• 2 days PDVSA Booted From Caribbean Terminal Over Unpaid Bills
  • 2 days Russia Warns Ukraine Against Recovering Oil Off The Coast Of Crimea
  • 2 days Syrian Rebels Relinquish Control Of Major Gas Field
  • 2 days Schlumberger Warns Of Moderating Investment In North America
  • 2 days Oil Prices Set For Weekly Loss As Profit Taking Trumps Mideast Tensions
  • 2 days Energy Regulators Look To Guard Grid From Cyberattacks
  • 2 days Mexico Says OPEC Has Not Approached It For Deal Extension
  • 2 days New Video Game Targets Oil Infrastructure
  • 2 days Shell Restarts Bonny Light Exports
  • 2 days Russia’s Rosneft To Take Majority In Kurdish Oil Pipeline
  • 3 days Iraq Struggles To Replace Damaged Kirkuk Equipment As Output Falls
  • 3 days British Utility Companies Brace For Major Reforms
  • 3 days Montenegro A ‘Sweet Spot’ Of Untapped Oil, Gas In The Adriatic
  • 3 days Rosneft CEO: Rising U.S. Shale A Downside Risk To Oil Prices
  • 3 days Brazil Could Invite More Bids For Unsold Pre-Salt Oil Blocks
  • 3 days OPEC/Non-OPEC Seek Consensus On Deal Before Nov Summit
  • 3 days London Stock Exchange Boss Defends Push To Win Aramco IPO
  • 3 days Rosneft Signs $400M Deal With Kurdistan
  • 3 days Kinder Morgan Warns About Trans Mountain Delays
  • 4 days India, China, U.S., Complain Of Venezuelan Crude Oil Quality Issues
  • 4 days Kurdish Kirkuk-Ceyhan Crude Oil Flows Plunge To 225,000 Bpd
  • 4 days Russia, Saudis Team Up To Boost Fracking Tech
  • 4 days Conflicting News Spurs Doubt On Aramco IPO
  • 4 days Exxon Starts Production At New Refinery In Texas
  • 4 days Iraq Asks BP To Redevelop Kirkuk Oil Fields
  • 5 days Oil Prices Rise After U.S. API Reports Strong Crude Inventory Draw
  • 5 days Oil Gains Spur Growth In Canada’s Oil Cities
  • 5 days China To Take 5% Of Rosneft’s Output In New Deal
  • 5 days UAE Oil Giant Seeks Partnership For Possible IPO
  • 5 days Planting Trees Could Cut Emissions As Much As Quitting Oil
  • 5 days VW Fails To Secure Critical Commodity For EVs
  • 5 days Enbridge Pipeline Expansion Finally Approved
  • 5 days Iraqi Forces Seize Control Of North Oil Co Fields In Kirkuk
  • 5 days OPEC Oil Deal Compliance Falls To 86%
  • 6 days U.S. Oil Production To Increase in November As Rig Count Falls
  • 6 days Gazprom Neft Unhappy With OPEC-Russia Production Cut Deal
  • 6 days Disputed Venezuelan Vote Could Lead To More Sanctions, Clashes
  • 6 days EU Urges U.S. Congress To Protect Iran Nuclear Deal
  • 6 days Oil Rig Explosion In Louisiana Leaves 7 Injured, 1 Still Missing
  • 6 days Aramco Says No Plans To Shelve IPO

Russian Oligarchs to (Involuntarily) Fund Cyprus Bailout

Russian Oligarchs to (Involuntarily) Fund Cyprus Bailout

Negotiations for Cyprus’ bailout, which has hinged largely on its hydrocarbons future, have ended with Russia missing the chance to swap aid for offshore exploration licenses and the Greek Cypriots agreeing to an EU bailout package that hits at the Russian oligarchy by shutting down the island’s second-largest bank.

Over the course of last week, Greek Cypriots were shuffling back and forth to Moscow in an attempt to lure Russia into a bailout package that would have given it a stake in the island’s estimated 60 trillion cubic feet of natural gas offshore—but it wasn’t a big enough stake to tempt the Kremlin.

Earlier in the week, Cypriot officials had rejected an EU bailout package that would have seen anyone with a bank account over 20,000 euros paying a 3-15% levy on deposits in return for future gas shares.

Related article: Cypriot Bailout Linked to Gas Potential

Cyprus then hit up Russia to raise the stakes in this geopolitical game for control of Mediterranean hydrocarbons. The trick was to raise the specter of a Russian grab for Cypriot gas reserves in order to force a kinder bailout offer from the EU.

Russia held out for more from Cyprus, but the possibility of a deal with Moscow was enough to put steps in motion for a new plan.

To wit, the new EU bailout package accepted by Cyprus shuts down the island’s second-largest bank, Laiki, which will mean heavy losses for uninsured account-holders, many of whom are Russian oligarchs. In return, Cyprus gets a €10 billion ($13 billion) bailout and avoids the total collapse of its banking system. Only depositors with over €100,000 will be hit, while smaller depositors will be protected.

It’s still not clear what will happen to deposits of over €100,000. According to the BBC, once Laiki is closed down, these deposits will be moved into a “bad bank”, but it is not clear how much of the deposits will actually be lost. Smaller deposits will be moved to the Bank of Cyprus, which will undergo a significant reconstruction.

Related article: EU Caught Playing Dirty and it’s all about Russian Gas

The EU has never done this before. It has always sought to protect depositors. This time, however, we’re talking about Russian oligarchs.

Why the change in strategy? As we noted last week, Europe now feels emboldened to hit out at Russian oligarchs because of major gas discoveries in the Levant Basin—particularly Israel’s Leviathan and Tamar fields, the latter which is to begin production already in April. This is gas that can make its way to Europe and provide an alternative to the Russian monopoly on European gas supplies. Simply put, the EU is no longer afraid of the implications of Russia turning off the gas spigots in retribution.

The markets—oblivious to the geopolitical nuances of the Cyprus bailout—are relieved. According to Reuters, Europe’s top shares rose 0.8% on Monday, while the euro zone banking shares index rallied 2.4% on the bailout news.

The bottom line here is that Russian oligarchs are effectively funding the Cyprus bailout, and this certainly won’t go down well in Moscow. And it certainly isn’t the end of this game. There will be a proxy response from Russia.

By. Jen Alic of Oilprice.com




Back to homepage


Leave a comment
  • Rick on March 26 2013 said:
    It appears that Russia is willing to renegociate the 2011 loan to Cyprus even after this episode. Could it be that Cyprus, with a nod and a wink, has made some future deal with Russia over it's Gas and oil development?
  • Philip Andrews on March 26 2013 said:
    As was pointed by out on an RT interview by John Laughland of the Institute for Democracy and Cooperation, this raiding of bank deposits is illegal; it amounts to daylight robbry.

    If it becomes a precedent by an increasingly desperate EU elite, not only will it speed up the collapse of the euro and Europe's financial system, but it may well encourage Russia even more to head eastwards towards China etc. witth her energy.

    If Russia has to choose between a stable and expanding East Asian energy market and an increasingly unstable and crumbling EU market, guess which way she will go? The EU may well end up begging for Russian resources. For those obsesed with shale and the possibility of shale imports, my impression is that shale is hugely oversold by its proponents. The same proponents who largely want to keep the US and the West top dog...

    Too many people are being 'persuaded' to look at Russia as the 'bad guy' just as they are being persuaded to regard Iran as the 'bad guy'. These people represent a West that can't acknowledge the decline of the West and the Rise of Eurasia and the AP region and BRIC.

    Cyprus, like Greece may be the crack that finally bursts the EU euro dam. If the EU goes down the US will also suffer. Time we in Europe made our peace with Russia and began to work together with her to salvage something from this mess. The US is terminally involved with China, and once China becomes the most powerful economy, may end up as a Chinese 'appendage', something like Europe has been to the US.
  • Mark chambers on March 26 2013 said:
    Is there trouble in tinseltown?
  • Buster Bluth on March 26 2013 said:
    " Time we in Europe made our peace." No offense, but when did Europe ( England included ) ever make peace when money was involved ? You must have literally been born yesterday to make such a ridiculous statement. No i'm afraid the West is wedded to conflict as a means to keep its hegemony .

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News