MOSCOW, March 18 (RIA Novosti) – The Russian ruble and stocks plummeted at the opening of a trading session on the Moscow Exchange on Monday amid investors’ growing concerns over the Cyprus bailout deal and fears of an escalation of the eurozone debt crisis.
As of 11:50 a.m. Moscow time, the ruble had fallen by 24 kopecks against the US dollar to 30.8925 and gained 15 kopecks against the euro to 39.8645. The ruble-denominated MICEX stock index sagged by 2.86 percent to 1,452.28 points and the dollar-denominated RTS index nosedived by 3.59 percent to 1,482.52 points.
International prices for the benchmark Brent crude shed 1.31 percent in Monday morning trade to $108.38 per barrel. The euro sank against the US dollar to $1.2903, down from $1.3076 in late North American trading on Friday.
Investors across the world were rushing to safe-haven US dollars and dumping risky assets, including the Russian ruble and stocks, following the news that the European Union and the IMF agreed on Saturday to bail out the debt-laden Cyprus economy and grant the island nation a loan worth 10 billion euros ($13 billion) in return for the Cyprus government’s obligation to tax all deposits kept at Cypriot banks.
Under the terms of the bailout deal, Cyprus will have to impose a levy of 6.75 percent on deposits of less than 100,000 euros and 9.9 percent on deposits with greater sums. Cypriots reacted with shock and rushed to cash machines to withdraw their savings, but many machines refused to pay out.
Cypriot President Nicos Anastasiades said he had to choose between the "catastrophic scenario of disorderly bankruptcy and the scenario of a painful but controlled management of the crisis".
The bailout plan has yet to be approved by the Cyprus parliament, with the vote on the bank deposit levy scheduled for Tuesday.
Russian corporate and individual depositors are likely to lose about 2 billion euros, if the Cyprus government imposes a levy on bank deposits, with their funds kept at the island nation’s banks estimated at about 20 billion euros, according to experts of the international rating agency Moody’s.
Russia’s former finance minister Alexei Kudrin warned in January that debt-saddled Cyprus may spark a new flare-up of the debt crisis in Europe.
“The Cyprus problem is becoming very acute. Cyprus could trigger an expansion of the debt crisis,” Kudrin said.
Cyprus officially applied to the European Union and the IMF for financial aid in mid-2012 in the hope of shoring up its banking sector, which had been battered by the eurozone sovereign debt crisis as local banks had to write-down billions of euros in “voluntary” Greek debt restructuring.
The Cyprus government, whose debt is now junk-rated by all three major rating agencies, cannot raise funds in international capital markets to cover its financing needs.
Updated to account for Cyprus parliament's decision to postpone voting on the levy until Tuesday.