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Cyprus Bailout May Spare Russia's Oligarchs, but Hurt Russian Companies

Customers wait on Monday to withdraw cash from a Bank of Cyprus ATM in Nicosia, Cyprus 

Customers wait on Monday to withdraw cash from a Bank of Cyprus ATM in Nicosia, Cyprus Photograph by Simon Dawson/Bloomberg

A planned bailout of Cyprus could turn Russia’s favorite offshore financial haven into hostile territory. Cyprus and its European creditors agreed early Monday to slap a tax of up to 40 percent on bank deposits over €100,000 ($130,000) and impose strict controls on capital leaving the island nation.

That sounds pretty bad for wealthy Russians who have tens of billions of dollars in Cypriot bank accounts— and for Russian companies that funnel tens of billions more through Cypriot subsidiaries to take advantage of the island’s low corporate tax rate.