Russia spurned Cyprus's offers of assets for a bailout as theisland nation's lawmakers begin debate on legislation to avert afinancial collapse.

“I think we aren't able to get the support that we wanted toget,” Cypriot Finance Minister Michael Sarris said in an interviewafter checking out of the Lotte Hotel in Moscow. “But we must goback home because things are getting serious.”

Cypriot lawmakers begin debating legislation today to prevent afinancial meltdown as the European Central Bank threatens to cutoff a lifeline for the country's banks in three days unless abailout agreement with the European Union is reached. Russiancompanies and individuals may have about $31 billion of deposits inCyprus, which in turn is the biggest source of foreign directinvestment in Russia.

“The only thing that Cyprus could hope for is Gazprom buyingsome reserves from them,” Vladimir Kolychev, head of research atSociete Generale SA's Rosbank unit in Moscow, said by phone. “It'snot clear what these gas reserves are worth, and apparently Gazpromwasn't particularly interested.”

Russia has ended talks with Cyprus and will decide onparticipating in restructuring debt after the so-called troikaoverseeing euro-area bailouts makes its decision, Finance MinisterAnton Siluanov told reporters today. The troika comprises officialsfrom the European Commission, ECB and International MonetaryFund.

“We didn't close the door, didn't say we won't discussanything,” Prime Minister Dmitry Medvedev said today at a briefingin the Russian capital with Jose Barroso, head of the EuropeanCommission. While “we are prepared to discuss various options forsupporting” Cyprus, Russia's possible assistance is contingent on aconsensus over a rescue plan between the nation and the EU, hesaid.

A solution to the crisis “can be found” and it must beacceptable to all members of the currency union, Barroso said. “Ibelieve there is no time to lose,” he said.

Sarris met with First Deputy Minister Igor Shuvalov and Siluanovon March 20, asking Russia to restructure a 2.5 billion-euro ($3.2billion) loan that was granted in December 2011 by extending itsduration beyond 2016 and lowering the rate. The Mediterraneanisland nation is seeking to overcome a deadlock after lawmakersrejected an unprecedented 5.8 billion- euro levy on bank depositsthat the Eurogroup proposed.

'Not Ready'

“I think the loan will be extended and the conditions adjusted,”Sarris said. “But the rest of the support, we are not ready to haveconcluded anything.”

A new loan to Cyprus wasn't considered because it would haveexceeded a European debt limit, Siluanov said. Cyprus had askedRussia for about 5 billion euros, three Russian governmentofficials said yesterday, asking not to be identified because thetalks were private.

The euro-area nation sought to attract Russian capital into aproposed investment fund that would include gas, banking and otherassets, intended to help raise the 5.8 billion euros needed totrigger emergency loans, Siluanov said. “Investors didn't showinterest,” he said.

OAO Rosneft and OAO Gazprom, Russia's state-run oil and gasproducers, received an offer only to participate in tenders forCypriot offshore assets and weren't interested, a Russiangovernment official said today. State-run OAO Sberbank and VTBGroup, Russia's two largest lenders, said they didn't plan to buyassets in Cyprus.

Sarris said March 20 that talks would last “as long as ittakes,” while his hotel room had been booked until March 25,according to hotel reception.

The euro appreciated 0.2 percent to $1.2929 at 1:52 p.m. inMoscow. Russia's Micex Index declined 0.8 percent to 1,448.11,while the ruble was little changed at 34.9767 against the centralbank's target dollar-euro currency basket.

Russian companies and individuals have $31 billion of depositsin Cyprus, according to Moody's Investors Service. Including loansto companies registered in Cyprus, Russia's exposure is about $60billion, Moody's estimates.

Bloomberg News

Copyright 2018 Bloomberg. All rightsreserved. This material may not be published, broadcast, rewritten,or redistributed.