Nicosia looks to Moscow for financial help
Cypriot finance minister due in Russia as alternatives to EU-led bailout are sought
A couple pass outside the Russian commercial bank in Nicosia yesterday. A high proportion of deposits in Cypriot banks are believed to be held by Russians. Photograph: Petros Karadjias/AP
Cyprus was seeking financial help from Russia last night as it looked for alternatives to a European Union bailout that would see a tax of nearly 10 per cent slapped on many of the island’s bank deposits.
As parliament in Nicosia debated the bailout, Cypriot finance minister Michael Sarris was due in Moscow to meet Russian counterpart Anton Siluanov, to discuss easing the terms of a €2.5 billion Russian loan to Cyprus, and unspecified “other options” that could assist Cyprus.
Russian companies and wealthy individuals are believed to have tens of billions of euro in Cypriot banks, and Moscow’s leaders denounced the planned levy on deposits, which is part of the EU’s proposed €10 billion bailout of the debt-laden island.
Cypriots’ anger over the EU proposals, and powerful Russians’ fear of suffering major losses in the bailout, have fuelled speculation that Moscow will try to help prop up Nicosia and protect its own interests in the process.
Cypriot finance ministry official Andreas Charalambous said Mr Sarris’s top priority would be to seek a lower interest rate and longer repayment period for the €2.5 billion loan taken from Russia in 2011.
On Monday, Mr Siluanov lambasted the EU for seeking to impose the savings levy without consultation with Russia. He warned that, in response, Moscow would rethink its offer to discuss easing the terms of its loan to Cyprus.
“The first issue is we have a large loan maturing in 2016 and if we manage to come to an understanding this will help facilitate our debt repayments and debt sustainability,” Mr Charalambous said.
“If we manage to extend the loan, the refinancing needs of the economy would be manageable. So it’s very important.”
Mr Charalambous added: “There are other options the minister is going to discuss with the Russian government and investors as our ambitions are going beyond the extension of the loan. We will see if there is potential interest for further investment.”
Mr Charalambous did not give details of what this might entail, but Russian and Cypriot media have reported that Kremlin-controlled energy giant Gazprom might be interested in pumping money into Cyprus in return for rights to explore for gas off its coastline.
Other reports suggest major Russian banks might seek to take over Cypriot lenders, so stabilising its financial system and strengthening Moscow’s already considerable influence over its banking sector.
Cypriot government spokesman Christos Stylianides said that Mr Anastasiades may also speak by telephone to Mr Putin, who on Monday described the EU plan as “unfair, unprofessional and dangerous”.
Russia’s prime minister Dmitry Medvedev complained that the scheme would force Moscow to “make adjustments to our position” on Cyprus after an EU move that “looks just like the confiscation of other people's money”.
In seeking Russia’s help, Cyprus appeared to be defying German chancellor Angela Merkel, who in a telephone conversation with Mr Anastasiades “once again emphasised that the negotiations are to be conducted only with the troika”, according to her spokeswoman. The troika comprises the EU, the European Central Bank and the International Monetary Fund. Germany is one of several EU states that has aired concerns about the provenance of much of the money held in Cyprus and noted its reputation as a place for Russians to launder cash.
Late last year, German media cited a German intelligence agency report warning that “Russian oligarchs, business people and mafiosi” would benefit most from a bailout of Cyprus.
Nicosia denies such claims and has offered to open its bank books to international scrutiny.