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25th Aug 2019

Cypriot minister in Moscow as Putin enters bailout crisis

  • Russia - holding the key to the Cypriot debt crisis? (Photo: Holy Trinity Church of Pārdaugava)

Cypriot finance minister Michalis Sarris headed for Moscow early on Wednesday (20 March) for talks with his Russian counterpart, finance minister Anton Siluanov, in the latest twist of the island's bailout drama.

Speaking on Cypriot news channel CNA, Sarris said that he would not leave Moscow until a deal had been reached. "The situation needs to be resolved today," he said, confirming that the meeting with Siluanov would "discuss how Russia could assist in finding the billions needed."

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The Moscow mission comes as Cyprus seeks an alternative to the controversial €10 billion EU rescue rejected on Tuesday night by the Cypriot parliament.

Following the vote, which did not see a single MP back the bailout, Russian President Vladimir Putin held a phone conference with Cypriot President Nicos Anastasiades.

According to a statement issued by the Kremlin, Putin "expressed concern about possible measures that could harm the interests of Russian legal entities and citizens" on the Mediterranean island.

The statement added that Putin and Anastasiades would "continue consultations on this issue both in a bilateral format and with the European Commission."

Earlier, Putin had described the EU's proposed €5.8 billion one-off levy on Cypriot savers' money as "unfair, unprofessional and dangerous."

The close involvement of Moscow in the Cypriot mess is a new development in the eurozone crisis.

But Cyprus and Russia have had strong links ever since the Mediterranean island declared its independence from Britain in 1960.

Economic and military ties between the two countries advanced since the collapse of the Soviet Union. Some EU officials have in the past referred to Cyprus, which joined the EU in 2004, as Moscow's "Trojan donkey."

Cyprus is officially the third largest foreign investor in Russia, while the island courted controversy and a diplomatic row with Turkey in 1998 after striking a $200 million deal to buy 40 surface-to-air missiles from Moscow.

Credit rating agency Moody's estimates that around €25 billion of Russian money is held in Cypriot bank accounts, with loans worth a further $40 billion (€32 billion) having been pumped in to Russian companies in Cyprus.

Cyprus is also hoping to delay the repayment of a €2.5 billion loan granted by Russia in November 2011.

Meanwhile, early on Wednesday reports on Cypriot TV channel Sigma, and covered elsewhere, indicated that Russian giant Gazprom had submitted an offer to the Cypriot government to take control of part of the country's banking sector in exchange for access and exploration rights to the country's natural gas reserves. Gazprom has yet to make an official comment.

Cyprus rejects bailout deal

The eurozone plunged into uncertainty on Tuesday after the Cypriot parliament rejected its EU bailout plan by an overwhelming majority.

Cyprus struggling on bailout Plan B

With no firm offer from Russia, Cypriot officials are scrambling to find alternative money to secure a €10 billion EU bailout.

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