Cypriot bailout to feature high in EU-Russia ‘executive’ talks


The banking crisis in Cyprus, where almost half of the €70 billion deposits are believed to be Russian money, will feature high in a meeting between the European Commission and the Russian government on 21 and 22 March in Moscow, diplomats told EURACTIV.

On 21 March Commissioners will meet bilaterally with their Russian counterparts, while on the next day the college of Commissioners will hold plenary discussion with Russian ministers and Prime Minister Dmitry Medvedev. A bilateral meeting between Commission President José Manuel Barroso and President Vladimir Putin is also foreseen.

Breaking with previous practice that depositors' savings were inviolable, eurozone finance ministers announced over the weekend a one-off tax on Cypriot bank accounts would be imposed as part of a €10 billion bailout by the European Union. The details of the levy on deposits remain, after the Cypriot Parliament rejected a proposed tax on bank deposits.

Putin called the proposed levy "unfair, unprofessional and dangerous", and Moscow has expressed frustration Russia was not included in European decision-making on Cyprus.

Sources quoted by Reuters said that over €2 billion of Russian money has been withdrawn from Cyprus in recent days.

Russia warns about ‘domino effect’

Russia’s ambassador to the EU, Vladimir Chizhov, spoke on 19 March in strong terms against the levy on deposits.

"This decision is fraught with social implications for Cyprus and with the risk of 'domino effect' for other eurozone countries," Chizhov told Brussels journalists in a video conference from Moscow.

Moscow has discussed the possibility of bailing out Cyprus bilaterally with Nicosia and also with the European Union, but failed, he said.

The Russian diplomat argued that the decision to introduce a levy on deposits was “similar to forceful expropriation”.

“We are worried not about the concrete figures, but about the principle of forceful expropriation,” he said.

Chizhov added that when the banks would open, people would massively withdraw their deposits, leading to a collapse of the entire Cyprus banking system.

“Among the Russian deposits in Cyprus are not only citizens’ savings, but also the accounts of companies. Consequently until solved, this problem will worry the Russian government,” Chizhov said, adding that he would be “highly surprised” if the issue doesn’t come up at the EU-Russia “executive-to-executive” meeting.

‘Cementing trust’

An EU official said that Cyprus did not feature on the official agenda, but didn’t exclude that discussions could take place.

Such meetings, he said, were usually characterised by “disengagement at political level” and held a potential “to cement strategic trust”.

Foreign affairs issues will not be a subject of the plenary meeting, the EU official said. Apparently the situation in Syria would not feature high, as the Commission’s prerogatives mostly focus on the humanitarian situation and the need to provide a response to the challenge of massive immigration from the country.


The evolution of the energy market until 2050 is expected to be discussed. The focus on the long-term perspective is a sign that both sides want to have a win-win relationship on energy-related issues, the EU official said.

Asked if the probe on Russian gas monopoly Gazprom would be discussed, the official said that this was purely a legal issue in the framework of the Commission’s competition activities.

“There are no political intentions behind this case. We are continuing the investigations, we are getting facts, we are still in that stage, we are not drawing conclusions,” he said.

EURACTIV asked if the Commission had looked into the Russian claim that the Third Energy Package should not apply to Russia under Article 34 of the EU-Russia Partnership and Cooperation Agreement.

>> Read: Putin slams Barroso: ‘You know you are wrong, you’re guilty’

The EU official said that the Third Internal Market Package applied to any operator who wants to be established in the EU, no matter of their nationality. He said that Moscow may believe that this was targeted against them, but this was not so.

He also argued that it was “good for Russia” to have an integrated market for energy on the European side.

“Russia is benefitting from this, it is benefitting from downstream business opportunities, it benefits from having a predictable environment on our side, from not having to deal with 27 different legislation, but just one,” he said, adding that the Commission was going to highlight this with its Russian counterparts.

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