Tomahawk, WI 3/25/2013 (BasicsMedia) – The relationship between Cyprus and Russia will not be damaged as a result of a bailout deal Cyprus struck with its European partners, Cypriot finance minister Michael Sarris told CNBC, even though many Russian depositors will be hit hard by the agreement.
“I think the Russians were understandably disappointed with this turn of events. They have had a long, successful and happy history and association and this has come partly as a shock despite the fact that many of these things had been rumored,” Cyprus’ finance minister, Michael Sarris, said early on Monday in Brussels.
The last-minute deal between Cyprus and its international lenders involves setting up a “good bank” and a “bad bank” and includes a levy on uninsured deposits over 100,000 euros ($130,000) at the second largest lender, the Popular Bank of Cyprus (Laiki) which is set to be wound down. Any deposits below 100,000 euros at the Popular Bank of Cyprus will be protected and moved to the Bank of Cyprus, the country’s largest bank.
Meanwhile, Russian President Vladimir Putin has instructed his government to negotiate the restructuring of a pre-existing $3.2 billion Russian loan to Cyprus, according to his spokesman. Last week, Cyprus requested an extension to the loan and a reduction in its interest to 2.5 percent from 4.5 percent.
Reuters quoted Putin’s spokesperson as saying the Russian President “considers it possible to support efforts… aimed at overcoming the crisis in the economy and banking system of this island state”.
Up to 40 percent of Cypriot bank deposits are estimated to belong to Russian businesses and individuals worth around $32 billion, according to Moody’s ratings agency.
Sarris said some Russians were “disappointed” and “have said ‘maybe we’ll look somewhere elsewhere’ [to put our money]” he told CNBC in Brussels.
But with an estimated 40,000 Russians living in Cyprus, Sarris was keen to stress relations between Russia and Cyprus were good.
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