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Russia bashes ‘absurd’ Cyprus bailout plans

MOSCOW - Russian Prime Minister Dmitry Medvedev on Thursday hammered current European proposals to solve the Cyprus crisis as absurd, while Cypriot Finance Minister Michalis Sarris was set to hold further talks in Moscow on aid.

At the opening of a conference in Moscow with the head of the European Commission, Jose Manuel Barroso, Medvedev slammed the European strategy to bail out the near-bankrupt eurozone member.

“This scheme that is being discussed on Cyprus now looks absolutely absurd,” Medvedev said, adding that it undermined trust in the banking system.

“I think that in any case the Eurogroup could examine a future plan of regulating Cyprus with the participation of all the interested sides, including Russian structures.”

Medvedev complained that Russia had not been adequately informed.

“The system of early warning did not work very well. It is not accorded the necessary importance either in the European Union and in our strategic relations ... That means we need to work on it.”

Barroso argued that Russia had been consulted on Cyprus, including his own conversation in December with President Vladimir Putin, although he acknowledged the bailout plan was a last-minute compromise.

“The decision was the result of a compromise, I am open to listen to concerns of our Russian partner,” Barroso said.

“We have in the past solved bigger problems. I hope that this time a solution can be found.”

Medvedev and Barroso were to meet again on Thursday evening and Friday.

Russian finance minister Anton Siluanov was planning to hold further talks with Sarris on Thursday after a round of negotiations in Moscow the day earlier failed to make progress.

On Thursday, Cypriot leaders were discussing a “Plan B” aimed at securing a eurozone bailout.

In an interview released by the Russian government early Thursday, Medvedev compared the actions of the European Union, the European Commission and the Cypriot government to “a bull in a china shop.”

On Saturday, the EU, European Central Bank and International Monetary Fund agreed a 10-billion-euro bailout for the debt-hit island on condition that Cyprus raise another 5.8 billion euros from its side.

But earlier this week Cypriot lawmakers rejected a highly unpopular measure that would have slapped a one-time fee of up to 9.9 percent on bank deposits of over 20,000 euros as a condition for the bailout.

In the interview to European media, Medvedev threatened that Russia could pull out of a double taxation treaty with Cyprus and consider reducing its euro reserves.

“For us, as for any country, predictability is important,” he said.

Russians including wealthy tycoons hold between a third and half of all Cypriot deposits and are believed to have more than $30 billion in private and corporate cash in the island’s banks.

The crisis in Cyprus has led to the blocking of the bank accounts of Russian government agencies, Medvedev complained.

“A large number of our open public structures work through Cyprus. They now have money blocked for reasons that are unclear, because the source of that money is obvious. This money is declared everywhere. These include government structures.”

Sarris on Wednesday held talks with Siluanov and First Deputy Prime Minister Igor Shuvalov that failed to produce tangible results as Russia appeared to seek lucrative assets in exchange for more help.

Medvedev said Cyprus was offering Russia a number of assets but did not provide details. Asked about a possible deal involving Cyprus’s gas reserves, he played down this possibility, saying it was “a very complex question.”

Sarris has vowed to stay in Moscow until some agreement is reached that could help his country’s banks avoid bankruptcy and the island from going into default.

The Cypriot finance minister also hopes to ease the terms of a 2.5-billion-euro ($3.2-billion) loan that Moscow afforded Nicosia in 2011 and which matures in 2016.

“This crisis has shown that cooperation mechanisms between Russia and the EU just do not work,” said Fyodor Lukyanov, chairman of the Council on Foreign and Defence Policy.

“Our conclusion is that for the European Union, we are a second-tier country. They do not take us into account,” added Alexei Makarkin, an analyst at the Centre for Political Technologies.