When Cyprus in June 2012 came to the EU to ask for a bailout, Brussels decided that this time round things should be different. No simple bailout like in Greece, Ireland or Portugal, but something that would put more of a burden on those who had been responsible for the financial mess: the banks.
With European taxpayers increasingly worried about paying for southern Europe, Brussels made a stand. Cyprus got its helping hand - but with severe conditions. The troika of EU, European Central Bank (ECB) and International Monetary Fund (IMF) decided for a bail-in, i.e. investors had to shoulder part of the bill.
In return for 10 billion euros ($13.6 billion) to be paid out unil 2016, the troika demanded the winding up of the country's second-largest bank Laiki and a haircut on deposits over 100,000 euros in its largest lender, Bank of Cyprus. To compensate for their losses, the investors got shares.
What few people seemed to have realized though was that this meant that the majority of shares would almost over night be in the hands of foreigners, most of them: Russians. In September, six Russians were in fact appointed to the 16-member board of directors of the bank.
Even more dependant on Russia
"It shows the mistakes in the comments by many northern European leaders that the bailout and the haircut was a way of getting Cyprus out of Russian hands," Alexandros Apostolides, economist at the European University Cyprus, told DW.
"It means that now we are completely dependant on Russia. Before, they were only depositors, now they are shareholders. They own a bank that is even more systemic than it was before the bailout."
Germany in particular was one of the countries that had been warning that the EU should not help Cypriot banks as this allegedly would have meant bailing out Russian oligarchs who had used the little island state in the Mediterranean as a convenient money laundering location.
The German foreign intelligence service even compiled a special report on how Cyprus was in effect a laundromat for dirty Russian money. But if the goal had been to push back Russian influence, it failed. And experts say that it's something the EU should have seen coming.
"When it was decided that the Bank of Cyprus would be saved by a bail-in, it was clear that those who would lose their savings and investments would in return get shares. That's what happens in the case of a bail-in," explained Sofronis Clerides of the University of Cyprus.
"The decision for a bail-in was strange, because the main reason was to use the large Russian investments as part of saving the banks - rather than the tax payer. But the result was that the very same Russian oligarchs now are shareholders. It's quite ironic."
Take the money and run?
While some European leaders may have wanted to curb alleged Russian money laundering in Cyprus, the fact that the country's largest bank is now under Russian influence is not necessarily a bad thing, say many Cypriots. The country's president, Nicos Anastasiades, in fact thanked the Russian community for sticking it out: "Our friends have remained our friends," he said.
Economist Apostolides argues that having Russians involved will most likely help the bank. Their main goal after all is most likely to eventually get back the money they lost. And that means they have to have a very strong interest in the bank becoming more profitable.
"Among economists the reaction was mostly positive," he explained. "The bank is active in eastern Europe and should have some representation of its main markets on the board. So that makes sense. But some are worried that when the bank finally becomes healthy again you might see a lot of the shareholders take liquidity out of Cyprus and even out of the eurozone and take it back to Russia. So that's why there are mixed reactions."
Yet it seems that so far things have gone relatively well. It's in fact very difficult to say how many shares are in foreign hands. Many of the former investors are represented by lawyers where it's not clear who the actual shareholder is. The country's media estimates as much as 60 percent of shares are held by Russians. But even if ownership is overwhelmingly in foreign hands, it doesn't seem, at least so far, that they are organized enough to actually control the bank.
A question of trust
The bank has issued new competitive mortgage products and is doing business - although there are still restrictions, limiting the amount that people can withdraw from their accounts. There still is the fear that small depositors might gradually be moving their money abroad. The lack of trust is still the main problem.
For Apostolides, it's a question of finally getting the ECB to stand behind the Bank of Cyprus so that investors know the future of the bank is safe.
"Investors are not idiots. They see a bank that owes a lot of money to the ECB while the ECB at least publicly is being completely unwilling to help out in resolving the situation," he explained.
"Unless the ECB decides to help out and convert the emergency liquidity into something much more long term, then we can not the resolve this crisis. The ECB has to provide a guarantee that now that the bank has done the bail-in, it is willing to support its existence."