Cyprus seeks Russian bailout, rebuffed EU threatens cutoff | world | Hindustan Times
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Cyprus seeks Russian bailout, rebuffed EU threatens cutoff

world Updated: Mar 20, 2013 20:41 IST

Cyprus pleaded for a new loan from Russia on Wednesday to avert a financial meltdown, but won no immediate relief after the island’s parliament rejected the terms of a European bailout, raising the risk of default and a bank crash.

Finance minister Michael Sarris said in Moscow he had reached no deal with his Russian counterpart Anton Siluanov, but talks would continue. Russia’s finance ministry said Nicosia had sought €5 billion on top of a five-year extension and lower interest on a €2.5 billion loan.

Cyprus has to seek Moscow’s help after the euro zone’s plan for a €10 billion bailout was cast into disarray on Tuesday when the island’s parliament rebuffed EU demands for a levy on bank deposits to raise €5.8 billion. This is a first, after lawmakers in Greece, Ireland, Portugal, Spain and Italy all accepted biting austerity measures for aid.

Moscow has its own interests in ensuring the survival of Cypriot banks, which have served as a financial haven for Russian firms and individuals.

Cypriot officials disclosed it’s energy minister was also in Moscow, ostensibly for a tourism exhibition, fuelling speculation that access to offshore gas reserves could be part of any deal for Russian aid. It has found big gas fields in waters near Israel but is yet to develop them.

Not a single Cypriot lawmaker voted for the bailout, which included a proposed levy that would have taken up to 10% from accounts over €100,000. Smaller accounts would also have been hit, although the government proposed to spare small savers with under €20,000 in the bank.