Wednesday

27th Oct 2021

Cyprus to get 'no strings attached' Russian bail-out

Eurozone member Cyprus is set to join Greece, Ireland and Portugal by seeking external aid to prop up its finances. But unlike the EU and IMF bail-out packages, its loan is to come from Russia with "no strings attached".

Russian finance minister Alexei Kudrin in a telephone conference with press on Wednesday (14 September) confirmed that Moscow is at an advanced stage in negotiating the rescue package with Nicosia.

Read and decide

Join EUobserver today

Become an expert on Europe

Get instant access to all articles — and 20 years of archives. 14-day free trial.

... or subscribe as a group

"Italy has not approached us. Eurozone countries have not approached us in general ... At the moment, we are holding talks only with Cyprus. We have good progress [in the] talks. They will conclude within one month," he said.

Cypriot newspaper Phileleftheros earlier reported that Russia will bung Cyprus a €2.5 billion loan at an annual interest rate of just 4.5 percent, 10 percent below the market rate. A €1 billion tranche is to be paid in December and two other payments are to be made by March 2012.

Speaking in the Financial Times on Wednesday, Cyprus finance minister Kikis Kazamias said the money will be used to plug the country's budget deficit and to help re-finance maturing debt, €1 billion of which is up for repayment in early 2012.

He added that the deal is "a friendly agreement with no strings attached", in contrast to the onerous austerity and financial sector reform measures demanded by the EU and IMF from Cyprus' fellow eurozone bail-out states.

One possible motive for Russia's generosity is the prospect of an EU and IMF-led overhaul of the country's offshore banking sector, said by analysts to be a haven for money laundering.

"US and European intelligence and law enforcement officials say Cyprus remains a haven for shadowy enterprises ranging from Islamic terrorists to narco-gangsters, as well as for Russian and other citizens of the former Soviet Union seeking the perfect destination to park, clean and re-export billions in stolen cash," Czech investigative journalist Jiri Kominek wrote in a 2009 report published by the Jamestown Foundation, a US think-tank.

For their part, financial analysts have said the quick-fix Russian loan will not help put the country back on a sound financial footing.

"If the government does not take the necessary measures as promised, this lending will lead to greater problems in the medium term as the government deficit is structural and rating agencies will continue to downgrade the country", the Piraeus Bank's Cyprus-based fund manager Marios Demetriades told Bloomberg.

Cyprus government resigns amid economic woes

Cypriot President Demetris Christofias on Thursday dissolved his cabinet amid growing public anger over the handling of Iran-bound ammunition that exploded earlier this month and wiped out the country's main energy plant, triggering market fears that the island nation may be the next in line for a eurozone bailout.

Cyprus bail-out 'not excluded'

Cypriot officials have said their country may be the fourth eurozone state in line for a bail-out due to exposure to Greece.

Cyprus-Turkey gas dispute escalates

Turkish vessel the Piri Reis has set sail to drill for gas in waters claimed by EU member Cyprus amid talk of a potential new military confrontation after 35 years of peace.

News in Brief

  1. US to add last three EU states to visa-waiver list
  2. German ministry gives thumbs up to Russian pipeline
  3. EU regulator foresees endless battles with Facebook
  4. UK fears three migrants drowned in Channel
  5. Israel joins EU science scheme, despite Palestine clause
  6. Upcoming flu season 'could be severe', EU agency warns
  7. Ukraine wins Dutch case on Crimea gold
  8. Most Poles want Warsaw to back down in EU dispute

Vietnam jails journalist critical of EU trade deal

A journalist who had demanded the EU postpone its trade deal with Vietnam until human rights improved has been sentenced to 15 years in jail. The EU Commission says it first needs to conduct a detailed analysis before responding.

Stakeholders' Highlights

  1. Nordic Council of MinistersNew report reveals bad environmental habits
  2. Nordic Council of MinistersImproving the integration of young refugees
  3. Nordic Council of MinistersNATO Secretary General guest at the Session of the Nordic Council
  4. Nordic Council of MinistersCan you love whoever you want in care homes?
  5. Nordic Council of MinistersNineteen demands by Nordic young people to save biodiversity
  6. Nordic Council of MinistersSustainable public procurement is an effective way to achieve global goals

Latest News

  1. Environment ministers continue dogfight on energy price hike
  2. Most lawmakers unhappy with lead MEP's asylum bill
  3. More transparency on EU media owners planned for 2022
  4. Europe's deadly border policies
  5. 'Brussels So White' needs action, not magical thinking
  6. How to break the political deadlock on migration
  7. Hedegaard on the hazards of stalling climate action
  8. Belarus exiles in EU fear regime-linked murderers

Join EUobserver

Support quality EU news

Join us