In the wake of declining to raid the country’s private bank accounts as part of the terms of a proffered bailout package from the EU and IMF, Cyprus was hoping they might be able to entice Russia to work out an alternative rescue plan for them, partially in exchange for some kind of claim on Cyprus’s gas reserves.

So much for that plan.

Russian gas giant Gazprom and oil company Rosneft did not display any interest in Cyprus’ hydrocarbons deposit offer to Russia, an Energy Ministry source told journalists. …

Another problem is Cyprus’ territorial disputes with Turkey, he added.

Asked to assess the accuracy of the estimates and proposals prepared by Cyprus, the source said that “they [Cypriots] invited us to take part in a tender on a [hydrocarbon] deposit there, but a seismic survey has not been completed yet, and it is unclear what kind of deposit they have. It should be analyzed more profoundly in the future. Gazprom and Rosneft are not interested in these proposals.”

Which means that it’s up to Cyprus to come up with some kind of offer to convince the EU to extend their aid, and they only have until Monday to do it — the European Central Bank has already said they’ll cut funds to Cypriot banks after that without a viable plan. Officials are now scrambling to work something out, because otherwise, their financial system is looking at a likely collapse:

In Nicosia, the country’s biggest bank urged politicians to make haste and cut a deal with their EU partners as parliament considered proposals to nationalize pension funds, pool state assets and split the country’s second-largest bank in a desperate effort to satisfy those exasperated European allies. …

Elsewhere, depositors, who have been besieging bank cash machines all week, queued again to withdraw what they could. …

New bills submitted to the Cypriot parliament included a “solidarity fund” to bundle state assets, including future gas revenues and nationalized semi-state pension funds, as the basis for an emergency bond issue.

JP Morgan likened it to “a national fire sale”, and euro zone paymaster Germany indicated it opposed the nationalization of pension funds. …

They also quoted Merkel as saying: “There is no way we can accept that”, and “I hope it does not come to a crash”.

That escalated quickly. Whatever they come up with, the euro zone ministers have so far been decidedly unimpressed, and a one-off “tax” on bank deposits still isn’t off the table — and I wonder if it won’t get increasingly attractive as desperation builds.