Russia rebuffed Cyprus’s request for a bailout loan as the euro-area nation sought to salvage talks in Moscow by wooing investment in its energy reserves.
Russia is unable to provide loans and will instead consider making investments in the Cypriot energy industry, the island nation’s Finance Minister Michael Sarris said today in an interview broadcast on Antenna TV. Sarris said he will have a later meeting with his Russian counterpart, Anton Siluanov.
Cyprus asked Russia for a loan of about 5 billion euros ($6.5 billion), according to three Russian officials. The island nation offered energy and other assets in return, said one of the three officials, who all declined to be identified because the negotiations in Moscow that started yesterday are confidential. The assets are offshore natural-gas fields, said a second official. Cypriot government spokesman Christos Stylianides didn’t immediately answer calls to his mobile phone.
The euro region’s third-smallest economy is trying to overcome a deadlock after Cypriot lawmakers rejected an unprecedented 5.8 billion-euro levy on bank deposits imposed by euro-area finance ministers as a condition for a 10 billion-euro rescue. Cyprus is offering Russia “opportunities,” including in banking and natural gas, in return for financial assistance, according to Sarris.
“We are asking for help clearly, but something that would make also economic sense for Russia,” Sarris told reporters.
The two sides discussed energy cooperation and the prospects of Russian companies taking part in tenders for offshore exploration rights in Cyprus during talks yesterday between Russian Energy Minister Alexander Novak and Cypriot Commerce and Industry Minister George Lakkotrypis, according to a statement e-mailed by the Russian ministry.
The negotiations will last until the end of the week, Andrey Kostin, head of state-run VTB Group, Russia’s second-largest bank, told reporters today. The European Central Bank said it may cut Cypriot banks off from emergency funds after March 25 unless an aid program from the euro area and International Monetary Fund is in place.
A 5 billion-euro loan would be the same size as the credit Cyprus requested in July from Russia, which also lent 2.5 billion euros to the island nation in December 2011. The Moscow-based newspaper Vedomosti also reported today without citing anyone that the country was seeking 5 billion euros.
Russia has been offered Cypriot assets, including offshore gas resources, “but we didn’t hear anything particularly new,” Prime Minister Dmitry Medvedev said in an interview with European media published today on the government’s website. The gas fields are “a difficult issue” because of a territorial dispute with Turkey and the complexity of estimating their value, he said.
Cyprus says it has gas reserves of 60 trillion cubic feet. That’s about 21 years of U.K. demand, according to BP Plc’s statistical review. The country has so far given gas-exploration licenses to Noble, Total SA and a venture of Eni SpA and Korea Gas Corp.
Some of the rights to offshore reserves are disputed by Turkey, which invaded the northern part of the island in 1974 after a coup aimed at uniting it with Greece. Turkey sent an exploration vessel accompanied by warships and jets to stop Cyprus drilling for oil and gas in 2011.
The proposed Cyprus bailout is “absurd” and “surprising in its unpredictability and lack of consistency,” Medvedev said at a conference in Moscow today. He met European Commission President Jose Barroso today.
Russia wants to coordinate with the European Union on any Cyprus agreement, rather than trying to strike a separate deal, Vladimir Chizhov, the country’s ambassador to the 27-nation bloc, said in an interview in Moscow today.
Russian companies and individuals have $31 billion of deposits in Cyprus, according to Moody’s Investors Services. Including loans to companies registered in Cyprus, Russia’s exposure is about $60 billion, Moody’s estimates.