MacroScope

They’ve only been looking for it for a day but Cyprus’s Plan B has already taken on mythical status. A myth it might remain.

Ideas being floated include nationalizing the pension fund (back of the envelope calculations suggest that will raise less than a billion euros) and issuing bonds underpinned by future natural gas revenues (but no one is really sure how much they are worth). So to avoid default it still looks like the Cypriots may have to return to the bank levy they rejected so decisively in parliament on Tuesday, to raise the 5.8 billion euros the euro zone is demanding in return for a bailout.

Finance minister Sarris is still in Moscow hoping for some change out of the Russians and is out this morning saying discussions are ongoing about banks and natural gas.

An existing 2.5 billion euros loan may be extended and on better terms – though there is some doubt even about that. But anything further looks much tougher to secure. Moscow will clearly adopt a “what’s in it for us” attitude and unless it gets its hands on untapped offshore gas reserves for a knock-down price it’s hard to see much money changing hands. The idea floating around yesterday that an essentially failed Cypriot bank could be bought for a chunk of cash seems somewhat fanciful.

Sarris said any help would have to make “economic sense” for Russia. If Moscow merely offered more loans, the euro zone and IMF would presumably say that takes Nicosia’s debts to unsustainable levels so it’s not clear that would work either. After likening the EU to a “bull in a china shop”, Russian Prime Minister Dmitry Medvedev mused this morning that Moscow might review the share of euros it holds in its reserves, saying what was done to Cyprus could happen to Spain or Italy. Medvedev meets a European Commission delegation headed by Jose Manuel Barroso later today. This increasingly feels like a Russian/EU powerplay with Cyprus as the pawn.

The slow motion Cypriot car crash of the past five days reached impact point last night when not a single lawmaker voted for the bailout with bank levy attached – the first time a euro zone legislature has simply said no.

So what next? The finance minister is in Russia, ostensibly to seek an extension on an existing 2.5 billion euros loan on better terms, but could there be more on offer besides? The Eurogroup made clear last night that the 10 billion euros bailout was still on the table but that Nicosia had to come up with 5.8 billion euros of its own – the sum that a levy on bank depositors was supposed to raise. Could Moscow fill that gap, maybe in return for a slice of the island’s untapped offshore gas reserves? It looks unlikely but not impossible and there are powerful geopolitics at play. That there will be no more money from the euro zone looks like a given and there seems to be a resolve that it would be better to let Cyprus default then buckle at the last moment.

Finance minister Sarris has just said he hopes for a deal on the existing Russian loan today. In Nicosia, the president is meeting party leaders.

This week has seen a rush of key policymakers and business executives from Africa flocking to London. Apart from Sierra Leone, oil and gas executives have been discussing the outlook for Equatorial Guinea, a small central African state rich in oil.

Equatorial Guinea made a relatively rare foray into the global news earlier this month for a presidential pardon of  former British army officer Simon Mann, who was serving a 34-year prison sentence in the country for his role in a failed coup d’etat in 2004.

Gabriel Obiang Lima, vice minister of mines, industry and energy, was in London to talk about his ambition for the country. “Our aim is not to be the Kuwait of the region. It’s to be the Singapore of the region,” he told dozens of business executives in a conference in London on Wednesday.