Russia said Friday it would wait for Cyprus and the European Union to strike a deal before pitching in to any possible bailout for the debt-ridden island.
The announcement from Prime Minister Dmitry Medvedev came after Cypriot Finance Minister Michalis Sarris ended a fruitless two-day visit intended to win an urgent financial lifeline from Russia.
Analysts said the mission failed because Russia calculated that Cyprus, with its survival in the eurozone in jeopardy, was too great a risk.
“Russia is effectively being asked to throw more good money after bad and double up on the commitments it has already made,” JPMorgan Chase analyst Alex White said.
“The risk-reward trade off (for Moscow) doesn't appear to make sense,” said White.
But Medvedev said Moscow “has not closed the door” on possible future assistance to Cyprus where Russians hold $31 billion in private and corporate accounts.
“But this will only come after there is a final plan of support for Cyprus from the European countries,” he said following talks with European Commission president Jose Manuel Barroso.
Medvedev said that Russia was taking this approach “for very obvious economic reasons” that he did not spell out.
Russian officials earlier said two state energy firms had turned down offers put forward by Sarris that could have helped Cyprus fill a nearly six billion euro shortfall left by a 10 billion euro bailout offer from the EU and IMF.
“Our investors examined this issue and showed no interest,” Finance Minister Anton Siluanov said.
He said that Moscow did not consider offering Cyprus a new loan, fearing bankruptcy-threatened Cyprus could not withstand more debt.
There was no news however on a request for Russia, which holds between one third and half of all the island's bank deposits, to ease the terms of an existing 2.5-billion-euro loan.
Sarris had originally said he would stay in Russia until a deal was reached even while the banking crisis raged back home and the government pushed ahead with a “Plan B” to stave off a default.
The Cypriot parliament overwhelmingly voted against an initial bailout deal from the EU and IMF earlier this week.
In a new plan, Cyprus had been expected to introduce an investment “solidarity fund” in which Russia was to have helped underwrite government bonds.
Analysts noted that the energy deals were never picked up by Moscow because of questions over the reported supply of oil and gas resting off Cyprus's southern shore.
They also cited uncertainties revolving around Turkey's own claims to a share of the deposits.
“Gazprom and Rosneft were not interested in these proposals,” a Russian finance ministry source told the state-run RIA Novosti news agency.
But simple politics have also been at play.
Moscow was angered by the original terms of the rescue plan for Cyprus proposed by the troika of international lenders that would have slapped a levy of 9.9 percent on deposits of more than 20,000 euros.
President Vladimir Putin called the idea “unprofessional and dangerous” while others compared it to illegal confiscation of property.
BNP Paribas's head Russian economist Julia Tsepliaeva said that Moscow was “following a pragmatic approach” despite hurt feelings over the EU-IMF decision to institute a bank levy without prior consultations with the Kremlin.
“The other thing is that providing financial assistance in return for assets is not that interesting when the assets are set for a drop in price,” Tsepliaeva added.
Officials also hinted that they felt safe letting Cyprus and the European Union alone settle their differences because they did not feel Russia's own financial system was under threat.
Russia first deputy central bank chairman Alexei Simanovsky stressed on Friday that he “sees no serious risks” from the crisis in Nicosia.
Russia holds back on Cyprus aid, uncertain of Turkey’s role