Bloomberg News

Cyprus Asks Russia for 5 Billion-Euro Loan, Siluanov Says

July 06, 2012

Cyprus is seeking a second loan from Russia in less than a year to help mitigate threats to its economy after becoming the fifth of the euro area’s 17 members to request a bailout.

The east Mediterranean island has asked to borrow 5 billion euros ($6.2 billion) from Russia, according to Finance Minister Anton Siluanov, who said the application is being considered. That’s equivalent to 28 percent of Cyprus’s 17.8 billion euro ($22 billion) economy last year.

“We’ve received a request from Cyprus and we’re looking at it now,” Siluanov told reporters today in Moscow. “Cyprus didn’t just approach us but also asked the European Union for help.”

Cyprus last month followed Greece, Ireland, Portugal and Spain in seeking help to return to financial health. The third- smallest euro economy has been hurt by losses from Greece’s recession and is seeking support from the euro region’s firewall funds to bolster its banking industry.

The Cypriot government’s domestic debt due in January 2016 surged, cutting the yield 2.82 percentage points to 12.48 percent, the lowest since November.

“We shall do everything for the good of our Cyprus and the EU,” President Demetris Christofias told reporters today in Nicosia, the capital. Cyprus reserves the right to maintain relations with other countries and hasn’t heard reservations from the European Commission about ties with Russia, China or Arab countries, he said.

Russian Capitalism

“In Russia capitalism is being restored,” said Christofias, the Moscow-educated former leader of the Cypriot communist party AKEL. “You should not be concerned that we shall bring communism to Cyprus because of our ties to Russia.”

Russia, which agreed to lend Cyprus 2.5 billion euros in December, has received requests for financial aid from other countries and will act to help euro-area nations safeguard the currency, First Deputy Prime Minister Igor Shuvalov has said, without identifying the nations in question.

The world’s biggest energy exporter had $514.3 billion of gold and foreign-currency reserves at the end of last month, the world’s fourth biggest after China, Japan and Saudi Arabia. More than 41 percent of its currency reserves were in euros as of Sept. 30, according to the most recent central bank figures.

Russia’s Interest

“We have an interest in seeing the entire euro zone and everything connected to the EU currency union remain fairly stable,” Shuvalov said June 28. “If we can, without any damage to our reserves, offer some assistance, knowing that we’re stabilizing the situation and thereby helping ourselves -- in that case the government should do it.”

Russia has begun to examine Cyprus’s request, Konstantin Vyshkovsky, head of the Finance Ministry’s debt department, said today. The government is monitoring whether Europe offers Cyprus aid and will consider that as it decides on the loan, he said.

“We’re looking at whether it’s possible and makes sense to provide another loan,” he told reporters after Siluanov addressed the lower house of parliament, or State Duma. “Now we’ll invite our colleagues and ask them some questions.”

Christofias expressed confidence yesterday that his government will win a loan from Russia on top of the European bailout requested last week.

“We do expect a positive reply,” Christofias told reporters in Nicosia, Cyprus. “We are still waiting for the reply.”

To contact the reporters on this story: Scott Rose in Moscow at rrose10@bloomberg.net; Stelios Orphanides in Nicosia at sorphanides@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net


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