Cyprus, Russia discuss banking, natural gas deals

Cyprus and Russia are discussing cooperation in the banking and energy sectors in addition to a loan, and any deal to solve the island's debt crisis should also be in Moscow's interests, the Cypriot finance minister said on Thursday.

"There's a lot of teams now working on a number of issues. Banks, natural gas, are there opportunities (on which) we can base some cooperation and some support from Russia," Finance Minister Michael Sarris told reporters in Moscow.

"We've asked for help clearly, but something that would make also economic sense for Russia."

Sarris was holding a second day of talks with Russian officials after the Cypriot parliament on Tuesday threw out a proposal to tax bank deposits in return for a 10-billion-euro bailout from the European Union.

With banks on the Mediterranean island shut all week, the Cypriot government could be ready to put assets up as security for a 5 billion euro Russian loan that would avoid the levy on depositors, many of whom are Russian.

Sarris is also seeking to extend and lower the cost of an existing 2.5 billion euro loan from Moscow.

Russian Finance Minister Anton Siluanov said talks in Moscow would continue.

Analysts and sources have suggested that Russian state development bank VEB could become involved in a rescue package. No immediate comment was available from VEB.

"It might be possible for part of this loan to be convertible over time to equity in Cypriot assets, such as privatized state assets and hydrocarbon rights," Jacob Nell, a Moscow-based economist, said.

"There are precedents in Belarus and Ukraine for similar deals involving Russia," said Nell, referring to deals with Russia's ex-Soviet neighbors in which debts owed to state gas export monopoly Gazprom were swapped for assets.

(Reporting by Darya Korsunskaya and Lidia Kelly; Writing by Maria Kiselyova and Douglas Busvine, Editing by Timothy Heritage)