Russia Ready to Assist Cyprus

On Friday, Russia announced that it is prepared to ease the conditions under which debt-laden Cyprus must repay loans granted by Moscow, considering the problems faced by this close Russian trading partner in negotiations for international assistance.

Russian Finance Minister Anton Siluanov stated that this willingness from Moscow specifically pertains to the €2.5 billion loan that Cyprus received from Russia in 2011. He did not provide any details regarding discussions about potential future loans to the island nation.

Siluanov also mentioned that he is beginning negotiations with EU leaders to alleviate Cyprus’s debt burden, which reaches about 90 percent of its Gross Domestic Product (GDP).

“Together with EU countries, we will work on steps that can be taken towards easing the repayment of Cyprus’s debt in several stages,” said Siluanov, as reported by the news agency Prime. He did not wish to disclose details or discuss the current phase of the negotiations.

Russian President Vladimir Putin stated last week that Russia has money for Cyprus but wants a more coordinated action with the EU to help the Cypriot economy get back on its feet. Some analysts believe that Moscow is significantly interested in assisting Cyprus due to the strong ties of the island with major Russian companies.

Last year, Cyprus turned to Russia for help, seeking a €5 billion loan after its requests for assistance directed to the EU were unsuccessful. In mid-last year, Cyprus sought financial assistance after its banking sector found itself on the brink of collapse due to massive losses caused by the write-off of Greek debts approved by the EU.

So far, Nicosia has failed to convince its EU partners to sign off on a aid package, given concerns that due to its level of indebtedness, Cyprus may not be able to service its debts without additional concessions from international lenders.

Germany is also hesitant to provide financial assistance to a country that some consider a center for money laundering activities. Cyprus is, in fact, a popular tax haven for wealthy Russians.

European Commissioner for Economic and Monetary Affairs Olli Rehn shares this concern, reminding that the small island nation has amended its money laundering laws. “Now we must ensure that these new laws are applied in practice,” he added in an interview with the German business daily Handelsblatt on Friday.

He also ruled out the possibility of restructuring Cyprus’s debt. “Debt write-off is not an option for us,” he emphasized.

Separately, Moody’s agency downgraded Cyprus’s credit rating by three notches to Caa3, which is the middle level of the ‘junk’ category that does not recommend investments except for speculative purposes. The agency cites the expected increase in the country’s debts as the reason.

Cyprus’s Finance Minister Vassos Shiarly stated that he is not happy with Moody’s decision, but he would like to focus on the positive prospects that the expected conclusion of a rescue loan package, which could reach €17 billion, offers to Cyprus, approximately equal to the total GDP of the country.

Eurozone finance ministers could, at best, decide on the draft agreement with international lenders related to the mentioned rescue package for the struggling EU member on the meeting scheduled for January 21.