Russian Lenders Face Billions In Losses Due To Cypriot Levy

Via The Moscow Times:

The proposal by the Cypriot authorities to introduce a levy on the country’s bank deposits as part of a plan to bail out its economy drew harsh criticism from Moscow on Monday, with the largest Russian lenders facing multibillion-dollar losses as a result of the measure.

President Vladimir Putin warned of possible negative implications of the proposed move, which is pending approval by the Cypriot parliament. He said it would be “unfair, unprofessional, and dangerous”, his spokesman, Dmitry Peskov, told journalists.

The government of Cyprus on Saturday agreed to introduce a 6.75 percent tax on bank deposits of below 100.000 euros ($130.738) and a 9.9 percent tax on those above that amount in a move expected to secure 5.8 billion of the 10 billion euros it needs to cope with the sovereign debt crisis.

The measure is widely expected to become a severe blow for Russia, which accounts for nearly a third of the 70 billion euros deposited in Cyprus’ banks.

Meanwhile, the Russian authorities are unlikely to confine themselves to mere assertions, with a decisive reaction to the move being already contemplated.

Russia might change its mind on easing the terms of the 2.5 billion euro loan it had provided to Cyprus, since the levy had been agreed upon without consulting Moscow, Finance Minister Anton Siluanov said Monday.

Cyprus is likely to lose its status as one of the largest investors into the Russian economy.

“The money withdrawn from Cyprus will flow to Russia from other jurisdictions, so new countries could appear among big investors in Russia”, Smolyaninov said.

Cyprus was the second-biggest investor into the Russian economy last year after the Netherlands, with direct investment by the former reaching $16.5 billion, according to the State Statistics Service.

The Netherlands contributed $21.1 billion.

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