Cyprus Finance Minister Constantinos Petrides expressed his grave concern over inflationist pressures, noting this is the “most dangerous parameter of the crisis” with unknown results.

Speaking in a panel discussion with Energy Minister Natasa Pilidou during the 12th Nicosia Economic Congress, Petrides said the policy of imposing a green tax on fuel prices should be revised with a view to smooth out green transition and to reduce social consequences.

Petrides’ remarks come in the backdrop of rising inflation, due to the rising demand as the world economy is recovering from the COVID-19 pandemic, while the Russian invasion in Ukraine exacerbated inflationist pressures due to rising energy prices.

He noted that the current inflation, which has the characteristics of the 1970s oil crisis, can be difficultly tackled because it stems from imported energy and grain products whose prices are rising and it is unknown whether it will abate.

“If this situation continues, surely many countries’ economic policies will have to be readjusted, more public money will be targeted towards the vulnerable to avert the possibility of energy poverty and to protect the most vulnerable groups because they will bear the brunt of inflation,” he said, adding he is not optimistic on whether inflation can be curtailed.

Limited exposure to Russia

Concerning Cyprus’ exposure to Russia, Petrides said the exposure of the Cypriot banking system to Russian is very low with Russian deposits at 3.8% of the total and just 0.8% being exposed to Russia, while the Cypriot Central Bank holds no Russian reserves.

Surely some transactions will be affected but the impression that Cyprus is overexposed to Russia is false, he added.

Cyprus should be a part of Europe’s energy diversification, Pilides says

On her part, Pilidou referred to the feasibility studies for the EastMed, a pipeline aspiring to link the Eastern Mediterranean natural gas deposits with Europe via Cyprus and Greece, stating that the project’s viability will be determined by the discovery of the appropriate natural gas quantities and finding the suitable markets.

She also noted that if the project would proceed, this should be done immediately, as Europe has some short-term needs, adding however that it is not certain that all the Egyptian and Israeli natural gas deposits would be available for export to Europe, as these countries have significant domestic markets to satisfy.

Referring to the Cypriot natural gas discoveries, Pilidou said particular effort and importance is needed, as the war in Ukraine highlights the need of reducing the dependency with certain energy markets.

“Our effort is not only to continue our exploration programme but to be part of the plan for reducing dependency which will not be easy, given that Cyprus does have deposits which can be immediately utilised but require some more years to be exploited even in the most expedited process.

So far Cyprus has one confirmed natural gas deposit in Aphrodite gas field in block 12, which is estimated to hold 4.5 trillion cubic feet, while explorations in Glaucus gas field in block 10 revealed a gross mean of 5 to 8 tcf.