Monday, April 22, 2013

Russia: Release our Bank from Capital Controls and We Will Ease Terms of Loan 

Russian Commercial Bank in Cyprus
Russian Finance Minister Anton Siluanov  has stated “We will deliver our support (restructuring of the loan to Cyprus) taking into account our interests, and our interests are that our subsidiary (the Russian Commercial Bank) should operate in normal conditions.

The Russian Commercial Bank, a subsidiary VTB, like all banks in Cyprus, is under strict capital controls in order to prevent capital flight.
Here is a brief re-cap of the major points in Russia's role in the Cyprus financial bailout. In 2011 Russia granted Cyprus a 5 year 2.5 billion euro loan. In July of 2012 Cyprus, under former administration by the opposition party, applied for financial assistance from the EU or "bailout."

Current president, Anastasiades, took office 24th of February 2013 and focused immediatley securing a bailout (which had been delayed due to missed deadlines by the former adminisration). Troika required Cyprus to raise 5.8 billion euros in order to receive EU financial assistance and was adamant that Cyprus raise the money internally rather than taking a loan from anywhere else other than the EU.

Anastasiades met with Troika on 15.03 with the intent to secure a financial bailout. The meeting lasted until the early hours of Saturday the 16.03, when Anastasiades agreed to put the controversial levy on banks before parliament

All banks in Cyprus, whether domestic or international, went into immediate lockdown, reopening after two week of closure under strict capital controls; read about it here: Cyprus Announces Unprecedented Capital Controls.

Cypriot Parlimanent rejected the levy. Details can be found in my post on the issue dated 19.03 Why Anastasiades was Right to Put Controversial Levy Before Parliament.
The Cypriot Greek Orthodox Church, with vast business interests in the island nation and believed to be its largest landowner, offered to fianancially assist the Cyprus government (in exchange for energy rights), but Troika rejected this scenario. See my post on the issue dated 21.03:  Cypriot Greek OrthodoxChurch Offers to Assist Cyprus Government; Troika Says No.

Cyprus turned to Russia to request financial assistance in two forms, a restructuring of its loan with lower interests rates and later maturity date, and a second loan despites the fact that Troika was adamant that Cyprus should only negotiate a loan with the EU and not Russia, and that the only assistance from Russia could be easing of the terms of the current loan.

Russian President Putin told reporters in March after holding talks with German Chancellor Merkel in Hannover, "At the request of the European Commission, we have decided to restructure this debt." Russia declined to offer another loan to Cyprus, see earlier post on the issue dated 22.03: Russia Says No, and Then No, and Then No Again. Putin went on the say, "We are making our own contribution," but did not disclose the details of the debt restructuring.


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