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Tuesday, March 19, 2013 2:55 PM

EU Blinks Already? Staged Vote? Cyprus Finance Minister Proposes Deal with Russia; Will That Fly?

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Staged Vote?

In spite of the 1-Not Present, 36-No, 19-abstentions vote in the Cypriot parliament, one really has to wonder if this was a staged vote to show solidarity with Cypriot citizens, with some sort of face-saving deal already approved for tomorrow (in which the Cypriot parliament votes yes by a slim majority in return for minor concessions from the ECB and Germany).

In short, it is unclear if we really know what is happening in the Cypriot parliament.

Note: I originally posted that as 1-Yes vote but the "1" was actually a member of parliament who was not present.

EU Blinks Already?

While pondering that thought, please consider the Bloomberg Tweet "The ECB reaffirms its commitment to provide liquidity as needed within the existing rules"

What precisely does that ECB statement mean? Did the ECB just blink, or was that a meaningless statement counting on "existing rules" to lay the hammer on Cyprus once things calm down a bit?

What About Russia?

In other conflicting news, a CNBC headline reads Gazprom Is or Is Not Offering Cyprus a Bailout.

The latest news: Russian energy giant Gazprom either has or has not offered to bail out the country in exchange for exploration rights.

Cypriot President Nicos Anstasiades is not willing to discuss the Russian's offer, according to Newsit, [which] cited an anonymous source close to the President.

But the Russian news agency ITAR-TASS says no such offer is on the table although the offer has been "initiated." Also, Gazprombank's spokesman both could and could not be reached for comment.
Well, that sure clears things up, doesn't it?

And adding to the confusion, there were rumors today that Cyprus Finance Minister Resigns, President Refuses To Accept Resignation, complete with official denials.

Is there a Gazprom Offer On the Table?

World News Australia reports Cyprus finance minister heads to Russia amid an explosion of anger over a bank levy that could cost investors billions of euros.
Cyprus Finance Minister Michalis Sarris is heading to Moscow amid an explosion of anger over an EU bailout deal that could cost Russian investors billions of euros.

Local media said the main aim of the visit was to discuss a 2.5 billion euros ($A3.14 billion) loan that Moscow extended to Nicosia in 2011 at a rate of 4.5 per cent.

Sarris's brief was to lower that rate and extend the loan's expiration date until 2020 from 2016, the reports said.

In exchange, Moscow was reported to be seeking details about Russian billionaires who held accounts on the island. Russia was also said to be interested in buying a majority stake in Cypriot lender Patriot Bank that is in need of rescue.
Cyprus Finance Minister Proposes Deal with Russia

The Wall Street Journal reports Cyprus Finance Minister to Offer New Plan in Bid for Russian Support
Cyprus's finance minister is set to present a plan to his Russian counterpart in Moscow Wednesday aimed at saving the country's financial sector, a government official said Tuesday.

The official said that Michalis Sarris, who is being accompanied by a delegation of businessmen, is going to propose a deal that includes imposing a 20% to 30% levy on Russian-held deposits in Cypriot banks, which could cost them billions of euros. In exchange, Russia will be given equity in Cyprus's future national gas company and some additional strategic benefits in the sector, while Russian investors would be given control of the board of directors at Cyprus's banks.

There were unconfirmed reports Tuesday that Mr. Sarris had resigned as finance minister, but officials did say he was on a plane heading for Russia.

However, the deal looks like a long shot. Ahead of the visit, Kremlin spokesman Dmitry Peskov said: "It's practically impossible to talk without knowing the details."

"The situation is very difficult--unprecedented--and we don't understand what's happening," he said. Mr. Putin hasn't spoken to his Cypriot counterpart, he added.
What's Really Happening?

"The situation is very difficult--unprecedented--and we don't understand what's happening."

That line is a succinct summation of the situation regarding staged votes, the possibility of the ECB blinking, and Gazprom offers.

One thing is for sure, if the ECB did blink, one of the reasons would be fear of driving Cyprus further into the hands of Russia.

Mike "Mish" Shedlock

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