Cyprus’s rejection of the European Union’s tax levy plan to finance the country’s bailout has piqued the interest of Russia’s biggest and most important businesses.
The proposed levy put over $31 billion of Russian money at risk of taxation, sent Russian stocks to a three month low on March 18.
Russian depositors would be especially hard hit by any levy, but so would Russian business, as Russia is a major player in the Cyprus banking industry.
According to rating agency Moody’s, Russians hold $31 billion in Cyprus banks and could lose more than $3 billion in the levy. Nearly a third of the money in the Cyprus banking sector is Russian.
Cypriot Finance Minister Michael Sarris flew to Moscow and met with his Russian counterpart Anton Siluanov to discuss loan extensions and bailout options. But as of Wednesday the talks didn’t lead to any result yet.
According to Moody’s, VTB group is ‘the most exposed’ to the credit crisis in Cyprus. VTB's subsidiary, Russian Commerce Bank, operates in Cyprus and is one of few to possess a full banking license. However the Bank is an active member of the deposit insurance system of Cyprus and VTB has only 3% of its capital tied up in Cyprus, which, according to First Deputy Chief Executive Officer Vasily Titov is ‘insignificant’ and should not be ‘dramatized’, as he told reporters in Moscow on Wednesday. ...