MOSCOW is counting on the changing perceptions of Cyprus as a haven for Russian companies to help fulfill the city’s goal of becoming a global financial centre, according to a minister in the municipal government.

“It’s totally changed the perception of Cyprus and it’s a good thing for Russia,” Sergey Cheremin, head of Moscow’s department for economic and international relations, said in an interview at Bloomberg’s headquarters in New York yesterday.

“It shows those Russians who keep their accounts in Cyprus that it’s not a heaven, it’s a hell. It will encourage a lot of Russian companies to concentrate their resources in Moscow.”

Cyprus’ plan to rescue its economy through a tax on savings accounts sent Russian stocks to a three-month low as Moody’s Investors Service said it may affect $60 billion of loans and deposits from Russia, which has a double-tax avoidance treaty with the island nation. The Bloomberg Russia-US Equity Index of the most-traded Russian companies in the US fell for a third day in New York on Tuesday, to the lowest level since December 10.

Russia has been modernising the Moscow Exchange, its main stock and fixed-income bourse, and hired Goldman Sachs Group Inc. last month to burnish the image of the nation, which ranked 112th on the World Bank’s Doing Business survey in October.

Prime Minister Dmitry Medvedev made turning Moscow into an international financial centre a key goal when he was president in 2008. The city is holding its first international non-deal roadshow this month to lure foreign direct investment to a city that needs to spend $10 billion a year upgrading its transport infrastructure, Cheremin said.Tax rejected:

The Cypriot parliament rejected the bank deposit levy in a vote on Tuesday after the proposal roiled global markets. Stock of VTB Group, a Russian state-backed lender with a unit in Cyprus, sank to the lowest level since November in Moscow.

The plan to tax bank deposits was aimed at securing European aid after Cypriot banks lost 4.5 billion euros ($5.8 billion) on Greek sovereign debt. Russian President Vladimir Putin called it ‘unfair, unprofessional and dangerous.’ Cyprus is the biggest direct investor into Russia and the chief recipient of Russian investment abroad because of the treaty and low tax rates, according to central bank data.

“Naturally a big chunk of this money pot would move back from Cyprus to Moscow,” Luis Saenz, head of equity sales at BCS Financial Group in London, said by e-mail on Tuesday.. “Russia bled billions of dollars every year in lost income tax and value-added tax from money being funneled through Cyprus.”

Cyprus’ Finance Minister Michael Sarris is to hold talks in Moscow with Russia’s government over financial assistance. Russia, which defaulted on $40 billion of domestic debt in 1998, ‘never dared’ to impose anything like a savings tax, First Deputy Prime Minister Igor Shuvalov said to reporters in Kazan yesterday.

“It’s bad that someone’s going to lose something, but from the point of view of what Russia stands to gain, Russia is more likely to gain than lose” from the Cyprus situation, he said. —Washington Post/Bloomberg