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Russia to coordinate Cyprus loan decision with EU

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.