Norwegian Rig Company Loses Millions of Dollars in Cyprus

Prospector Offshore Drilling has $ 8.1 million in the account of the crisis-hit Cypriot Laiki Bank, writes Dagbladet. After the deal with European Union, the Bank’s corporate customers have been notified that 37.5 percent of deposits in excess of EUR 100 000 will be converted to what appears to be virtually worthless shares in the bank.

Now, the big customers have been told that another 22.5 percent of the deposits have been frozen until Cyprus can meet the terms of the rescue package from the International Monetary Fund (IMF) and the EU.

Investor Øystein Stray Spetalen has recently acquired 10 percent of Prospector Offshore Drilling,  and now is furious with the company’s chairman.

– You have to ask the chairman Geir Sandvik why he has put 50 million NOK in a Cypriot bank. I do not know what he was planning with this move, says Spetalen to Dagbladet.

In response, Sandvik admits Spetalen has reason to be dissatisfied and he respect for his reaction by suggesting that he first learned of the monetary crisis on Monday.

The Collapse of Cyprus as a Tax-Haven

Cyprus, although only a relatively small player in a global network of low-tax financial centers, has made serving tax-averse foreigners a central pillar of its economy. The small island whose main economic engine used to be potato farming, Cyprus shifted to a “tax havens” for the foreign investors who are keeping their money beyond the reach of local tax authorities. 

Particularly successful at attracting Russians, Cyprus has built up a large infrastructure of lawyers, accountants and other professionals schooled in the arts of tax avoidance, writes NYT. Its corporate registry now has 320,000 registered companies, a staggering number for a country with only 860,000 people. Most are shells set up for foreign companies and wealthy individuals seeking to avoid taxes.

However, the island could not escape from a major economic crisis with the easining influence of the exposure of Cypriot banks to the Greek Debt Crisis. The Cypriot economy has downgraded to junk status by international rating agencies, and the country could not refund its state expenses from the international markets by refusing to restructure the troubled tax-haven Cypriot financial sector.

On 25 March 2013, a €10 billion bailout was announced in return for Cyprus agreeing to close its second largest bank, the Cyprus Popular Bank (also known as Laiki Bank), levying all uninsured deposits there, and possibly around 40% of uninsured deposits in the Bank of Cyprus (the Island’s largest commercial bank), many held by wealthy citizens of other countries, significantly Russia, who use Cyprus as a tax haven. 

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