Russia is offering Cyprus more favourable conditions than the EU and IMF as the Meditarranean island seeks aid to shore up its banks, Cypriot President Demetris Christofias said Wednesday.
"The conditions offered by Russia are more favourable" because it does not "impose any conditions" and offers "a lower interest rate," Christofias, a communist, told the European Parliament.
Cyprus currently holds the rotating European Union presidency.
Aid from the EU and International Monetary Fund comes with strict conditions on economic policy as has been the case in Greece, Ireland and Portugal which have all needed bailouts while Spain is seeking help for its banks.
Experts from the European Commission, the European Central Bank and the IMF arrived in Cyprus on Tuesday to look into its request for financial aid.
The government has not said how much it is seeking but local media speculated it would need around 10 billion euros ($12.5 billion).
According a Cypriot diplomatic source, the island nation is also conducting negotiations in parallel with Russia, from which it secured a low-interest 2.5-billion-euro loan last year to cover refinancing needs for 2012.
Many Russian banks and businessmen keep funds in Cypriot banks.
On June 25, Cyprus became the fifth out the 17 countries that share the euro to seek a rescue, seeking funds to save Bank of Cyprus as well as Cyprus Popular Bank from massive losses linked to their holdings of Greek bonds.
A number of eurodeputies including conservative leader Joseph Daul of France called on Christofias to show "courage and determination" in pushing through EU reforms that are to usher in full economic and monetary union.
Up to now, "strict austerity policies implemented in reaction to the crisis not only did not resolve the problems but they worsened them," Christofias replied.
The former Cypriot communist party leader reassured eurodeputies that he "will not harm the EU.
"The communist will fight for a better Union, I will not start a revolution," he said.
Graham Watson, president of the European Liberal Democrat and Reform Party, cautioned that Cyprus should be wary of Russia's favourable conditions after securing last year's loan.
Nicosia should also secure another one from the EU executive, the European Central Bank and the International Monetary Fund, he said.
However Christofias told a press briefing that "conditions offered by Russia are more favourable," as Moscow "does not set any conditions" and merely offers "low interest rates. Period".
Rebecca Harms of the European Greens asked Christofias to reverse Cyprus' perceived position as a tax haven.
At 10 percent, Cyprus has one of lowest corporate tax rates in Europe which it sees as vital to attracting foreign investment and keeping its international business sector thriving.
The finance ministry in Nicosia has said that the low corporate income tax rate will not be up for discussion.
"Cyprus will fight to keep this system in place, our survival depends on it," said Christofias. Raising the tax to 15 percent would "immediately" lead to a flight of businesses to neighbouring countries, he added.