March 20 (Bloomberg) -- Cypriot Finance Minister Michael Sarris pledged to continue talks with Russian officials “as long as it takes” as the island nation seeks to overcome a deadlock after rejecting an unprecedented levy on bank deposits.
“We had a very good first meeting, very constructive, very honest discussion,” Sarris told reporters today in Moscow after meeting his Russian counterpart, Anton Siluanov. Sarris later held talks lasting about an hour and a half with Russian First Deputy Prime Minister Igor Shuvalov, who was accompanied by Siluanov and Deputy Finance Minister Sergei Storchak, Shuvalov’s spokesman, Alexander Machevsky, said by phone.
Russia, which granted Cyprus a 2.5 billion-euro ($3.2 billion) loan in December 2011, had been in talks on easing the terms before being left out of a European Union-led bailout that would see a levy imposed on depositors. President Vladimir Putin called the deal “unfair” and “dangerous” before the Mediterranean nation voted down the proposal yesterday.
European countries including Germany have demanded that Russia contribute to any new rescue package to Cyprus. German Finance Minister Wolfgang Schaeuble in January urged an investigation into whether Russia is using the island as a destination for money laundering. Cypriot officials deny the country is a haven for illegal money.
Today’s talks included “things beyond that,” Sarris said when asked about extending the terms of the 2.5 billion-euro loan from Russia or new credit. Meetings in Moscow have so far yielded no result, with discussions set to continue today and tomorrow, state-run RIA Novosti reported, citing an unidentified official.
The euro strengthened from a four-month low against the dollar on speculation the European Central Bank’s pledge to provide liquidity to Cyprus will give it time to renegotiate a financial rescue package. The common currency advanced 0.3 percent to $1.2918 at 7:19 a.m. New York time after sliding to $1.2844 yesterday, the weakest level since Nov. 22.
The 17-nation currency gained for the first time in eight days versus the Swiss franc as the ECB yesterday reaffirmed its commitment to offer funding to Cyprus “within the existing rules.”
Russia stands to gain more than it may lose in the medium-term from Europe’s decision to impose the levy, Shuvalov told reporters late yesterday. The country’s banking industry may receive an inflow of capital as investors leave Cyprus, he added.
“I take what’s happening now as a clear signal that there’s something to compare against when we’re being criticized for a bad investment climate,” Shuvalov said. “We have something to point to. When things were bad for us, we never dared to do anything like this.”
The bank levy plan amounts to a “confiscation” and if implemented, Cyprus would be heading down “Trotsky’s path,” billionaire Mikhail Prokhorov, whose assets include the Moscow-based Renaissance Capital investment bank, said in an opinion piece in the Vedomosti newspaper.
The investment bank’s brokerage and securities custody accounts of its Cyprus-based subsidiary are “entirely unaffected” by the proposed levy, the lender said in an e-mailed statement March 18. The bank itself has “no material balances” in Cyprus banks, Renaissance said.
VTB Group may have an “insignificant” loss in Cyprus, First Deputy Chief Executive Officer Vasily Titov told reporters in Moscow today.
“We are concerned about the situation, but we feel confident,” he said.
Officials from the state-run bank, including CEO Andrey Kostin, are planning to participate in talks with Cypriot officials, Titov said.
Sarris, who arrived in Moscow last night, is being accompanied on the visit by Commerce and Industry Minister George Lakkotrypis, RIA Novosti reported yesterday, citing an unidentified EU official.
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