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Russia to coordinate Cyprus loan decision with EU

Russia has said that it would only grant a bailout loan to Cyprus as part of a coordinated rescue with the EU for the island state, which it said was seeking a total of €20 billion in aid.

FINANCE Minister Anton Siluanov told Reuters on Friday that Russia was considering Cyprus’ request for a €5 billion loan, and added that Cyprus was seeking a further €15 billion from the EU.

There was no immediate comment from authorities in Nicosia.

In June, Cyprus became the fifth country in the 17 nation euro zone to seek some form of international aid, when its banks needed state support to cover massive losses on their exposure to debt-crippled Greece.

It has repeatedly said since that a bailout figure has not yet been defined, and it was still in consultation with its would-be lenders from the European Union as well as the International Monetary Fund.

Siluanov, who this week met Jean-Claude Juncker – the chairman of the eurogroup of euro zone finance ministers and prime minister of Luxembourg – estimated Cyprus’ total borrowing needs at €15 billion.

This meant that, even if Cyprus borrowed from Russia, it would still need EU assistance.

Siluanov’s comments appeared to represent an attempt to prevent Cyprus – a popular offshore haven for Russian businesses seeking protection from their country’s unpredictable investment climate – from playing off Moscow against Brussels to secure more favourable borrowing terms.

“If we give this credit for 5 billion euro, they still will have to borrow somewhere else,” Siluanov told the Reuters Russia Investment Summit in an interview.

“Therefore, the decision needs to be coordinated, because our 5 billion is not enough for them; their (EU) 15 billion, in principle, is sufficient.”

Cyprus bailout needs

Ratings agency Standard and Poor’s has estimated that an EU rescue package for Cyprus would exceed €15 billion – or more than 80 per cent of the country’s GDP.

European officials have said previously that Cyprus’s total bailout needs could reach €10 billion.

Siluanov said that the main factor influencing Moscow’s decision on the loan is whether Cyprus can service the loan and eventually repay it.

“What will 5 billion euros give Cyprus? Will it allow it to solve its debt problems?” Siluanov said.

He also said five other European countries had asked Moscow for financial help – roughly matching the number of countries that sought aid from Russia during the 2008-2009 crisis.

“These are not large (countries),” Siluanov said, declining to name any of them.

Russia, whose low sovereign debt is more than balanced by its half a trillion dollars in foreign exchange reserves, has been a favourite stopping-off point for finance ministers of indebted countries laid low by the global financial crisis.

Russia has already lent Cyprus €2.5 billion.

But Moscow has generally resisted pleas for bilateral aid, instead supporting steps to beef up the lending power of the International Monetary Fund in return for a greater say in how the global lender of last resort is run.

[Reuters]

Readers' comments

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  • martyn says:

    So the suspicions of many of us now seem to be being confirmed – its €20bn that’s needed now:

    15bn from the Troika (with severe austerity strings)

    5bn from Russia (dependent perhaps on the outcomes when the Successful Bidders on the next 11 Cyprus blocks are announced (shortly?)

    October looks like being a hectic, perhaps humbling?, month for the holders of the current EU Presidency!

  • Curmudgen says:

    A fine political web is slowly being cast. Russia, will eventually get its hands on the gas (and oil?) reserves or at least have a controlling interest.

    Cypriots think they are smart but I can assure all the Russian political creature is way, way ahead of any Cypriot no matter how well educated.

    The Russians shall have them for breakfast (or should I say over a barrel!)

  • andyp says:

    Never mind that a similar Russian statement was issued and reported months ago do they really think we are stupid?

    Government spokesman Steff has told us on many occasions that the Russian loan is still under consideration.

    Who are we to believe? The Russians who have the money and told everyone months ago that Cyprus was not getting it until agreement was reached with The Troika or Steff? Mmmm.

  • Gavin Jones says:

    Russia is being extremely sensible and in effect has scuppered any ideas that President Christofias may have had to play her off against the troika.

    This has pushed the government into a corner from which it cannot escape and has no option other than get on with what needs to be done. Having said that, the track record of this administration is such that “getting on” with anything is questionable.

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