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| Russia condemns 'unfair' Cyprus bank levy as bailout fears grow | Russia condemns 'unfair' Cyprus bank levy as bailout fears grow |
| (about 1 month later) | |
| A deep sense of anger and uncertainty has swept the highest levels of Russian government and big business as Moscow faced the prospect of losing billions in an EU plan to bail out Cyprus. | A deep sense of anger and uncertainty has swept the highest levels of Russian government and big business as Moscow faced the prospect of losing billions in an EU plan to bail out Cyprus. |
| The proposal, which would levy a one-time fee on depositors, evoked widespread surprise and criticism in Russia, whose officials and oligarchs have flocked to Cypriot banks, seeking the stability and secrecy they are unable to find at home. | The proposal, which would levy a one-time fee on depositors, evoked widespread surprise and criticism in Russia, whose officials and oligarchs have flocked to Cypriot banks, seeking the stability and secrecy they are unable to find at home. |
| Vladimir Putin, Russia's president, said the measure would be "unfair, unprofessional and dangerous". His prime minister, Dmitry Medvedev, said the move "was just like a confiscation of someone else's money". He warned Russia would have to "correct" its relationship with Cyprus if the measure were passed. | Vladimir Putin, Russia's president, said the measure would be "unfair, unprofessional and dangerous". His prime minister, Dmitry Medvedev, said the move "was just like a confiscation of someone else's money". He warned Russia would have to "correct" its relationship with Cyprus if the measure were passed. |
| Cyprus's parliament postponed a vote on the levy on Monday. | Cyprus's parliament postponed a vote on the levy on Monday. |
| Russian banks and businesses have been flooding Cyprus for years, taking advantage of the country's low taxes and loose regulations. Much of the cash is then re-invested back into Russia, making Cyprus the biggest foreign director investor in Russia, at least nominally. | Russian banks and businesses have been flooding Cyprus for years, taking advantage of the country's low taxes and loose regulations. Much of the cash is then re-invested back into Russia, making Cyprus the biggest foreign director investor in Russia, at least nominally. |
| Cyprus has had to fight off accusations that it has become a money-laundering haven for Russia's ill-gotten gains. Undeniable is the fact that vast networks of offshore companies registered in the country have added to the opaque nature of Russian business, allowing true company owners and directors to mask themselves from public view while also avoiding taxes. | Cyprus has had to fight off accusations that it has become a money-laundering haven for Russia's ill-gotten gains. Undeniable is the fact that vast networks of offshore companies registered in the country have added to the opaque nature of Russian business, allowing true company owners and directors to mask themselves from public view while also avoiding taxes. |
| According to Reuters, nearly half of the €70bn-worth of deposits in Cyprus's banks is held by foreigners, the vast majority believed to be Russian. The Moody's rating agency said Russian deposits amounted to $12bn-$32bn coming from banks and $19bn from corporate clients. | According to Reuters, nearly half of the €70bn-worth of deposits in Cyprus's banks is held by foreigners, the vast majority believed to be Russian. The Moody's rating agency said Russian deposits amounted to $12bn-$32bn coming from banks and $19bn from corporate clients. |
| The controversial levy, which would institute a charge of 9.9% on those holding more than €100,000 in Cyprus banks, is believed to have been designed to address EU concerns over using taxpayers' money to rescue a banking system heavily reliant on questionable Russian deposits. A plan to levy a 6.75% charge on those holding less than €100,000 is reportedly being negotiated downward. | The controversial levy, which would institute a charge of 9.9% on those holding more than €100,000 in Cyprus banks, is believed to have been designed to address EU concerns over using taxpayers' money to rescue a banking system heavily reliant on questionable Russian deposits. A plan to levy a 6.75% charge on those holding less than €100,000 is reportedly being negotiated downward. |
| News of the levy, announced at the weekend, caught Russia by surprise. The country's finance minister, Anton Siluanov, said Europe's failure to consult with Russia could affect its decision on restructuring and extending a €2.5bn loan issued to Cyprus last year. | News of the levy, announced at the weekend, caught Russia by surprise. The country's finance minister, Anton Siluanov, said Europe's failure to consult with Russia could affect its decision on restructuring and extending a €2.5bn loan issued to Cyprus last year. |
| The Russian stock markets plunged to a four-month low over concerns about Cyprus. | The Russian stock markets plunged to a four-month low over concerns about Cyprus. |
| "We had an agreement with colleagues from the eurozone that we will co-ordinate our actions," Siluanov told Reuters. "It turns out that the eurozone actions on the introduction of the deposit levy took place without discussions with Russia, so we will consider the issue of restructurisation of the loan, taking into account our participation in the joint actions with the European Union to help Cyprus." | "We had an agreement with colleagues from the eurozone that we will co-ordinate our actions," Siluanov told Reuters. "It turns out that the eurozone actions on the introduction of the deposit levy took place without discussions with Russia, so we will consider the issue of restructurisation of the loan, taking into account our participation in the joint actions with the European Union to help Cyprus." |
| Russian oligarchs stepped in to condemn the move. Writing in the Kommersant daily newspaper, Mikhail Prokhorov, a metals magnate turned politician, warned that Europe "has opened a Pandora's box, creating a dangerous precedent in deciding the problem of the capitalisation of the banking system in problem countries". | Russian oligarchs stepped in to condemn the move. Writing in the Kommersant daily newspaper, Mikhail Prokhorov, a metals magnate turned politician, warned that Europe "has opened a Pandora's box, creating a dangerous precedent in deciding the problem of the capitalisation of the banking system in problem countries". |
| "It's dangerous if only because it encroaches upon the foundation of Western civilisation: the sanctity of private property," Prokhorov said, noting that he held no money in Cypriot banks. "We lived through something similar many times in Soviet days, when the authorities carried out confiscatory monetary reforms. Everyone knows how that ended." | "It's dangerous if only because it encroaches upon the foundation of Western civilisation: the sanctity of private property," Prokhorov said, noting that he held no money in Cypriot banks. "We lived through something similar many times in Soviet days, when the authorities carried out confiscatory monetary reforms. Everyone knows how that ended." |
| Oligarch Alexander Lebedev, owner of the Independent and Evening Standard newspapers in London, also expressed concerns, telling Kommersant: "For Russia, Cyprus was also a transit point for criminal money leaving the country. And such a tax doesn't really affect transit. There are fears for the middle class, who also used Cyprus." | Oligarch Alexander Lebedev, owner of the Independent and Evening Standard newspapers in London, also expressed concerns, telling Kommersant: "For Russia, Cyprus was also a transit point for criminal money leaving the country. And such a tax doesn't really affect transit. There are fears for the middle class, who also used Cyprus." |
| Putin criticised the proposal after a meeting with his economic advisers. "While assessing the proposed additional levy on bank accounts in Cyprus, Putin said that such a decision, should it be made, would be unfair, unprofessional and dangerous," his spokesman, Dmitry Peskov, said. | Putin criticised the proposal after a meeting with his economic advisers. "While assessing the proposed additional levy on bank accounts in Cyprus, Putin said that such a decision, should it be made, would be unfair, unprofessional and dangerous," his spokesman, Dmitry Peskov, said. |
| Although Putin has devoted much rhetoric to calling for the "de-offshorisation" of the Russian economy and to encouraging officials and business leaders to keep their money at home since returning to the presidency last year, he has failed to directly address Cyprus's role as Russia's favourite offshore haven. | Although Putin has devoted much rhetoric to calling for the "de-offshorisation" of the Russian economy and to encouraging officials and business leaders to keep their money at home since returning to the presidency last year, he has failed to directly address Cyprus's role as Russia's favourite offshore haven. |
| The island's finance minister, Michael Sarris, is due to visit Moscow on Wednesday. | The island's finance minister, Michael Sarris, is due to visit Moscow on Wednesday. |
| Gazprom was forced to dismiss press reports originating in Cyprus that the state gas monopoly had offered to provide the country with loans in exchange for gas exploration licences around the island. Its spokesman, Sergei Kupriyanov, said: "I deny this." | Gazprom was forced to dismiss press reports originating in Cyprus that the state gas monopoly had offered to provide the country with loans in exchange for gas exploration licences around the island. Its spokesman, Sergei Kupriyanov, said: "I deny this." |
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