Russia’s deep ties to Cyprus have made the country react quickly to unprecedented EU bailout conditions, involving a simple levy on all deposits. Carnegie’s Matthew Rojansky spoke to CNN International about the relationship between the two countries and the consequences of this still unconfirmed policy.

Rojansky characterized the relationship between the two countries as a ‘two-way street’ with lanes of different widths. The size of Russian corporate deposits in Cyprus is comparable to the country’s GDP. Many Russian investors have registered companies on the island to benefit from its favorable fiscal and legal climate. Russia has also become Cyprus’ main creditor over recent years and has offered to grant Cyprus more favorable payback terms, Rojansky added.

To explain rumors concerning a possible geopolitical subtext, Rojansky pointed to the fact that, while investors may not be happy to see 10 to 15 percent of their deposits being withdrawn, this comes at a time when President Putin is trying to convince important civil servants and businessmen to repatriate their funds. Rojansky also noted that such a dramatic step would not have been taken were it not for the EU’s main contributor, Germany, disapproving of Cyprus’ lax attitude to Russian money-laundering.