President Vladimir Putin ordered his government to negotiate the restructuring of a bailout loan it granted to Cyprus in 2011 - having rejected Nicosia's request for easier terms during crisis talks last week.
Putin "considers it possible to support efforts ... aimed at overcoming the crisis in the economy and banking system of this island state," his spokesman Dmitry Peskov said.
Russia has repeatedly expressed its dismay at Europe's handling of the debt crisis in Cyprus, while resisting the entreaties of President Nicos Anastasiades to offer significant financial support of its own.
But, following the agreement of a Euro 10 billion ($13-billion) European bailout deal over the weekend, Moscow's position has softened. While Russia has complained over discrimination against businesses that rely on Cyprus as an offshore centre, the Kremlin has been careful not to become embroiled in a potentially open-ended financial and strategic commitment that could become a nexus of friction with Europe.
Nevertheless, Prime Minister Dmitry Medvedev - who ranks below Putin in Russia's ruling hierarchy - earlier criticised the bailout deal that will inflict heavy losses on uninsured deposits of over Euro 100,000 at the two main Cypriot banks.
"The stealing of what has already been stolen continues," Medvedev was quoted by news agencies as telling a meeting of government officials.
Cyprus had requested an extension of the existing Euro 2.5-billion Russian loan, and a reduction in the interest it charges to 2.5 per cent from 4.5 per cent.
Russia also last week turned down a Cypriot offer of stakes in its banks and offshore energy reserves in return for around Euro 6 billion in new financing, a sign that Moscow is reluctant to become over-extended financially and geopolitically despite a strong balance sheet that is underwritten by oil revenues.
Russians are believed to account for most of the Euro 19 billion of non-EU, non-bank money held in Cypriot banks at the last count by the central bank in January. Of Euro 38 billion in deposits from banks, Euro 13 billion came from outside the EU. Speaking after the meeting with Medvedev, First Deputy Prime Minister Igor Shuvalov said losses to Russian investors in Cyprus were not yet clear.
He also said that the Cypriot unit of state-controlled VTB, Russian Commercial Bank, would not be affected by measures taken by the government. Russia hopes that further financial support will not be needed.
"What is happening is a good signal to those who plan to move their capital to ... Russian banks," he was quoted as saying. "We have very stable banks."
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WHAT THE DEAL ENTAILS Cyprus clinched a last-ditch deal with international lenders on Monday for a Euro 10-billion ($13-billion) bailout that will shut down its second largest bank - the Popular Bank of Cyprus, also known as Laiki - and inflict heavy losses on uninsured depositors. Here are some details |
* Laiki will be resolved immediately - with full contribution of equity shareholders, bond holders and uninsured depositors - based on a decision by the Central Bank of Cyprus, using the newly adopted Bank Resolution Framework
* Laiki will be split into a good bank and a bad bank. The bad bank will be run down over time
* The good bank will be folded into Bank of Cyprus (BoC), using the Bank Resolution Framework, after having heard the Boards of Directors of BoC and Laiki. It will take Euro 9 billion of ELA with it. Only uninsured deposits in BoC will remain frozen until recapitalisation has been effected, and may subsequently be subject to appropriate conditions
* The Governing Council of the ECB will provide liquidity to the BoC in line with applicable rules
* BoC will be recapitalised through a deposit/equity conversion of uninsured deposits with full contribution of equity shareholders and bond holders
* The conversion will be such that a capital ratio of 9 % is secured by the end of the programme
* All insured depositors in all banks will be fully protected in accordance with the relevant EU legislation
* The programme money (up to Euro 10 billion) will not be used to recapitalise Laiki and Bank of Cyprus
