LinkedIn: https://www.linkedin.com/showcase/integrity-insights/?viewAsMember=true
• Berlin Risk Linkedin: https://www.linkedin.com/company/berlinrisk/?viewAsMember=true
• Website: https://berlinrisk.com/

Transcript

Aaron, welcome on the podcast. Hey, Philip. Uh, thank you for having me. Well, it is obviously a great pleasure. Uh, let's do a quick intro. Can you tell our, our listeners who you are, what your background is, and what you have been doing, uh, lately? So I have a background, uh, in, in journalism and, uh. Uh, kind of Russia post-Soviet studies.

Uh, for the last two years, uh, I've been a fellow at the Institute of Current World Affairs. It is, uh, an American foundation that gives, uh, journalists, uh, area studies, experts, uh, sociologists, uh, grants, uh, for two years where we spend, uh, two years abroad or really. Uh, honing into a particular subject. And what have, what have you been doing like over those two, uh, two years?

Uh, so the subject I've been working with is, uh, the, the sort of grand title is Russia's Wartime Immigration. And I am covering, um, reporting on, uh, the hundreds of thousands of Russians who left after, who left their country after Russia invaded Ukraine. Some left out of, um, the political opposition to the war.

Uh, to the Putin regime. Others left, uh, out of, out of fear that kind of isolationism and sanctions, uh, could have on their career prospects and, and connection to the western world. And then this sort of third category of people are, are. You know, typically men who fled in September, 2022 after, uh, the Russian government announced a mobilization order.

And so I've been mostly based in Tbilisi, Georgia, which is one of the major hubs. But I've also been traveling to, to other cities and countries where Russians have settled either to places that have sort of visa free regimes, uh, like Armenia, Kazakhstan, uh, and Serbia, or. Uh, specialized visas like in Germany, humanitarian visa programs.

And my last trip, uh, took me to Cyprus where there was already a big kind of foundational, uh, diaspora of Russian. Not just Russian, but the sort of rouson world, Russian Belarusian, Ukrainian, uh, businessmen, entrepreneurs and tech workers. Who have been attracted to the island for well over a decade for its, uh, incredibly low tax rates and, and, um, sort of gray economic schemes that, that enable the easy flow of capital and money.

And I read, I, I was, uh, fortunate enough to, uh, receive your dispatch from Cypress, which I found super interesting and maybe, um. We can start by kind of discussing what has been happening since the start of the war in Ukraine, since 2022 in terms of Russian influx into the country. Like what have you observed or what do you have your sources, uh, shared with you on that subject?

Yeah, so, so Cyprus has always been, uh, under. Cyprus has always been a, a place that, that initially attracted Russian oligarchs, uh, government personnel that, that wanted to, uh, take their sort of dirty money out of Russia and, and make it clean in Cyprus and, and then use that money to further, uh, invest and buy land in, in Western Europe.

Uh, you know, it was, it was notorious for its, uh, now discontinued, uh, golden passport scheme, which was just an accelerated way that through investment into property, uh, you know, millionaires, billionaires can quickly get, uh, CYP passports, which then gives them access to the entire Chenin zone. Um, now since the start of the invasion, the, the, the Golden Passport System was, I believe, discontinued in 2020.

And after Russia's invasion of Ukraine, uh, European governments have really held, um, have sort of tried to hold a magnifying glass to Cyprus. Uh, and it's been under heavy scrutiny. In its sort of culture of, of enabling the movement of, of large masses of money. And I think what they, they really try to crack down is, is to, to make sure that Cypress doesn't become a place where, where mo money for the purchase of weapons or the sales of oil, uh, can, can sort of flow through.

Um, but still the island, uh, attracted, you know, some, uh, 50, 50,000 Russians and Ukrainians. Ukrainians who obviously fled. You know, their country because, because of the invasion and the destruction that was happening back home and, and Russians who, uh, that were either moved, uh, by employees, for example, tech employees of companies that decided to completely move fearing.

For example, uh, let's take a company like, uh, in drive. Uh, it is a Russian rideshare company. It is actually the second largest in the world after Uber because much of its market is, is in South America, and outta fear of losing that entire market, uh, as a result of Russia's invasion of the Ukraine and the sanctions that that, uh, came subsequently.

In Drive moved much of its personnel to Kazakhstan and also Cyprus. And so, uh, among this new diaspora, there are tech workers who, who were flown here on company Air Airlines, um, but also entrepreneurs and businessmen, some who just couldn't stand the. The, the sort of new political reality they were living in or were just kind of motivated to retain their connections with the west, uh, and, uh, you know, move somewhere where they can quickly secure some sort of European residence permit.

Um, you know, among, among the people I spoke to were former CEOs of, of major, uh, Russian streaming platforms. Um, you know, uh, former boards of directors of, of major, uh, banking companies that, that are closely allied with the Russian state. Um, but also professors who, uh, you know, took on career switches and like re one professor rebranded himself as a life coach to sort of service all these Russian entrepreneurs that were coming, coming here.

Uh, so now you're seeing kind of. And, and they are, most of them, most of the new migration lives in, in Lima seo. Uh, it's a coastal town on the, and it's important to note that most all these people are coming to the Greek side of Cyprus, not, not what the Greeks would refer to as the Turkish occupied side.

Um. Uh, you know, there's an entire street with, with, uh, on the coastal on the coast, on the coastline that is just littered with, with Russian ruon businesses from, from shops that have grocery stores that have been there since, since the 1990s to, uh, major. Uh, luxury, uh, apartments that, that were once used that are half empty because they were once used to buy out golden passports.

So it's, it's a very, the, the presence of Russians and Russian speakers is, is, uh, very visible in, in I mussel. And you, and you haven't had any, um, experiences or like you haven't heard from sources talking about like actual. Uh, uh, like Russians actually leaving the country because we've, we've read a lot of reports, um, that in recent years the authorities, law enforcement in, in Cyprus have been cracking down on Russians closing down bank accounts, which you also mentioned in your, in your dispatch.

Uh, but if I understand you correctly, are basically saying that there's still actually more Russians coming in than leaving the country. I would assume that the, those who are leaving are the, are the really kind of, uh, extremely hyper wealthy hyper elites, uh, like oil oligarchs, uh, politicians who were allied with Putin.

Uh, who are directly, you know, being targeted by the European governments and European sanctions, but there's this sort of, sort of lower peg and lower tier of millionaires, maybe even billionaires, uh, who, who continue to arrive, uh, to Cyprus because, you know, it's a place where if they can no longer get a um, uh, maybe an accelerated passport, they can still get an accelerated, uh, residency permit.

Uh, by again, investing into local property, making a certain amount of money on the island, uh, which then, you know, paves the way for them getting a passport through kind of a legitimate process in a couple years if they learn Greek and, and reside in the country. Uh, but, but, so this has been a major destination for people who want to continue to kind of maintain their connection with, with Western Europe.

This obviously, like from our perspective, since we focus on financial crime, money laundering, uh, the, the part of your dispatch that I found particularly interesting was where you describe, you have the source, I think you refer to him as Misha, the source that kind of explains how Russians, um, convert their assets.

Uh, or transfer their assets from Russia, uh, to Cyprus. Can you, can you kind of explain how, how this works? Yeah. So, you know, I think it's important to draw a distinction that there's like, maybe very dirty money that's, that comes out of Russia, uh, which is, which is money that again belongs to oil oligarchs, uh, you know, resource, uh, resource magnets.

Uh, but then there's just kind of general dirty Russian money be because everything is, is still built on corruption, Russia. You know, ev everything, companies, even during my experience kind of reporting on the country, I, I, I didn't know a single person. And these are, you know, ordinary, uh, young millennials living in Moscow.

Uh, nine outta 10 times people would get paid an envelopes in cash because nobody ever wanted to pay taxes. Not the company, not the recipient. And so this. You know, unless you're, for example, a doctor or a teacher who has, has probably the, the sort of cleanest record by European standards. If you are any sort of businessman or entrepreneur, one way or another, your money would still be kind of considered gray, uh, by Western standards.

Uh, there's kind of so little accountability for it. Um, and so, and, and another thing is that, hmm. Uh, the, as my source said that this isn't, that this isn't actually a, a direct consequence of the sanctions regime, but this is more kind of European banks as a result of sort of discourse around sanctions fearing to, to take any money in larger quantities that comes out of Russia.

It, it, it has sort of posed a problem for these sort of Russian entrepreneurs. Uh, millionaires who, who, who want to, for example, sell assets, uh, and sell an apartment in Moscow and, and bring, bring the money into a CYP bank. So the resort to, to people like this, this mission individual who you know, is a self-described kind of cryptocurrency, money mover.

Um. To transfer the money, uh, into Cyprus with the use of of his crypto resources and sort of loosely the way this works is that, say a couple want to sell their apartment in St. Petersburg. Uh, no Cipt Bank. We'll be willing to, to have any sort of direct transaction from with a Russian bank. So in order to do this, the couple, um, uh, resorts to a service like Misha's using Telegram, um, which with the recent arrest of Paval dur and him handing the encryption keys to the French government might actually.

Pose, uh, new, new challenges for this type of transaction. But anyway, with the u uh, the, they use his platform on Telegram, uh, Misha's company sends out a dispatcher. The dispatcher comes, takes, takes the, the physical cash and rubles, transfers it to cr crypto, uh, and then in Cyprus, the crypto money is received.

On the Cy end, uh, another dispatcher in Cyprus converts the crypto into euros and then brings it to this couple in, in Cyprus. Um, and all this, this is fascinating and all the, so all the communication takes place on, on, uh, telegram. Yeah. So, so when I last spoke to him, this was just a couple weeks before pa and.

So I really can't comment on it. It could be an entirely new reality, or, or, you know, maybe he'll revert, revert to a, a different, uh, a different messaging app. Like, like Signal or something. But just telegram, you know. Uh, the, the format of Telegram allows for all these kind of bots and transactions that, that that can take place.

Because there are all these, you can create groups, you can create sort of entire markets on Telegram that you just can't do through signals. So yeah, one way or another, this, this will certainly pose a challenge to him. Um. Yeah, but at this point he's, I guess he's not really worried about it, but like also, I mean, so I now understand the, the way this works, converting these assets, these assets, or the value of these assets back to Europe and converting it to Euros.

But he also mentioned in your dispatch this example of one of Misha's clients. Where he, um, where he purchased a, an apartment using or paying the majority of the price of the property in crypto. Can you, can you also explain that? Yeah. So again, when I drew the distinction between dirty, dirty, like oil money and then dirty money, uh, you know, the many Russian entrepreneurs presumably have sources of income that are.

That, you know, uh, would not, would not be tolerated or kind of approved of by, uh, western banks, uh, from kind of shady, shady, questionable, uh, revenue streams. So he was explaining to me, Misha was explaining to me how one of his clients purchased an apartment. Uh. On Cyprus as in part to, to live in it for two years, but also in part to wash, uh, some of the money, some of the money that he had made in that this client had made in Russia.

So what had happened is this, so the client basically, uh, purchased, uh, an apartment in, in Lius soul. Through, through this method, he found a developer. Who, first of all, he found an apartment, which its market value was 1.2 million euros. Um, but the developer was willing to accept a partial sum of that, of that money in crypto because then the de developer, it's, first of all, it's not gonna be taxed.

Uh, and the developer can, can pocket some of it, use it for whatever he needs. So the, the sort of the legal transaction. Uh, it was for, for example, 500,000, uh, euros. And this was, this was paid in, this was done through a sort of clean mechanism. Uh, it was, it was his clients, like 500,000 that he had on in Euros on his CYP bank that he paid directly to the developer.

But remember that the market value of the apartment was 1.2 million. So where does the rest of the 700,000 come from? It then comes in crypto, which is transferred straight to the developer, uh, and the developer takes it done deal. It's sold. The developer walks off with 700,000, uh, and, and 500,000 in, in legal cash, 700,000 in crypto.

Um, the client now, now has an apartment with a market value of 1.2 million that he legally purchased for 500,000. Uh, euros. So in two years, this client will then go on to sell this very apartment, uh, to a buyer who is actually willing to, to go through the full process legally, uh, and transparently and sell it for its full market value of $1.2 million.

Therefore, the, the then 700. Thousand is then gets transferred into, into clean capital. Mm-hmm. In Cyprus. Yeah. And traceable. And then this, this client can then go to a European bank, say, I have these $1.2 million. They say, where did you get, get it? Here's this transaction. I sold it to, uh, uh, a buyer. I sold an apartment to a buyer on, I mean, what I, what my first question would be, I mean, what my question was when I was reading the, the dispatch also, 'cause as far as I understand, the.

The real estate, uh, uh, seller or like real estate engines, I think they are officially, at least officially legally oblig to also conduct these basic KYC checks on the buyers, even if they accept cryptocurrency, which I guess is legal. But what you're basically saying is that it seems to be almost like a, or at least with this particle example, but maybe it's like even like a common practice that uh, these real estate agent agents, they don't really.

Kind of look at the source of wealth in these cryptocurrency transactions. Yeah, exactly. I mean, I think, I think the issue from, from, um. From what I had gathered speaking to Misha, is that this, this was quite a common practice among Russians. He, he named numerous people. He named this one example of, you know, of, of just like to, to sort of break down how, how the process works.

But this, this seemed completely widespread. Among many of these sort of millionaires and entrepreneurs that are coming to Russia and uh, you know, although the European Union is, is, is trying to sort of crack down on Cyprus, I think it's, there's still still a long ways to go for, for, for it to really begin to, to fully regulate its market.

And, uh, you know, the place seems quite rife with corruption. I eve's dropped on some interesting conversations of. Certain people boasting about having, uh, local secret services, uh, in their pockets, you know, you know, let me know who you need. I, I got, got local police, you know, even the president. Uh, so yeah, it, I think all of this is just, just shows that, that maybe again, the dirty, dirty money is slowly getting out of Cyprus, but the, the dirty money is, is still there.

And you didn't get a sense from talking to all these people that, that, uh, you know, that there was like concerned among them about all this, all these crackdowns and people like, people like speculating or thinking about leaving, going to different places like the UAE for instance. I know there has been very popular about Russian immigrants.

Have you, have you got any sense on that?

I, I am, I, I did not get the impression that people were leaving, you know, there were people who were still living in, in sort of two countries, that being Russia and, and Cyprus. You know, maybe they. Purchased property in Cyprus shortly after the war, but then realized, okay, you know, I can still go back without ending up in jail or ending up in the Army.

And so they're kind of living in this in between world. Um, I, I got the impression that a lot of people were kind of there to stay to, to, I mean, almost everyone I spoke to had already, were already, had already acquired the residency permits and so. Uh, you know, I think they were keen on, on waiting it, waiting it through until they get, uh, European, uh, until they get a CYP passport.

And I, I really don't think the, the, the money moving element is, is the main draw to the island, I think. Not anymore, at least. Uh. Um, I think, you know, by the, by the looks of it, like Russians are, are quite nifty and we'll find other ways to bypass, uh, bypass sanctions. I, I even asked. Uh, this Misha guy, like, what, what are you gonna do if they, they start to crack down and he said, well, I'm an entrepreneur.

I'll find something else. Um, and, and told me about some ideas in FinTech that he had. So, and, and about like four different startups that he just launched. So, I, I don't know. I, I think, I think it'll just, it'll create new difficulties for them, but I think they'll, they'll sort of continue to find these channels.

It's been really fascinating. I will, and I will also make sure to link your dispatch in the, in the show notes so that everyone can take a look at it. But, uh, uh, I'm really grateful to you that you came all the way to Berlin to, uh, to speak, to speak to us about this. Uh, but is your, uh, maybe last question.

What is your, what is your next. I know that you have been covering, there's a lot of interesting stories, uh, that I've read and, um, anyone can read about the Russian immigration. What is your next, what is your next destination? Uh, so I'm actually at the tail end of the fellowship and my next. Destination will be to return to Washington DC and give my end of the fellowship report just, uh, three days after the US election.

So we'll see whether the city is burning or not. Um, but my, my last dispatch, uh, a huge departure from the. Cyprus one will be on, uh, the Russian, the current Russian exile movement in France. Um, kind of delving into the France is a place that has always been a home for Russian dissidents and exiles for over a hundred years since the Bolshevik Revolution.

So. Yeah, uh, quite different and, and maybe a little bit more, uh, like story driven by protagonists rather than the one, uh, in Cyprus. Fascinating. I look forward to reading that as well. But thank you. Thank you very much, Aaron, for your time and, uh, maybe, maybe some other time. Thank you.