Inside Story

Can I get a passport with that?

Cash-strapped microstates are selling citizenship that opens doors for the wealthy non-Western elite

Max Holleran Books 25 October 2023 1695 words

Plan B: the growing citizenship-by-investment market was given a boost by the return of Hong Kong to China in 1997. Jack Picone/Alamy

If people give any thought to what citizenship means in Cyprus it’s probably because they’re aware that the island has been divided since Turkey invaded in 1974 and took over a large section of the north — a split still policed by UN troops. Or they might focus on the large number of undocumented Middle Eastern and African migrants who try to use the island as a launching point into continental Europe.

What probably doesn’t come to mind is Cyprus’s leading role in selling passports to members of the global elite. Since the 2008 global financial crisis the island has joined the growing number of small countries that peddle their passports in the growing citizenship-by-investment market.

These countries — often island microstates with British colonial histories — offer citizenship to anyone who can afford prices ranging from around A$200,000 to A$1 million. You don’t necessarily need to visit the country whose citizenship you buy, let alone live there, but you’ll gain much easier access to the countries your new passport opens up for you. A passport for tiny Saint Kitts and Nevis, for example, entitles its holder to ninety-day visa-free access to Britain and the countries of the European Union — not a privilege available to many citizens outside the West.

As sociologist Kristin Surak observes in her new book, The Golden Passport: Global Mobility for Millionaires, citizenship was once an equaliser, neutralising some aspects of class inequality. Now that it’s for sale, it has become another fading feature of the twentieth-century nation-state and its mildly redistributive policies. Hypermobility and growing inequality have created a business that, while still very small, threatens to replace our current sense of citizenship and nationalism with a more elastic variety of belonging based on class.

Some of the island microstates that figure prominently in the citizenship-by-investment market have also used their sovereignty to attract offshore banking. But this is not what motivates people to buy a passport, says Surak: wealthy countries like Britain and Switzerland have more than enough tax loopholes to go around.

Rather, non-Western elites are driven by the disjuncture between their economic status and their national belonging. They are mostly the wealthy, but not uber-rich, of the Middle East, Central Asia, Russia and China. They have enough funds for a business class ticket but are hassled at passport control. They have places to go and people to see and are sick of waiting weeks for visas to the European Union, the United States or Australia.

Increasingly, these wealthy individuals buy citizenship in places like Saint Kitts, Antigua, Dominica and Saint Lucia in the Caribbean; Cyprus and Malta in Mediterranean Europe; Vanuatu in the Pacific; and, surprisingly, Turkey. Of course, they could invest for citizenship in the United States, Canada, Britain or Australia, but those countries’ programs cost US$1 million or more and require residency.

The citizenship-by-investment industry emerged in the Caribbean in the 1990s but was largely kept in check by American concerns about money laundering. It started to pick up steam with the return of Hong Kong to China in 1997, when a plethora of citizenship-by-investment stores with names like “Emergency Exit Company” sprang up in Kowloon. After the 2008 financial crisis, Spain and Portugal also launched popular residency-by-investment programs, which are more like regular immigration.

The Hong Kong example reveals another built-in attraction of these programs: many people want an extra passport as insurance. Hong Kong’s political future was uncertain in the 1990s, but it also had a roaring economy fuelled by mainland China’s free-market reforms; wealthy Hong Kongers, with their extra passport, could continue to make money while having a concrete exit plan.

The same goes for Russians, Kazakhs, Vietnamese and many other elites today. Doing business in a place without democratic institutions can be lucrative, but being able to leave — when there is a coup, mass imprisonment of those charged with corruption (sometimes by the very governments that cooperated with them), or a war — is prudent. That’s why Jho Low, a Malaysian business figure who stole US$4 billion from his government with the connivance of former prime minister Najib Razak, became a Cypriot in 2015. His new passport has allowed him to evade capture despite an Interpol warrant.

The programs that most interest Surak are those that involve a simple exchange of passports for cash. The European Union reluctantly allowed Cyprus and Malta to go ahead with their programs because migration is controlled by individual member countries despite local citizenship giving passport holders access to the Schengen zone. You can organise a flat in Malta (for the property rental requirement of its citizenship-by-investment program) but actually live in Paris. Similarly, investors in Caribbean countries might be taking a first step to using their new passports for investor-residence permits to the United States and Britain under their E-2 and Tier 1 visa programs respectively. Thus, citizenship in an island country is a backdoor to residency and investment in a global superpower.

As Surak shows, the leading citizenship-by-investment countries are accommodating elites despite growing anger among their own populations. In Malta the program was shut down after corruption allegations and the fatal car bombing of investigative journalist Daphne Caruana Galizia, who had reported on cash-for-passports. In Cyprus, a sting report by Al Jazeera showed someone posing as a Chinese citizen-investor being cleared by government officials after announcing he had a criminal conviction.

Cyprus and Malta responded to the economic challenges brought on by Europe’s 2009–10 sovereign debt crisis by setting up their lucrative schemes. In the Caribbean islands the schemes have been even more successful: they are the biggest export product in Saint Kitts, where citizenship-by-investment made up about 40 per cent of the economy before Covid-19 struck, and in Dominica.

Although lawyers, accountants and property developers get a good cut (the leading global citizenship-by-investment firm, Henley & Partners, makes €32,000, or about A$54,000, on each Malta deal), governments get the majority, and the evidence shows that the more formalised the scheme, the less likely the money goes into officials’ pockets.

It costs a family of four €975,000 for Maltese papers and the government gets €700,000 of that for social and infrastructure programs. In the five years of the ironically named “Identity Malta” program, the country made €1.4 billion, or 2.1 per cent of GDP. This is why resistance, although present, isn’t strong.

Many former colonies have complex attitudes towards immigration after having governments thrust upon them by foreign powers. Rather than opposing newcomers, locals often feel that if people want to stay — and some citizen-investors do stay — then they can pay. In Cyprus, even the communist AKEL party supports citizenship-by-investment. As Surak points out, “Microstates in particular are diaspora societies. Their small size means that, by nature, bigger and more diverse opportunities are available only abroad.” These schemes add income to economies driven by remittances and bring people to places that are ageing and depopulating.

Yet the practice of selling citizenship is taking on extra poignancy as conflicts spread across the world. The biggest new player is Turkey, which is growing so quickly it may forever alter the market, particularly because it is a major regional power with NATO membership and a huge military. While its passport sales are probably driven by the collapse of the Turkish lira, they appeal to wealthy displaced people (as do the citizenship-by-investment programs in Egypt and Jordan). Syrians, Palestinians, Lebanese, Iranians and many others may use this industry not as a backup plan but as an immediate means of escape. Some are also being encouraged to “buy in” to societies where they are already refugees.

The Golden Passport opens with an account of a citizenship-by-investment conference in Montenegro where Robert De Niro and Wyclef Jean were guests. Drawing on his own background in the Armenian diaspora, the founder of the Global Citizen Forum, investor Armand Arton, declares that “migration needs a new brand.”

Surak is adept at showing how the citizenship-by-investment sector often exploits the language of human rights and freedom of movement while commodifying citizenship and stripping it of its former values. She lays out the contours of this surprising industry very well, though I would have liked to hear more from the buyers themselves, whose voices only appear in one small chapter. What drives them to invest? How does it affect their feelings of nationalism? Do they think it is fair that they can buy their way into better mobility at the very moment of multiple migration crises?

There are wider questions too. Citizenship-by-investment only accounts for 50,000 naturalisations a year, but what if it were to grow? Other writers, most notably the journalist Atossa Araxia Abrahamian, have shown how Gulf states bought thousands of Comoros Island passports in order to give their Bidoon populations mobility while simultaneously depriving them of state benefits. Others have warned that these schemes could be adopted to forcibly remove citizenship from political dissenters or ethnic minorities.

Citizen-investors mostly want to get a new passport to move somewhere else. Yet, given that most of these places are islands highly susceptible to climate change, there is a grave irony in this flexible sense of citizenship. Funds from the programs have been used to build apartments and infrastructure, but often in places ill-suited to more people.

Dominica, for instance, constructed a world-class eco-resort with citizenship-by-investment money, only to see it levelled by a hurricane. Vanuatu hopes to build an entire new city with Chinese funds, some from citizenship-by-investment, but it is one of the countries most vulnerable to climate change (and some have even raised the possibility that the entire population may need to relocate to Australia during this century).

Looking at this phenomenon more critically, we can see programs run by small countries that have often been denied sovereignty in the past and now also face an uncertain future. This disconnect between the bright skies and sandy beaches of brochures and the pessimism of those actually living on the islands that pioneered these schemes can be startling. What will new citizens do for their new countries besides opening their wallets? And will their incomplete sense of national community catch on more widely? •

The Golden Passport: Global Mobility for Millionaires
By Kristin Surak | Harvard University Press | US$35 | 336 pages