European leaders engineered a harsh bailout deal for this tiny Mediterranean nation in March and the Russians are now in a position to get something that has previously eluded even Moscow’s most audacious oligarchs: control of a so-called systemic financial institution in the European Union. http://www.nytimes.com/2013/08/22/world/europe/russians-still-ride-high-in-cyprus-after-bailout.html?pagewanted=1&ref=world
“They wanted to throw out the Russians but in the end, they delivered our main bank to the Russians,” said the Cypriot president, Nicos Anastasiades.

“Whoever controls the Bank of Cyprus controls the island,” said Andreas Marangos, a Limassol lawyer.

The March bailout hammered bank creditors and depositors in an early test of what has since become the official European Union policy of “bailing-in” banks. The policy is intended to force creditors and depositors to pay for a bank’s mistakes.
The exercise was meant to banish what Germany and other Northern European nations viewed as dirty Russian money from Cyprus’s bloated banks. Instead, it has pulled Russia even deeper into Europe’s financial system by giving its plutocrats majority ownership, at least on paper, of the Bank of Cyprus, the country’s oldest, biggest and most important financial institution.

The Bank of Cyprus still holds a uniquely influential position in the economic and political affairs of a sun-swept nation that sits on potentially large reserves of natural gas and straddles strategic fault lines between East and West.

Moscow, though furious over the billions lost by Russians in Cypriot banks, still sees Cyprus as a prize worth courting. The Russian government has pushed for access for its military aircraft to an air base in Paphos and for its warships to Cypriot ports.

Depositors with large accounts in Laiki Bank were initially left with just 100,000 euros each, about $130,000, and the rest of their money was confiscated as the bank shut down. Those with more than 100,000 euros in the Bank of Cyprus lost access to 90 percent of their cash.

The central bank said in a July statement that the Bank of Cyprus had been “fully recapitalized” thanks to the forced deposits-for-shares conversion and will now be able to “support the Cyprus economy.”

“It is ironic,” Michael Olympios, head of the Cyprus Investors Association said. “The Germans tried to get rid of Russian money and they ended up with a shareholder structure stacked with Russian oligarchs.”