The gas reserves of Cyprus apparently do not sufficiently tantalize the Russian government, at least not enough to persuade Mr. Putin to lend the Mediterranean island some six billion Euros. The government of Cyprus has a new plan to give the big investors a haircut, but it still won't be enough (only about two billion Euros), and the EU is unlikely to approve it.
The Wall Street Journal today editorializes in favor of bankruptcy as the best option for the Cypriot banks, which is what probably should have happened to some US companies in 2008. After a 40 percent loss for large investors (accounts with $100,000 or more Euros), the bankrupt banks would be reorganized. Oddly, some Russian investors in Cyprus would have a big position in the new banks, not that that would be a huge consolation to them.
My Discovery colleague Yuri Mamchur thinks that the political/military temptation for the Kremlin is insufficient to justify the risk of a big loan to the insolvent Cypriots. I guess the gas reserves are in the future and the payout for a loan would be today, so no deal (at least not yet). Also, Yuri points out, the Russian oligarchs who will get the haircut are not the reason Mr. Putin is in power, so why save their tax avoidance schemes?