Poll reveals Russians take pride in country’s symbolsSociety & Culture August 21, 13:15
Press review: Moscow works to cool off US-North Korea spat and Japan eyes peace treatyPress Review August 21, 13:00
Passenger ground effect vehicle seating 100 to be created in Russia in 2020-2022Military & Defense August 21, 12:35
Australian cyclist Perkins gets Russian passportSport August 21, 12:21
St. Petersburg buyer scoops up Yeltsin’s limousine for over $330,000Society & Culture August 21, 12:20
US suspends procedure of issuing nonimmigrant visas throughout Russia as of August 23World August 21, 11:59
Four victims of Surgut stabbing remain in grave conditionWorld August 21, 11:21
Russian Arctic National Park to set up reserve area on Novaya ZemlyaSociety & Culture August 21, 9:36
Iranian president calls defending nuclear deal top priorityWorld August 21, 8:20
This content is available for viewing on PCs and tabletsGo to main page
The Russian government will intervene in the Cyprus crisis affair only if mixed public-private companies have problems. As for private depositors, who may lose tens of hundreds to hundreds of thousands of euros, they should not count on its support at all, First Deputy Prime Minister Igor Shuvalov said unequivocally.
In the meantime, some major enterprises may find themselves among the class of private depositors. However, as some experts say, the state has rather limited opportunities to defend the interests of Russian businesses and individuals who are now in the position of Cypriot crisis hostages.
Under the Cyprus debt rescheduling plan, agreed with the European Union and the IMF, the country’s authorities have taxed all deposits in the country’s two largest banks. The clients of the Bank of Cyprus having more than 100,000 euros on their accounts may lose up to 60 percent of their savings. The hardest-hit are clients who kept accounts over 100,000 euros in the Cyprus Popular Bank (known under the retail brand Laiki). De facto the bank has been declared bankrupt, and in several years’ time its clients can hope to have back no more than 10-20 percent of the accounts’ nominal value. According to experts, their number is significant, just as the size of their accounts.
“If somebody gets in trouble and loses money in these two major banks, it is very bad, of course, but the Russian government will not do anything about that,” Shuvalov said on the Rossiya 1 television news channel Sunday evening.
Shuvalov acknowledged that the origin of Russian money in the offshore zone in Cyprus had very different origin. There is illegal and semi-legal capital, and there is money that has been properly taxed. The Russian government will be prepared to extend a helping hand to some of them.
“If somebody sustains serious losses, if there are mixed public-private companies among them, if there is some concrete situation, we shall be prepared to consider it publicly and transparently here in Russia, but for that it is very unnecessary to help the Republic of Cyprus,” Shuvalov said.
Experts place the Cypriot daughter company of the VTB - Russian Commercial Bank (RCB) - on top of the list of likely recipients of government assistance. In terms of the size of its assets - only a little less than 14 billion euros - the RCB is Cyprus’s third bank. Its clients are not faced with the risk of expropriation of their deposits, but the Cyprus authorities in an attempt to prevent a landslide flight of capital have introduced control of cross-border transactions, set a cap on the withdrawal of cash and on payments with credit cards, and prohibited transactions with bank cheques, electronic transfers, etc. These are temporary measures, but it is nakedly clear the RCB’s problems cast a shadow on the reputation of the VTB, the largest Russian state-owned bank.
The prime minister’s press-secretary, Natalya Timakova, on Monday said Dmitry Medvedev on Saturday would hold a meeting with members of the Cabinet’s financial segment, including the president of the central bank.
“The conference discussed issues related with the rescheduling of the loan issued in 2011, as well as measures to protect the interests of the Russian Commercial Bank and the Russian companies that perform their transactions through that bank,” Timakova said.
The money of private businesses and individuals, who in different years took their cash to the offshore zone in Cyprus, constitutes a greater problem. On the list of the Russian companies that have shareholders in Cyprus the media have mentioned the Magnitogorsk Metallurgical Combine (MMC), OJSC Metalloinvest, OJSC Mechel, OJSC Evraz - Consolidated West Siberian Matallurgical Combine, OJSC NOVATEK, OJSC Novaya Perevozochnaya company, OJSC Novolipetsk Metallurgical Combine (NLMK), OJSC MMC Norilsk Nickel, OJSC Severstal, OJSC Siberian Coal Energy Company (SUEK), OJSC Tatneft, OJSC Uralkaliy, and OJSC Holding IDGC.
“Although all of them are dominant local employers on which everyday life in the nearby town or city depends almost entirely, they can hardly count on government assistance,” remarks the daily Nezavisimaya Gazeta. “Experts say that the Russian businesses and individuals, who have found themselves in the position of Cypriot crisis hostages, are very limited in the choice of means to protect themselves.”
The chief of the international projects group at the Vegas Lex consultancy, Yuri Bortnikov, told the daily that Moscow at negotiations with Nicosia on rescheduling the 2011 loan (2.5 billion euros extended for a period of five years) may try to secure special terms for specific companies and clients from Russia.
“No other leverage is available,” the lawyer said with certainty.
A leading lawyer of the tax practices division of the group Yakovlev and Partners, Andrei Felyust, wonders: “Why should the government help people keeping their money out of the country at all?”
“Such assistance might create a dangerous precedent. If in the future some other countries decide to follow the Cypriot scenario, then our government will have to intervene again,” he said.
The expert linked the refusal to protect the interests of fellow Russians with the Russian authorities’ officially declared policy of easing and even terminating the dependence of the national economy on offshore zones.
The president of Lionstone Investment Services Ltd. Alexander Belyakov, did not rule out that the government’s buyout of Cypriot banks’ shares may prove a means to extend assistance to the public companies harmed by the Cyprus crisis. The shares will be offered to the holders of deposits in compensation for the sustained damages.
However, experts are in no mood to overdramatize the situation. True, huge taxes have been imposed, the banks of Cyprus have frozen accounts, but it turns out that there is a way out. “While the banks in Cyprus were closed, their affiliates in London and in Moscow stayed open and it was possible to use them to withdraw funds. For instance, Uniastrumbank, owned by the Bank of Cyprus, has never terminated the servicing of accounts in the parent bank. Moody’s has estimated Russian money in the banks of Cyprus at 31 billion euros,” said the chief of the analysis department at FOREX CLUB, Andrei Dirgin.
In the meantime, a mere one-third of Russians (34 percent) feel sympathy for their fellow countrymen harmed by the banking crisis in Cyprus, as follows from a poll by the recruiting portal Superjob.ru. On the contrary, 43 percent of Internet users the portal questioned feel no sympathy at all, as they suspect that a large portion of the funds kept in Cyprus is of illegal origin.
Asked if the authorities should protect the interests of Russian clients, who have sustained losses in Cyprus, the audience split almost evenly - 38 percent regard this as unnecessary, while 36 percent are certain that the authorities should help those who kept money in Cypriot banks.