Until last weekend, Cyprus was seen as a sort of Delaware of the European Union: a state within a larger union with pointedly transparent tax and regulatory advantages. Unlike typical "offshore banking" destinations, say the Cayman Islands (UK), the Isle of Man (UK), the Seychelles or the Bahamas (note the British affiliations here), Cyprus was quite open and legalistically committed to that openness through bilateral tax agreements with most of the nations who's nationals did business or banking on the Island. Like Delaware in the United States, the corporate law in effect in Cyprus made it an advantageous place for companies that did business elsewhere to incorporate.
The bilateral tax treaty in effect with Russia combined with the British based legal system (same one that smiles on all those other islands listed above) to make it particularly attractive to Russians. Sadly for Russians this is because the mafia governing their periodically great nation gives its hard working countrymen every incentive to expatriate earnings, if not themselves, to preserve what wealth or life they can against a blatantly authoritarian and violence prone state. In a sort of Stalinist reprieve, by ceding power for a moment to the "reformer" Medvedev, Putin was able to empower his domestic opposition to expose themselves to the crackdown he is now, back in power, pursuing. So the self stigmatization Russia has embarked on has been pressed into service to stigmatize the Cypriots who afforded some Russians some legal and economic shelter.
I don't doubt that corrupt and crooked Russians did business in Cyprus. They probably won't any more. But then what with the London Whale, LIBOR, robo-signing, rampant foreclosure fraud, MF Global, HSBC money laundering and a near limitless list of like felonies American banks are documented to continuously engage in under the grateful eye of the regulators they pay, and in the future will no doubt employ directly, I find the "Russian money laundry" meme with regard to Cyprus ironic (if not gallingly hypocritical). That anyone continues to buy this rubbish is evidence of the masterful propaganda instrument the C suites of our profit driven media have happily transformed their institutions into. If the Feds are to be cut in on the take in all these crimes, why shouldn't media executives be as well? One must admit the money's been great so far.
So it came as something of a shock to the system when the people's representatives in Cyprus actually represented the people, blocking the bald theft proposed by the Troika and forcing for the first time the disembodied head of the European Union to consider the causal chain that historically led to the present tradition of creditor seniority culminating in deposit insurance. That affront to disembodied power has now been repaid by destroying everything else in the Cypriot economy but insured deposits. The Troika obviously didn't even consider what the consequences of eliminating all commercial liquidity on an island of several million might be, unless they are simply psychopaths and don't care (a real possibility, unfortunately).
So frightened in 1804 was the elected oligarchy (what else can you call the "representative" government of a slave state?) of the United States that when Haiti achieved its independence the American response was to impose on it reparations to France, making Haitians purchase the freedom their friends and families had already fought and died for. This is exactly the kind of "sanctity of contract" our current oligarchs here and abroad insist on when applied to the powerless and quite similar to what the Troika has imposed on Cyprus. So where the American financial system has in these last four years, through forgeries of deeds, titles, allonges, and innumerable other foreclosure documents hopelessly clouded the owner ship of real property, an "achievement" it took Soviet Communism eighty years to accomplish in Eastern Europe, the Troika is attempting to do in Cyprus in months what it took centuries to "accomplish" in Haiti.
May the bastards responsible burn in hell.