Indebted Cyprus fails to win Russia's help

2013-03-20 15:03
A woman holds a banner during a protest outside of the parliament in Nicosia, Cyprus. (File, AP)

A woman holds a banner during a protest outside of the parliament in Nicosia, Cyprus. (File, AP)

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Moscow - Cypriot Finance Minister Michalis Sarris failed to reach progress after two rounds of talks in Moscow on assistance from Russia after his island's rejection of an EU bailout that slapped a painful levy on bank deposits.

Sarris met his Russian counterpart Anton Siluanov before holding talks with First Deputy Prime Minister Igor Shuvalov about a possible new Moscow loan.

Cyprus also hopes to ease the terms of a €2.5bn loan Moscow afforded Nicosia in 2011 that matures in 2016.

"We had a very good beginning. We had a very good, honest and open discussion," Sarris told reporters after his talks with the Russian finance minister.

But a Russian government source said a second round of talks with Shuvalov - a close aide to President Vladimir Putin who oversees the financial sector - produced no results.

Sarris has vowed to stay in Moscow until some agreement is reached that could help his country's banks avoid bankruptcy and the island from going into default.

Exposure to Greek crisis

Russian news reports said the talks will continue in Moscow on Thursday.

The visit comes the day after furious Cypriot lawmakers flatly rejected a highly unpopular measure that would have slapped a one-time fee of up to 9.9% on bank deposits over €20 000 as a condition for an EU-led €10bn loan.

Cyprus's banks were heavily exposed to the Greek debt crisis and their collapse would leave the country bankrupt and in danger of going into default.

That in turn would put immense pressure on the eurozone and once again put the future of the single currency in doubt.

Cyprus is now scrambling for a Plan B that includes the option of turning to Russia.

Russians - many of them wealthy tycoons seeking to avoid taxes back home - have $31bn in private and corporate cash deposited in the island's teetering banks.


The Kremlin said that Putin received a telephone call late on Tuesday from his Cypriot counterpart Nicos Anastasiades in which the two leaders discussed what Russia could do to help.

Putin had on Monday lashed out at the proposed levy as "unfair, unprofessional and dangerous" - a position highlighting the links between the Kremlin and the Russian oligarchs who do business in Cyprus.

"The leaders analysed ... ways of getting out of the crisis," Putin's spokesperson Dmitry Peskov told Russian news agencies.

"Putin once again expressed his concern [over] ... any measures capable of harming the interests of Russian individuals and companies," said the spokesperson.

Local media have speculated that one proposal on the table in Moscow was for the Russian natural gas giant Gazprom to come in and infuse Cypriot's banks with cash in exchange for interest in the island's offshore energy fields.

Gazprom has refused to confirm that this offer - also reported by Cypriot media - is under discussion.

Credit extension ruled out

Sarris said that he had received no firm offer from Gazprom so far.

"There were no offers - nothing concrete," he said in reference to Gazprom.

Russian officials have so far ruled out the possibility of extending Cyprus credits beyond the 2011 loan.

But some reports said that Cyprus was considering the option of privatising its pensions programme and offering Russia and some European institutions a stake.

Read more on:    vladimir putin  |  cyprus  |  economy

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