Cyprus Finance Minister Michael Sarris returns home empty-handed on Friday afternoon, having failed to persuade Russian lenders to extend a 2.5 bln euro facility that expires in 2016, in a desperate attempt to raise fresh funds to avoid harsh bailout terms.
News reports said talks in Moscow with Finance Minister Anton Siluanov broke up overnight without an agreement and no possible new financing package, probably because Russian depositors are angry they may have to cough up a significant part of their savings in Cyprus, as demanded by the Eurogroup finance ministers in order to release a 10 bln euro rescue package.
Sarris, accompanied in the Russian capital by Trade and Energy Minister Yiorgos Lakotrypis, had said on Thursday that the discussions also involved possible Russian investments in Cypriot banks and energy resources.
Troubled Popular Laiki Bank, the second largest lender on the island, requires immediate liquidity to the tune of 2-3 bln euros or face default as early as next week, but will inevitably undergo restructuring, after which it might become attractive to Russian investors.
The Eurogroup said it wants Cyprus to raise 5.8 bln euros in a “bail-in” from own funds and not from external lenders such as Russia, in order to release the rest of the bailout that is part of a package devised by the EU, the ECB and the IMF that includes privatisations of government services and state assets, as well as raising the corporate tax from 10% to 12.5%.
Cypriot deputies rejected the initial package on Tuesday and are debating a revised package and a new bill to create a national wealth fund that will mortgage future revenues from natural gas discoveries off the island’s southern coast that could come on stream by the end of the decade.
Russia’s Gazprom was excluded from the second licensing round for natural gas exploration halfway between Cyprus and Israel, because bids from French Total, Italy’s ENi and South Korea’s Kogas were higher.
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