Cyprus FinMin to seek extension to Russian loan

Cyprus Finance Minister Michalis Sarris was headed to Moscow Tuesday to seek an extension to an existing Russian loan, a top official said, as the debt-hit island battles to stave off bankruptcy.

Finance ministry director Andreas Charalambous told reporters in Nicosia that securing an extension to the loan was «very important» as it would throw Cyprus an economic lifeline.

“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,» Charalambous told reporters.

“If we manage to extend the loan the refinancing needs of the economy would be manageable. So its very important.”

“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,» Charalambous said without elaborating.

Moscow extended Nicosia a 2.5-billion-euro loan in 2011 at a rate of 4.5 percent.

Sarris’s brief was to lower that rate and extending the loan’s expiration date until 2020 from 2016, media reports said.

Moscow was reported to be seeking in exchange details about Russian billionaires who held accounts on the island. Russia was also said to be interested in buying a majority stake in Cypriot lender Patriot Bank that is in need of rescue.

However, the discussions could be awkward in the wake of a weekend announcement that under the terms of a 10-billion-euro bailout for debt-laden Cyprus agreed by EU leaders, a controversial levy will be slapped on bank savings.

The move has raised widespread anger in Cyprus, but also in Russia, where investors have placed vast amounts of cash in the island’s banks.

Estimates vary but the Moody’s rating firm estimates that Russian companies and banks keep up to $31 billion in Cyprus. The figure accounts for between a third and half of all Cypriot deposits.

Russian President Vladimir Putin on Monday hammered the proposed tax as «unfair, unprofessional and dangerous».

Russian Prime Minister Dmitry Medvedev too slammed the harsh terms of the deal.

“We should say this directly: this simply looks like the confiscation of other people’s money,» Russian news agencies quoted Medvedev as saying. «I do not know who the author of this idea is, but this is what it looks like.”

Several analysts said the measure was meant to make sure that Brussels did not spend billions propping up the at-times ill-gotten gains of rich Russians, who are widely reported to have exploited Cyprus’s reputation as a tax haven.

Cyprus has repeatedly denied the allegations of being soft on «dirty money» and offered to open its accounts to international inspection.


Subscribe to our Newsletters

Enter your information below to receive our weekly newsletters with the latest insights, opinion pieces and current events straight to your inbox.

By signing up you are agreeing to our Terms of Service and Privacy Policy.