UPDATE 2-Cyprus options narrow as no deal on Russia funding

Fri Mar 22, 2013 4:00am EDT

* Russian FinMin says talks end without result

* Says no Russian investor interest in Cypriot gas reserves, banks

* Says no loan talks ahead of EU bailout decision

* Outcome cuts island's options for averting financial meltdown

MOSCOW, March 22 (Reuters) - Talks in Moscow on a possible funding lifeline from Russia to Cyprus ended without result, further cutting the island's options for raising the billions of euros it needs to find by Monday to avert a financial meltdown.

Russian Finance Minister Anton Siluanov said on Friday the two days of talks had yielded nothing new, adding that Russian investors were not interested in Cyprus' offshore gas reserves or its financial sector.

"The talks have ended as far as the Russian side is concerned," Siluanov told reporters.

The talks between Siluanov and his Cypriot counterpart Michael Sarris broke up overnight without even an agreement to extend an existing 2.5 billion euro ($3.2 billion) loan to the Mediterranean island, leaving Sarris to fly home empty-handed

Sarris said on Thursday that the discussions also involved possible Russian investments in Cypriot banks and energy resources.

Siluanov said the structure proposed by the Cypriot side was to create a state company and transfer energy assets to it. The entity would issue bonds to Russian investors who would have an opportunity later to gain an equity interest.

"Our investors reviewed this question and did not show any interest," Siluanov said, before a meeting with European Union officials in Moscow.

"They wanted to transfer shares of (the state energy firm), of banks and other assets that they could put up for disposal. They also proposed to us that we go into these banks. But not one of our lenders showed any desire to do so."

An extension of the Russian bailout loan was not discussed, Siluanov added, because it would impinge on sovereign debt ratios that would determine whether an EU bailout of Cyprus was viable.

"We await the decision of the EU Troika (lenders), and based on that we will ... take a decision on our participation in part of the debt restructuring."

The lenders have promised the island a 10 billion euro bailout, but to obtain those funds Cyprus needs to find 5.8 billion euros in new money by a Monday deadline, and avert a collapse of its financial system that could push it out of the euro zone.

Angry Cypriot lawmakers on Tuesday threw out a plan to raise the 5.8 billion through a tax on deposits, calling the EU-backed proposal "bank robbery".

A spokesman for the Cypriot embassy said Sarris was due to take the 11:55 (0755 GMT) daily flight from Moscow to Nicosia.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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