Russia says thanks, but no thanks; Cyprus goes into panic mode

posted at 10:41 am on March 22, 2013 by Erika Johnsen

In the wake of declining to raid the country’s private bank accounts as part of the terms of a proffered bailout package from the EU and IMF, Cyprus was hoping they might be able to entice Russia to work out an alternative rescue plan for them, partially in exchange for some kind of claim on Cyprus’s gas reserves.

So much for that plan.

Russian gas giant Gazprom and oil company Rosneft did not display any interest in Cyprus’ hydrocarbons deposit offer to Russia, an Energy Ministry source told journalists. …

Another problem is Cyprus’ territorial disputes with Turkey, he added.

Asked to assess the accuracy of the estimates and proposals prepared by Cyprus, the source said that “they [Cypriots] invited us to take part in a tender on a [hydrocarbon] deposit there, but a seismic survey has not been completed yet, and it is unclear what kind of deposit they have. It should be analyzed more profoundly in the future. Gazprom and Rosneft are not interested in these proposals.”

Which means that it’s up to Cyprus to come up with some kind of offer to convince the EU to extend their aid, and they only have until Monday to do it — the European Central Bank has already said they’ll cut funds to Cypriot banks after that without a viable plan. Officials are now scrambling to work something out, because otherwise, their financial system is looking at a likely collapse:

In Nicosia, the country’s biggest bank urged politicians to make haste and cut a deal with their EU partners as parliament considered proposals to nationalize pension funds, pool state assets and split the country’s second-largest bank in a desperate effort to satisfy those exasperated European allies. …

Elsewhere, depositors, who have been besieging bank cash machines all week, queued again to withdraw what they could. …

New bills submitted to the Cypriot parliament included a “solidarity fund” to bundle state assets, including future gas revenues and nationalized semi-state pension funds, as the basis for an emergency bond issue.

JP Morgan likened it to “a national fire sale”, and euro zone paymaster Germany indicated it opposed the nationalization of pension funds. …

They also quoted Merkel as saying: “There is no way we can accept that”, and “I hope it does not come to a crash”.

That escalated quickly. Whatever they come up with, the euro zone ministers have so far been decidedly unimpressed, and a one-off “tax” on bank deposits still isn’t off the table — and I wonder if it won’t get increasingly attractive as desperation builds.

 

 


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Jeffster on March 22, 2013 at 10:45 AM

A “solidarity fund”? When you see that word coming from any government you know it’s time to barricade the door and load the guns.

I remember when the EU was going to be the world’s new powerhouse economy; everything would be paid for and the people would live lives of luxury that would have made Roman Emperors jealous.

Bishop on March 22, 2013 at 10:47 AM

Obama is asking for copies of these proposals. “I’ll get that evil 2% and your little dog too.”

Oil Can on March 22, 2013 at 10:50 AM

America, your future is on display!

SDarchitect on March 22, 2013 at 10:52 AM

But remember, Cyprus by no means represents the Euro as a whole.

Even though they use it.

And are a member state.

And represent the Euro.

ANYWHO… You guys want to really see a messed up country, look at Spain! THEY are screwed!

Oh, wait, Euro member… Hmmmmm

Clearly we need to raise taxes.

Gatsu on March 22, 2013 at 10:52 AM

I remember when the EU was going to be the world’s new powerhouse economy; everything would be paid for and the people would live lives of luxury that would have made Roman Emperors jealous.

Bishop on March 22, 2013 at 10:47 AM

If I can ever have children, it’s going to be interesting to tell them about the rise and fall of the oh-so-glorious EU.

I was just old enough to understand that the idea was NUTS; that trading away your nation’s currency and identity for some fruity pipedream of world unity was Benedict Arnold-level betrayal.

MelonCollie on March 22, 2013 at 10:53 AM

It can happen here, folks.

gryphon202 on March 22, 2013 at 10:55 AM

Hello sad times
Roll with the bad times
We will never be rid of you
Howdy gay times
Cloudy old gay times
You are now the thing at last
Desperate days are here again
The skies above are falling in
So let’s sing a song of despair again
Desperate days are here again
Altogether shout it now
There’s no one
Who can doubt it now
So let’s tell the world about it now
Desperate days are here again
Your troubles are many
Because your gun bans are soon near
From now on…
Desperate days are here again
The skies above are falling in
So, Let’s sing a song of desperation again
Sad times
Desperate nights
Gay days
Are here again!

redguy on March 22, 2013 at 10:58 AM

That escalated quickly. Whatever they come up with, the euro zone ministers have so far been decidedly unimpressed, and a one-off “tax” on bank deposits still isn’t off the table — and I wonder if it won’t get increasingly attractive as desperation builds.

The EU appears to be punishing Cyprus as gratuitously as possible as a warning to Greece/Italy/Spain, as they are mandating capital controls on the country: http://www.zerohedge.com/news/2013-03-22/ecb-set-fair-cypriot-standard-living-capital-controls

You couldn’t pay me to live in Cyprus right now. I actually think it might be better for them if they took the short term pain, declared bankruptcy, and walked away from this mess.

Doomberg on March 22, 2013 at 10:58 AM

In Nicosia, the country’s biggest bank urged politicians to make haste and cut a deal with their EU partners as parliament considered proposals to nationalize pension funds, pool state assets and split the country’s second-largest bank in a desperate effort to satisfy those exasperated European allies. (emphasis added)

If this were AoSHQ, I’d have a Rat sockpuppet with a “We thought of that first” comment, but HotGasAir is a respectable site. Instead, I’ll comment on the folly of seizing those pension plans.

The major value of a retirement plan invested in variable-value assets is a paper value, entirely dependent on the ability to orderly liquidate only the small portion of the holdings necessary to pay out the benefit at any specific time. If the government (Cypriot, American, or otherwise) wants to seize and liquidate the whole kit and caboodle at once, there just isn’t enough buyers out there to get more than a small portion of the “expected” value.

Steve Eggleston on March 22, 2013 at 10:59 AM

a one-off “tax” on bank deposits still isn’t off the table — and I wonder if it won’t get increasingly attractive as desperation builds.

I’d bet it is still on the table to use out of sheer desperation. And it may be toooooo attractive to use as a solution for an immediate fix to address to a long term problem. Heck, Cypriots should be so thankful for all their government had done for them, they should express their national pride and patriotism and offer all they have to keep their nation financially afloat.

hawkeye54 on March 22, 2013 at 10:59 AM

It’s time for this message, needs to be updated, tho:
We didn’t start the fire…

JimK on March 22, 2013 at 11:01 AM

You couldn’t pay me to live in Cyprus right now. I actually think it might be better for them if they took the short term pain, declared bankruptcy, and walked away from this mess.

You could say the very same thing about a few of our states and cities of similar self-created financial messes.

If I weren’t already living in California, you couldn’t pay me enough to move here.

hawkeye54 on March 22, 2013 at 11:02 AM

It’s time for this message, needs to be updated, tho:
We didn’t start the fire…

JimK on March 22, 2013 at 11:01 AM

I see your Billy Joel and raise you Rock Master Scotty And The Dynamic Three (NSFW warning)

The roof, the roof, the roof is on fire. We don’t need no water. Let the <expletive deleted> burn. Burn <expletive deleted>, burn!

Steve Eggleston on March 22, 2013 at 11:10 AM

a one-off “tax” on bank deposits still isn’t off the table — and I wonder if it won’t get increasingly attractive as desperation builds.

I’m beginning to wonder if this whole Cyprus pas-de-deux’ wasn’t simply an effort to establish a precedent for “asset confiscation”, by government, from private individuals, across the EU. That is, the EU countries simply seizing whatever they wanted, or thought they needed, from the private sector without due process or any compensation. Rather than an “emergency measure” to accomplish another objective, the tax itself, as a precedent, may be the actual objective.

The EU’s impatience with Cyprus right now may be because they didn’t follow their part of the script. Meaning, the “tax” will be back again, only with the EU openly backing it. And this time Cyprus will go through with it, because the gnomes of Brussels have told them in no uncertain terms that that is their role in the OPLAN.

If so, any plan out of Cyprus that does not include the “tax” as its centerpiece is likely to be DOA in Brussels.

clear ether

eon

eon on March 22, 2013 at 11:11 AM

I’m all in with Jimi lyrics:

And so castles made of sand slip into the sea eventually.

Bishop on March 22, 2013 at 11:14 AM

You couldn’t pay me to live in Cyprus right now. I actually think it might be better for them if they took the short term pain, declared bankruptcy, and walked away from this mess.

Doomberg on March 22, 2013 at 10:58 AM

Come to beautiful Cyprus!

Enjoy our unique cuisine, fresh from the red cross!

See our people celebrate with riots parades through our trash strewn streets!

Enjoy our glorious beaches as you watch the fires sunsets from your hotel!

Gatsu on March 22, 2013 at 11:15 AM

It can will happen here, folks.

gryphon202 on March 22, 2013 at 10:55 AM

FIFY. I guess I am more pessimistic than you.

chemman on March 22, 2013 at 11:19 AM

That escalated quickly.

You betcha. And it’ll suddenly metastasize quickly too one day. I doubt this is the trigger, but it’s coming sooner or later.

forest on March 22, 2013 at 11:22 AM

Turkey?

Turkey’s already danced around helping Greece. With Turkey’s neo-Ottoman aspirations, I wouldn’t be surprised to see Erdogan and his party and government make efforts to help Cyprus in some way. It will hurt them in the present but they may feel that it’s worth the future reward.

Logus on March 22, 2013 at 11:25 AM

I actually think it might be better for them if they took the short term pain, declared bankruptcy, and walked away from this mess.

Doomberg on March 22, 2013 at 10:58 AM

With Turkey waiting in the wings to “help” pick up the pieces. Greece? Cyprus? Syria?

Peace! Peace!

All we want is peace and stability!

///

Logus on March 22, 2013 at 11:27 AM

hawkeye54 on March 22, 2013 at 11:02 AM

A cpl of weeks ago I declined fantastic job opportunities in Michigan and CA. Why new opportunities? I am looking to escape NY.

antisocial on March 22, 2013 at 11:30 AM

…wait until China says thanks…but no thanks!

KOOLAID2 on March 22, 2013 at 11:34 AM

Wouldn’t talk of stealing people’s money from their bank accounts have them running, not walking, to their respective banks and closing their accounts lickety-split? That’s the first thing I would do once such an option were made publicly known.

NotCoach on March 22, 2013 at 11:41 AM

It can will happen here, folks.

gryphon202 on March 22, 2013 at 10:55 AM

FIFY. I guess I am more pessimistic than you.

Considering who is running things here, I wouldn’t say pessimistic as much as I’d say realistic.

hawkeye54 on March 22, 2013 at 11:41 AM

eon on March 22, 2013 at 11:11 AM

You’re close. It’s more of a warning shot to countries that don’t comply with EU austerity programs. Germany is trying to create a penalty for countries that don’t cooperate so there can be dissuasion from these countries using Germany as a piggy bank. Merkel is facing election, and her bailout programs have been very unpopular. She’s trying to “look tough for the camera.” I personally think she looks foolish given what’s been going on, but perhaps it plays better at home.

I really think Cyprus would be better off exiting the Eurozone and going insolvent, personally. It would be terrible for them in the short term but it will be better than essentially permanent capital controls.

Doomberg on March 22, 2013 at 11:43 AM

A cpl of weeks ago I declined fantastic job opportunities in Michigan and CA. Why new opportunities? I am looking to escape NY.

antisocial on March 22, 2013 at 11:30 AM

Michigan isn’t so bad lately. We dropped out of the race to the bottom with California and Illinois after electing Schneider, and we are one of the most gun friendly states in the nation.

NotCoach on March 22, 2013 at 11:43 AM

Anybody recall dem superstar Theresa Ghilarducci? Allow me to introdue her then…

http://www.carolinajournal.com/exclusives/dems-target-private-retirement-accounts.html

You didn’t hear about these hearings? I believe they held another one in October 2010 just before they got pasted

DanMan on March 22, 2013 at 11:44 AM

Wouldn’t talk of stealing people’s money from their bank accounts have them running, not walking, to their respective banks and closing their accounts lickety-split? That’s the first thing I would do once such an option were made publicly known.

They’d make the banks shut down operations lickety-split to deny everyone the opportunity to make a run.

And it isn’t stealing other people’s money….it’s a claim on the funds the leftists in government have always considered theirs, and have allowed people to falsely believe to be considered “personal” and “private” property and assets. To the Left,there is no such thing as “private” property, at least for we commoners. Everything belongs to the government elites for them to use as they please.

hawkeye54 on March 22, 2013 at 11:49 AM

You’re close. It’s more of a warning shot to countries that don’t comply with EU austerity programs. Germany is trying to create a penalty for countries that don’t cooperate so there can be dissuasion from these countries using Germany as a piggy bank. Merkel is facing election, and her bailout programs have been very unpopular. She’s trying to “look tough for the camera.” I personally think she looks foolish given what’s been going on, but perhaps it plays better at home.

I really think Cyprus would be better off exiting the Eurozone and going insolvent, personally. It would be terrible for them in the short term but it will be better than essentially permanent capital controls.

Doomberg on March 22, 2013 at 11:43 AM

Problem with that direction is the countries she is essentially playing chicken with do not care if they get bailed out or not because they know they will be supported either way. Just look how much “austerity” has actually been implemented and the reactions that garnered. Problem is, Cyprus cannot be papered over the same way the rest of the PIIGS have been, they are looking at a total breakdown here and if that happens you can bet the EU as a whole will feel it.

Gatsu on March 22, 2013 at 11:50 AM

Wait, hold on. Earlier it was reported that a Russian energy company offered this deal up. Now it’s come out that Cyprus thought of this scheme and that the energy companies aren’t even interested at all.

So, who’s trying to pull the wool over everyone’s eyes?

Or was this another case or horrible journalism?

ButterflyDragon on March 22, 2013 at 11:51 AM

After it got out of a tariff system only, the Eurozone was a bad idea. The Eurozone was a desperate idea.

burt on March 22, 2013 at 11:53 AM

I remember when the EU was going to be the world’s new powerhouse economy; everything would be paid for and the people would live lives of luxury that would have made Roman Emperors jealous.

Bishop on March 22, 2013 at 10:47 AM

Emperors could not conceive of the luxury of ObamaCare.

BobMbx on March 22, 2013 at 11:56 AM

You couldn’t pay me to live in Cyprus right now. I actually think it might be better for them if they took the short term pain, declared bankruptcy, and walked away from this mess.

Doomberg on March 22, 2013 at 10:58 AM

In an amazing coincidence, no one in Cyprus is getting paid right now.

BobMbx on March 22, 2013 at 11:59 AM

They’d make the banks shut down operations lickety-split to deny everyone the opportunity to make a run.

hawkeye54 on March 22, 2013 at 11:49 AM

That’s a good point. That’s why I’d make sure I was the first in line.

And it isn’t stealing other people’s money….it’s a claim on the funds the leftists in government have always considered theirs, and have allowed people to falsely believe to be considered “personal” and “private” property and assets. To the Left,there is no such thing as “private” property, at least for we commoners. Everything belongs to the government elites for them to use as they please.

Funny how people see things differently when they have their own property taken from them. Maybe it will open the eyes of a few of those leftists in Greece. Then again that is probably just wishful thinking on my part.

NotCoach on March 22, 2013 at 12:08 PM

After it got out of a tariff system only, the EurozoneEuropean Union was a bad idea. The Eurozone was a desperate idea.

burt on March 22, 2013 at 12:08 PM

a one-off “tax” on bank deposits still isn’t off the table

I haven’t been following closely, are the Cypriot banks still locked up tight? If not I’m sure there are bank runs like no other going on right now.

LukeinNE on March 22, 2013 at 12:22 PM

Can we get Soros to buy the dang place? Maybe it would satisfy his urge to play kingmaker and get him out of *our* hair for a while? He could make Bloomberg Nanny in Chief. Heck, maybe he could get Reid to join him.

GWB on March 22, 2013 at 12:37 PM

I’m beginning to wonder if this whole Cyprus pas-de-deux’ wasn’t simply an effort to establish a precedent for “asset confiscation”, by government, from private individuals, across the EU. That is, the EU countries simply seizing whatever they wanted, or thought they needed, from the private sector without due process or any compensation. Rather than an “emergency measure” to accomplish another objective, the tax itself, as a precedent, may be the actual objective.

eon on March 22, 2013 at 11:11 AM

The Euro currency project was always unworkable in the form that it was launched — i.e. separate countries with diverse economic needs and policies sharing a currency and interest rate.

That implies either:

(1) Its instigators were too stupid and ignorant to understand what they were doing and how it would lead, inevitably, to turmoil.

(2) Its instigators new full-well what the consequences would be and intended to use the resulting turmoil as a means of furthering their goal of creating the European Empire.

Since political “union”, i.e. a European Empire, was the goal of the architects of the EEC I am inclined to think that of the above two options, the second most closely represents the truth and, if that is so, the deceit and power lust is much larger and older than you surmised.

YiZhangZhe on March 22, 2013 at 12:52 PM

Wait, hold on. Earlier it was reported that a Russian energy company offered this deal up. Now it’s come out that Cyprus thought of this scheme and that the energy companies aren’t even interested at all.

So, who’s trying to pull the wool over everyone’s eyes?

Or was this another case or horrible journalism?

ButterflyDragon on March 22, 2013 at 11:51 AM

More than bad journalism. Criminal one. By their reports it is supposedly not Russian money that makes up the bulk of deposits (sarcasm here). Well, looking at numbers it appears that it IS Russian money that makes up a huge portion of the funds at stake, no way that just a mere 1 Million Cypriots hold 50-55 Billion EU in banks while begging for a 10 Billion EU handout. Numbers don’t work. It IS mostly Russian money, as someone in Russian Duma let slip back on Tuesday, their holdings there do come up to about 50-55 Billion, this is just corporate funds plus some Russian government holdings as well. Add in private Russian money and you should see a complete picture.

No wonder a collective of EU representatives and Cyprus have been fellating Russians for the past few days, to no avail. Both Putin and Medvedev refused to even meet with them, all the discussions are done through intermediaries.

And no way in hell does EU tax that Russian money with impunity, one way or another EU will pay a heavy price if they do go through with the idiotic bank deposit tax. Close to 40% of natural gas that keeps EU working and warm comes from Gazprom, you can bet that Merkel is now facing limited gas availability as well as much higher prices to the tune of whatever EU steals from Russian bank deposits and then some. EU is in panic mode right, have no idea what else they expected from Russia, or any other country whose money were being confiscated “just because”.

If EU is not the culprit here, why is it that EU team has been on all fours in Moscow for the past few days begging.

riddick on March 22, 2013 at 1:16 PM

A View of Taxes from 1940

The demagogue tells the voters: “The state has to make large expenditures. But the procurement of funds for these expenditures is not your concern. The rich should be made to pay.” The The honest politician should say: “Unfortunately the state will need more money to cover its expenditures. In any case, you will have to carry most of the burden because you are receiving and consuming the largest share of the total national income. You have to choose between two methods. Either you restrict your consumption immediately, or you consume the capital of the wealthy first and then a bit later you will suffer from falling wages.”

The worst type of demagogue goes even further by saying: “We have to arm and possibly even go to war. But this not only will not lower your standard of living; it will even increase it. Right now we shall undertake a large-scale housing program and increase real wages.” To this we have to say that with a limited quantity of materials and labor we cannot simultaneously make both armaments and dwellings. Herr Göring* was more honest in this respect. He told his people “guns or butter,” but not “guns and (therefore) still more butter.” This honesty is the only thing Herr Göring will be able to claim to his credit before the tribunal of history.

Confiscation – Ludwig von Mises, Interventionism: An Economic Analysis [1940]
Source; Online Liberty Library;

IlikedAUH2O on March 22, 2013 at 1:34 PM

If only Cyprus had a printing press like the U.S., then they wouldn’t have these problems. Oh look…a unicorn!

dengony on March 22, 2013 at 5:43 PM