Cyprus finance minister says preselling gas reserves an option to pull country out of crisis

NICOSIA, Cyprus – Cyprus may presell the country’s offshore natural gas reserves to raise cash quickly and pull it out of its deep financial crisis, the country’s finance minister said Thursday.

Harris Georgiades said the country’s nascent gas sector still has some way to go before such weighty decisions are taken. But all options that will help the country extricate itself from the tough terms of multibillion euro rescue package that it negotiated with its euro area partners and the International Monetary Fund last March will be poured over.

“All possibilities will be examined within the framework of taking those decisions that will maximize the benefit for our economy,” Georgiades told the Associated Press in an interview when asked if the government is mulling such a gas presale.

Cyprus energy officials estimate that Cypriot waters hold about 60 trillion cubic feet (1.7 trillion cubic meters) of gas, enough to cover domestic needs for decades and supply energy-hungry foreign markets.

One recently discovered field that U.S. firm Noble Energy and Israeli partner Delek are developing is estimated to hold 5-8 trillion cubic feet (140-230 billion cubic meters) of gas.

Oil and gas companies including Italy’s ENI, France’s Total and South Korea’s Kogas have been licensed to search for mineral deposits off the island nation’s southern coast and are expected to spearhead development of a gas processing facility that will liquefy the gas for easier export.

But Georgiades said any future gas revenue won’t detract the government from enacting “whatever it takes” to fix a broken economy, including tackling an oversized public sector that had taken up nearly a third of all government spending.

The Cypriot economy is projected to shrink by 13 per cent of gross domestic product in the next couple of years and see joblessness rise to 14 per cent.

“We are very determined to take all necessary decisions irrespective of how unpopular we might be. It’s not a popularity contest…It will not be easy, I’m not going to present a rosy picture,” Georgiades said.

Georgiades said that limits on bank transactions that were put in place last March to prevent a bank run will be fully lifted eventually, but authorities won’t act “hastily” before trust is fully restored in the shaky banking system.

The limits, which include a daily withdrawal cap of 300 euros, were deemed necessary after the bailout agreement forced depositors with more than 100,000 euros in the country’s two largest lenders to incur significant losses. The country’s No. 2 bank Laiki, which was hardest hit from its exposure to toxic Greek debt and loans, has been wound down and folded into the larger Bank of Cyprus.

Nobody can offer a date because that won’t be done on the basis of a time frame but rather on the basis of how the market and the banking system are reacting to developments,” Georgiades said. “I see positive signs, but we shall not be making hasty steps. This has to be done carefully, not under the pressure of time.”

Georgiades said selling Cyprus’ gold reserves — another bailout condition — may not be necessary if the country finds other income to repay a 10 billion euro loan that the country will receive from other Eurozone countries and the IMF over the next four years.

“I think it goes without saying that if we’re able to determine alternatives, then there will be no need to dispose of the gold reserves,” he said, adding that Cyprus could have benefited from a “rather larger” loan that would make it easier for the country to meet its fiscal targets.

Georgiades said there would be no delay to Russia’s easing of the terms of a 2.5 billion euro loan it granted Cyprus in 2011, when it lost access to bond markets.

He said Moscow made it clear that it would lower the 4.5 per cent interest rate on the loan and extend the 2016 repayment deadline by several years once the entire bailout procedure was completed.

Cyprus received its first installment of around 2 billion euros in bailout cash this week.

Georgiades said two recently-concluded independent audits have dispelled any notion that Cypriot banks were money laundering hubs. Media reports, especially from Germany, had suggested that Russian oligarchs had preferred Cyprus’ banks to launder their ill-gotten money.

“The two audits that were commissioned verify that this bad press was unfair, unfounded and excessive,” Georgiades said. He added that Cypriot authorities would move to eliminate any loopholes that the audits had pinpointed.