To receive new articles instantly Subscribe to updates.
Cyprus: To west or not to west
Written by: PaxForex analytics dept - Tuesday, 22 January 2013 0 comments
Today, the Cyprus delegation brought to Moscow an offer to exchange shares in banks and natural gas fields of the island for the direct financial help, ignoring the open dissatisfaction of EU leaders about Cyprus’ Parliament decision not to impose a tax on bank deposits.
EU is also dissatisfied about new contacts between Cyprus and Russian Federation. Western politicians think that this island state is going to change its way in order to be closer in economy with Moscow.
Russian companies and banks analyze the situation in Cyprus and different experts are forecasting a massive withdrawal of funds from the island nation to other jurisdictions. German Chancellor Angela Merkel said the president of Cyprus, during a telephone conversation, that his country has to negotiate only with the "big three” of potential international creditors (European Commission, ECB and IMF). German Finance Minister Wolfgang Schaeuble was even more pessimistic saying that "Cypriot banks may never open".
In such an atmosphere in Moscow began negotiations between Cypriot Finance Minister Michalis Sarris and the
head of the Russian Ministry of Finance Anton Siluanov. Many representatives of the energy agencies and bankers of both countries are also taking part in negotiations.
Officially, the parts are going to discuss the terms of prolongation of the Russian loan of 2.5 billion Euros, but some media report that negotiations will also take the exchange of Cypriot assets on Russian financial aid. Russian gas companies Gazprom and Novatek, which had not previously been able to access the Cyprus natural gas fields, are not involved in the negotiations at the moment.
Possible taxes on bank deposits, that the EU offered to get a loan of 10 billion Euros, caused a panic among people and threatening the existence of the financial system of Cyprus. Banks in Cyprus are closed the fifth day in a row.
The Russian leadership reacted harshly on the idea of the deposits’ tax. President Vladimir Putin called it as "an unjust and dangerous decision" and the Prime Minister Dmitry Medvedev compared it with confiscation. Due to the fact that the final decision on Cyprus has not been made yet, Forex traders should be cautious and avoid risky transactions that involve the Euro.