President Vladimir Putin ordered his government to negotiate the restructuring of a bailout loan it granted to Cyprus in 2011 – having rejected Nicosia’s request for easier terms in crisis talks last week.
Putin “considers it possible to support efforts … aimed at overcoming the crisis in the economy and banking system of this island state,” his spokesman Dmitry Peskov said.
Russia has repeatedly expressed its dismay at Europe’s handling of the debt crisis in Cyprus, while until now rebuffing the entreaties of President Nicos Anastasiades to offer significant financial support of its own.
But, following the agreement of a 10 billion euro ($13 billion) European bailout deal over the weekend, Moscow’s position has softened over extending and easing the terms of its existing 2.5 billion euro loan to Cyprus.
Cyprus is seeking a five-year extension, a 10 percent writedown and a cut in the interest rate to 2.5 percent from 4.5 percent. This will only be possible if its banking system is stabilised, said Russian Finance Minister Anton Siluanov.
While Moscow has complained loudly over discrimination against the many Russian firms that use Cyprus as an offshore centre, the Kremlin is also reluctant to create the impression that it approves of structures that have facilitated large-scale capital outflows from Russia.
Putin coined the term ‘de-offshorisation’ in his first state-of-the-nation address after winning a third Kremlin term last year, and has made bolstering Russia’s ability to withstand external financial shocks a policy priority.
“Putin is against any offshores,” said Andrei Goltsblat, a business lawyer who advises clients on Cyprus as managing partner of Moscow-based law firm Goltsblat BLP.
Prime Minister Dmitry Medvedev – who ranks below Putin in the ruling hierarchy – earlier criticised the bailout deal that will inflict heavy losses on uninsured deposits of over 100,000 euros at the two main Cypriot banks.
“The stealing of what has already been stolen continues,” Medvedev was quoted by news agencies as telling a meeting of government officials.
Siluanov, however, backed a cleanup of the Cypriot banking sector that will see Cyprus Popular Bank close and its insured deposits shifted to Bank of Cyprus. Completing that restructuring would be a requisite for easier loan terms.
Russia has a significant banking presence in Cyprus through a subsidiary of state-controlled VTB, Russian Commercial Bank.
“It is in our interest for the banks to work well, for them not to be encumbered with any (bad) debts – including VTB’s own subsidiary,” Siluanov told Reuters. “They should keep working and not be the source of any burden.”
Russians are believed to account for most of the 19 billion euros of non-EU, non-bank money held in Cypriot banks at the last count by the central bank in January. Of 38 billion euros in deposits from banks, 13 billion came from outside the EU.
More importantly, Cyprus is the source of around a quarter of foreign direct investment into Russia – much of which originates in Russia – and of foreign lending to Russia. That, say lawyers and financial advisers, has less to do with suspected money laundering than an extremely favourable double taxation treaty struck between Cyprus and Russia in the 1990s.
Speaking after the meeting with Medvedev, First Deputy Prime Minister Igor Shuvalov said losses to Russian investors in Cyprus were not yet clear, but added that VTB’s Cypriot unit would not be affected by measures taken by the government there.
He added that he believed it would not be necessary for Russia to provide any additional financial assistance to Cyprus.
“What is happening is a good signal to those who plan to move their capital to … Russian banks,” Shuvalov was quoted as saying. “We have very stable banks.” DM
Photo: Vladimir Putin (Reuters)
Want to watch Richard Poplak’s audition for SA’s Got Talent?
Who doesn’t? Alas, it was removed by the host site for prolific swearing*... Now that we’ve got your attention, we thought we’d take the opportunity to talk to you about the small matter of book burning and freedom of speech.
Since its release, Pieter-Louis Myburgh’s book Gangster State, has sparked numerous fascist-like behavior from certain members of the public (and the State). There have been planned book burnings, disrupted launches and Ace Magashule has openly called him a liar. And just to say thanks, a R10m defamation suit has been lodged against the author.
Pieter-Louis Myburgh is our latest Scorpio Investigative journalist recruit and we’re not going to let him and his crucial book be silenced. When the Cape Town launch was postponed, Maverick Insider stepped in and relocated it to a secure location so that Pieter-Louis’ revelations could be heard by the public. If we’ve learnt one thing over the past ten years it is this: when anyone tries to infringe on our constitutional rights, we have to fight back. Every day, our journalists are uncovering more details and evidence of State Capture and its various reincarnations. The rot is deep and the threats, like this recent one to freedom of speech, are real. You can support the cause by becoming an Insider and help free the speech that can make a difference.
*No video of Richard Poplak auditioning for SA’s Got Talent actually exists. Unless it does and we don’t know about it please send it through.
The sound of Krakatoa exploding travelled around the earth three times.