While hope appears to still be alive that the Cypriot government will hand over their natural resources to wealthy Russia (or Gazpromia) and all depositors (Russians and Cypriots alike will be saved), we suspect there is a much bigger threat from Russia that has not been discussed. As Monument Securities' Marc Ostwald notes "there's a 50/50 chance Cypriot bailout fails because of the 'massive danger' a large amount of Russian cash flees Cyprus following deposit tax plans." Russia has ~$60 billion exposure to Cyprus, including loans to companies registered in the country and after the haircut 90% of Russian deposits will still be free to leave the country if the levy is approved.
The critical point is that, should this occur (such a large outflow of Russian cash - dwarfing in fact the size of the bailout package itself) it is hard to see how the Cypriot banking system could survive (even with the assistance of the ECB's ELA). Russia's Finance Minister Siluanov expressed disappointment that Russia was not involved in the deal and it is clear that should those outflows leave Cyprus, they are unlikely to end up in other European nation banks.
It seems the pre-emptive contagion and anxiety of this 'levy' have only just begun.