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Russia Awaits Cyprus Request for Bailout Loan, Storchak Says

Russia’s government is waiting for Cyprus to submit an official request for a new bailout loan to bolster its banks, which have been saddled with losses in Greece, Russian Deputy Finance Minister Sergei Storchak said.

“Cyprus hasn’t applied yet, there are no official papers,” Storchak told reporters on an airplane flying back from Los Cabos, Mexico, where he was part of President Vladimir Putin’s delegation at a Group of 20 meeting. Russia lent Cyprus 2.5 billion euros ($3.2 billion) last year, Storchak said.

Cyprus, which joined the EU in 2004, would be the fifth euro nation to seek a bailout, buffeted by the single-currency bloc’s debt crisis, now in its third year. More than 386 billion euros in loans have been pledged to Greece, Ireland and Portugal. On June 9, Spain requested as much as 100 billion euros to support its banks. The island nation has been shut out of markets for more than a year.

Cypriot Finance Minister Vassos Shiarly said June 19 in Nicosia that the government is pursuing a loan from Russia to improve its bargaining position in case it has to turn to its euro-area partners for emergency aid. The country may need as much as 6 billion euros to prop up its banks.

The Cypriot newspaper Alithia reported on June 12 that Cyprus was asking Russia for 5 billion euros. The Politis daily said three days later that Cypriot President Demetris Christofias was leading the loan talks.

Possible Impact

Commenting on the impact of a possible collapse of Cypriot lenders on Russia’s banking industry, Storchak said there may some interdependence between the two countries’ financial systems and directed further questions to the Russian central bank.

Mainly Russian non-residents hold one of every two euros deposited at Cypriot banks, directly or indirectly, according to Theo Parperis, chairman of the Institute of Certified Public Accountants of Cyprus.

Foreign companies that use Cyprus as a base or vehicle for offshore operations contribute about 15 percent to the island’s economy, said Parperis, who is also a partner in PricewaterhouseCoopers Cyprus.

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