February 4, 2013 / 10:41 AM / in 5 years

UPDATE 1-Russia leans towards loan extension to Cyprus: minister

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By Alexei Anishchuk

SOCHI, Russia, Feb 4 (Reuters) - Russia is considering extending the maturity of a 2.5 billion euros ($3.4 billion) loan to help Cyprus manage its debt crisis rather than offering a new loan, Finance Minister Anton Siluanov said on Monday.

Cyprus, hit by its exposure to Greece and shut out of international financial markets for nearly two years, asked Russia last month to extend the 5-year loan that Moscow provided Nicosia in 2011.

The island, part of the euro zone, is seeking a bailout from the European Union and International Monetary Fund. Last year it also asked Russia for a new five billion euro loan.

“We are more looking into the second option (extension),” Siluanov told journalists.

“We are ready for softening (of the terms)... Restructuring of the debt is possible and we’ll see about the rates.”

He also reiterated Moscow’s position that the island will still need additional financial aid from Europe.

“Our concessions will not solve the problem of Cyprus,” Siluanov said.

Last week, Cypriot Finance Minister Vassos Shiarly said he expected Russia to extend the maturity of the existing loan to 2022 from 2016.

A draft memorandum of understanding between Cyprus and the EU and IMF says the island could need up to 10 billion euros to recapitalise its banks, undermined by an EU-sanctioned writedown of Greek government debt in early 2012.

In addition, the government needs up to 7.5 billion euros for its own budget. The banking figure could change pending the results of an asset quality review, now underway.

Some euro zone member states, notably Germany, have expressed unease at the island’s close business ties with Russia, and questioned its commitment to fighting money laundering. Cyprus says it has all the safeguards in place. ($1 = 0.7301 euros) (Reporting by Alexei Anishchuk; Writing by Lidia Kelly; Editing by Maya Dyakina/Ruth pitchford)

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