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Cypriot Finance Minister Michalis Sarris failed to make progress in Moscow on Wednesday amid efforts by a tough-bargaining Russia to win lucrative assets in exchange for loans to the debt-ridden state.
Russian Prime Minister Dmitry Medvedev charged that the bailout of Cyprus had been bungled and warned that the island nations' rescue should not damage Russian-EU relations.
Sarris held separate meetings with his Russian counterpart Anton Siluanov and First Deputy Prime Minister Igor Shuvalov about how to make up for the shortfall left by the island's refusal Tuesday to adopt a levy on bank deposits.
The controversial levy that aimed to raise 5.8 billion euros ($7.5 billion) was the key condition for the EU and IMF to unlock 10 billion euros in bailout loans.
The Cypriot government is now scrambling to find alternative ways of raising the funds to get the EU-IMF rescue loans.
Cyprus also hopes to ease the terms of a 2.5-billion-euro ($3.2-billion) loan Moscow afforded Nicosia in 2011 that matures in 2016.
"We had a very good beginning. We had a very good, honest and open discussion," Sarris told reporters.
But a Russian government source told AFP that both rounds of talks produced no tangible results.
"There was no progress achieved today. The talks will continue on Thursday," another government source told the Prime news agency.
Sarris has vowed to stay in Moscow until some agreement is reached that could help his country's banks avoid bankruptcy and the island from going into default.
Analysts said it is very much in Moscow's interests to make sure that Cyprus -- one of the world's main gatekeepers of offshore Russian accounts -- does not fail.
"It makes sense for Russia to extend the loan, but at what price -- these are the things they are discussing now," said Renaissance Capital's chief economist Ivan Tchakarov.
"It is not a pretty picture," added Political Information Centre analyst Alexei Mukhin. "Russian officials have a reason to be angry with Cyprus."
Sarris's visit comes just a day after furious Cypriot lawmakers rejected a highly unpopular measure that would have slapped a one-time fee of up to 9.9 percent on bank deposits of over 20,000 euros.
Moscow officials have signalled that the fate of the new loan talks has been jeopardised by Cyprus's failure to warn Moscow about the possibility of it slapping a levy on deposits.
Russians -- people ranging from members of the middle class to the super-rich tycoons who seek to avoid taxes back home -- have $31 billion in private and corporate cash deposited in the island's teetering banks.
Medvedev had scathing comments about the handling of the bailout and reproached the EU for having kept Russia in the dark about the bank levy.
"It seems to me that every mistake possible in this situation has been made," the prime minister was quoted as saying by the Interfax news agency.
"Such negotiations and such decisions should have been discussed with the different parties concerned," he added.
Medvedev warned the eventual solution adopted should "aid Cyprus and not harm our relations with the EU."
Russian President Vladimir Putin had Monday lashed out at the proposed levy as "unfair, unprofessional and dangerous".
Analysts said that it was now up to Cyprus to offer prime assets to Moscow if it wanted to appease Putin and his team.
Local media have speculated that one idea involved Russian natural gas giant Gazprom coming in and infusing Cyprus's banks with cash in exchange for an interest in the island's offshore energy fields.
Gazprom denied on Wednesday that this offer -- also reported by Cypriot media -- was under serious consideration.
Other reported proposals involve huge Russian financial institutions such as VTB absorbing struggling Greek lenders and accepting their bad debts.
VTB for one said on Wednesday it was not interested in such investments.
But Tchakarov of Renaissance Capital said "there is good reason for Russia to be a part of the solution given the exposure that Russia has. There is a key interest in that".
Cyprus was also reportedly considering the option of privatising its pensions programme and offering Russia and some European institutions a stake.