Cyprus seeks Russian bailout aid, EU threatens cutoff

[dipsydoodle]

Source: Reuters

(Reuters) - Cyprus's finance minister pleaded with Russia for help on Wednesday to avert a financial meltdown after the island's parliament rejected the terms of a European bailout, raising the spectre of a looming default and bank crash.

Finance Minister Michael Sarris said he had reached no deal on financing with his Russian counterpart, Anton Siluanov, but talks were continuing.

Cypriot officials disclosed that the country's energy minister was also in Moscow, ostensibly for a tourism exhibition. Cyprus has found big gas reserves in its waters adjoining Israel but has yet to develop them.

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Austria's finance minister made clear the European Central Bank could soon pull the plug on Cypriot banks after the island's parliament rebuffed EU demands for a levy on bank deposits to raise 5.8 billion euros.

Read more: http://uk.reuters.com/article/2013/03/20/uk-eurozone-cyprus-idUKBRE92F07R20130320

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Aside from using their gas reserves as collateral Russia also wants a naval base on Cyprus.

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The finance minister, Michael Sarris, is in Moscow amid mounting speculation that the Kremlin could step in with a rescue plan to safeguard high levels of Russian deposits in Cypriot banks. Sarris said he would stay in Russia until a deal was reached.

Cyprus has asked Russia for a five-year extension of an existing loan of €2.5bn that matures in 2016, and a reduction in the 4.5% interest rate. Sarris told reporters in Moscow: "We're hoping for a good outcome, but we cannot really predict."

Anastasiades spoke with the Russian president, Vladimir Putin, on Tuesday night. Moody's ratings agency estimated Russian banks had extended up to $40bn in loans to companies in Cyprus.

If Cyprus does not find the money to secure a bailout and satisfy officials in the eurozone and the IMF, its biggest banks could fail. Banks remained closed across the island on Wednesday to avert a potential bank run. They had been scheduled to reopen on Thursday but it is possible they will remain closed for the rest of the week, or until a deal can be reached.

http://www.guardian.co.uk/world/2013/mar/20/cyprus-talks-avert-financial-meltdown

and :

10.16am GMT German Greens warn on Cyprus seeking Russian aid

Germany's Green party is not happy at the idea of Russia helping to prop up Cyprus. According to Reuters, co-chair of the Greens Cem Oezdemir told German radio:

I would probably not have voted 'no' if I'd been in the southern Cypriot parliament because of the possible consequences and because I don't think Cyprus should align itself with Russia.

We know this is not just about Russian money but Russia's geostrategic interest in the island. It can't be in the interests of Europe for it to have a foot in the door of an EU member state and thereby have an influence on the expansion of the European Union.

Oezdemir, of Turkish extraction, is clearly worried about the outlook for Turkey's membership of the EU. He has proposed making a bailout for Cyprus conditional on reviving talks about reunification of the island, which has been divided since 1974.

http://www.guardian.co.uk/business/2013/mar/20/eurozone-crisis-live-cyprus-new-bailout-russia

The chances of Cyprus accepting help from Turkey/Northern Cyprus are nil.