Cyprus Still Looking to Russia for Help: Finance Minister

Yiannis Kourtoglou | AFP | Getty Images

Cyprus Finance Minister Haris Georgiades

Cyprus is continuing talks with the Russian government to relax the terms of a 2.5 billion euro loan, the country's finance minister told CNBC on Monday ahead of a meeting of euro zone finance ministers who are expected to approve a first bailout payment to the country.

The loan was granted to Cyprus in 2011, but Russia refused to offer the island further financial assistance in late March. Cyprus secured a deal with its euro zone peers and the International Monetary Fund instead, but was forced to inflict losses on uninsured depositors as part of the rescue. Many large-scale foreign investors in Cyprus were believed to be Russian.

Georgiades, who replaced Michalis Sarris as finance minister last month after just five weeks in office said the Russian government had been very positive in discussions, and said the Cypriot government was determined to "do the job."

"We have been in talks with Russian government – we are very grateful (to the) Russian government for offering this loan in the first place. How well we have handled that opportunity is a different story," he said. "We are once again asking for the support of the Russian government in relaxing the terms of the loan," he added.

(Read More: Cyprus Finance Minister: We'll Do Everything It Takes)

The Russian deputy finance minister said an agreement to extend the terms of its 2.5 billion euro loan to Cyprus had not yet been made on Saturday.

"There was a request ... to change the duration of the loan, we promised to think about it," Sergei Storchak said after the European Bank for Reconstruction and Development annual meeting speaking through an interpreter.

"For that to be a done deal, we need to have it on paper," said Storchak.

"The Russian government is positive and has expressed it willingness to look into our demands. We have been in contact with the Russian government informing them that everything else is in position," added Georgiades.

Capital Controls Easing?

Cyprus became the first euro zone country to impose capital controls to prevent a collapse of its banking sector as it scrambled to secure the 10 billion euro bailout.

The controls were imposed in the country following a nearly two-week emergency bank holiday on the island while the negotiations were taking place.

Georgiades said progress is being made on the "tricky" banking sector in Cyprus

"We have already significantly relaxed these restrictions, they are nothing like they were a month ago," said Georgiades .

(Read More: Mystery Deepens: Has Cyprus Extended Capital Controls?)

Georgiades told CNBC he was eager to repair any damage to relations with Brussels, and said Cyprus will impose fiscal discipline in order to make ends meet.

"The government is eager to get down to work as far as these structural measures, these big reforms that were needed," he said.

"Progress is being made on the banking sector, that is a tricky sector I have to admit. In any case we shall at last be imposing fiscal discipline, we are ready to make ends meet – even if it is going to be a difficult year or two ahead of us for public finances but mostly for the real economy. We shall do it with determination," he added.

"We are making good progress, if I can remind you of all those doomsday scenarios we faced a month and a half ago, like the complete collapse of our banking system," he added.