Russia rejects Cyprus bailout proposals

PanARMENIAN.Net - Talks between Russia and Cyprus on Moscow’s possible bailout of the island nation’s economy have ended, with Russian investors rejecting Cypriot proposals, Russian Finance Minister Anton Siluanov said on Friday, March 22, according to RIA Novosti.

“The final round of talks took place yesterday. The talks have ended,” Siluanov told journalists, adding that Russian investors “demonstrated no interest” in Cypriot proposals.

Cyprus had offered Russia – which holds between one third and half of the island's bank deposits – investments in its national banks and gas projects in return for financial aid.

But Cypriot Finance Minister Michalis Sarris flew home on Friday from Moscow empty-handed after two days of tense discussions.

It remained unclear if Sarris had managed to persuade Russia to extend an existing 2.5-billion euro ($3.2-billion) loan.

The European Central Bank has said that unless Cyprus raises billions of dollars by Monday it could lose emergency funds and face inevitable financial collapse.

"The provision of a state loan was not considered because Europe has established a debt ceiling they [Cyprus] are not allowed to surpass, and a loan would take them past that threshold," Siluanov said.

Analysts say Cypriot gas projects to explore and produce natural gas in deep-water zones off the island’s coasts were likely to be a hard sell to Russia, in light of possible opposition from Turkey, which has refused to recognize the Republic of Cyprus or its maritime borders since the island was split into two parts in 1974.

The urgency for a multibillion-dollar loan from Russia emerged after the Cypriot parliament rejected on Tuesday a levy on bank accounts that international creditors, including the European Union and the International Monetary Fund, had set as a condition for providing a 10-billion euro ($13-billion) bailout for Cyprus.

International creditors said on Saturday that their rescue package for debt-laden Cyprus was contingent on a one-off deposit levy to yield an additional 5.8 billion euros ($7.5 billion) in revenues for the cash-strapped Cypriot budget.

Overall, Cyprus needs about 17 billion euros in aid to shore up its budget and recapitalize its banks, which were forced to write down billions of euros in “voluntary” Greek debt restructuring.