Minutes of the Fed Reserve Bank dealing with the 2013 bail in paint a picture of a Cypriot economy susceptible to Russian oligarchs and the Russian mafia.
The minutes of the Federal Open Market Committee on March 19–20, were made public on January 11, 2019.
They make reference to the economic crisis in Cyprus and the fact that Eurogroup’s first proposal for a bail-in that would cover all deposits, even those below €100,000 had triggered a political backlash in Cyprus and market downturns around the world, leading European leaders to backpedal on their initial plans.
Thus, even though the GDP of Cyprus amounts to only 0.2 percent of euro-area GDP, there’s potential to undermine depositor confidence in other peripheral countries, it said.
Especially revealing is the exchange between Richard W. Fisher, member of the Federal Open Market Committee, Nellie Liang, Director, Office of Financial Stability Policy and Research, Board of Governors and economist Steven Kamin.
Here is the exchange:
- FISHER. And then lastly, with regard to Cyprus, you can’t look at Cyprus without looking through the lens of organized Russian crime or corrupt Russian bureaucracy, including the president himself. That will determine the outcome of the election. I would suggest that.
- KAMIN. Well, we’re well aware of the Russian connection.
- FISHER. Right.
- KAMIN. And it is a connection that has definitely complicated choices.
- FISHER. Russian deposits appear to be the same size as the entire GDP of Cyprus.
- KAMIN. That sounds about right, so it’s very complicated.
- FISHER. You don’t mess with those folks.
- KAMIN. And it’s either being dealt with or not being dealt with right now.
CHAIRMAN BERNANKE. I forecast an international incident in five years. [Laughter]
When the fed met again on April 30, 2013, it was clear that the events in Cyprus had had little impact on international markets and the losses had been contained to Cypriot depositors.