The Russians are apparently afraid that Cypriot banks are in such bad shape, that bailing them out by taking them over is too risky. Instead, they are taking a wait and see attitude:

Meanwhile, Cypriot efforts to clinch a contribution from Russia appeared to have failed. Russia is a key player in Cyprus as Russian depositors have parked around 20 billion euros in the country.

"We will only be ready to discuss various ways of support for that state only after the EU nations and Cyprus work out a final settlement," Russian Prime Minister Dmitri Medvedev told a news conference.

Russia's finance minister, Anton Siluanov, said the Cypriots were seeking investment from Russian companies in a Cypriot state-owned firm that will manage revenue from the island's newfound offshore gas. The Russian investors, however, were not interested.

Cyprus also offered stakes in some of its banks, but there were no takers in Moscow for that, either. Siluanov also said they were not discussing providing a new loan to Cyprus as the EU has set a debt limit for Cyprus.

With the European Central Bank ready to cut off emergency funding of Cyprus banks on Monday unless the government can come up with a bailout plan, Cypriot officials are desperately trying to come up with a "Plan B" that the EU will accept.

Associated Press:

Cyprus needs to find a way to raise the 5.8 billion euros to qualify for 10 billion euros in rescue loans from other eurozone countries and the International Monetary Fund.

The plan needs approval from eurozone and IMF and that remained elusive. Eurozone officials said they had not seen all the details and would have to discuss whatever final plan Cyprus presents.

"The next few hours will determine the future of this country," said government spokesman Christos Stylianides.

Cyprus has had to come up with the new plan after lawmakers rejected a scheme that would have seized up to 10 percent of people's bank deposits.

The country needs to have the plan in place by Monday, when the European Central Bank has said it will cut off emergency support to the banks. That could trigger their collapse and devastate the economy, potentially pushing the country to leave the 17-country euro currency union.

Any new plan will be still be painful, Stylianides said. "But the country must be saved."

As part of the package being discussed Friday, lawmakers were considering restructuring the country's second largest lender, Laiki, which suffered big losses on Greek debt investments.

Seizing a percentage of deposits in Laiki above the 100,000 euro insurance limit is one option. A banking official said the percentages that were being discussed were a 25-30 percent seizures on deposits greater than 100,000.

Banking officials estimate the restructuring will take 3.6 billion euros off the 5.8 billion euros ($7.5 billion) the country needs to raise.

Laiki bank's acting CEO, Takis Phidias, condemned the plan. "I'm certain that there will be chaos after these bills are approved."

Phidias said the initial plan to seize deposits across all Cypriot accounts "would have more evenly shared the burden and certainly, it would have safeguarded both large banks. I'd like to believe that there's still time to carry out this negotiation.

A government official, speaking only on condition of anonymity as negotiations were on-going, indicated that a tax on deposits in other banks was also still on the table.

As I mentioned yesterday, the depositor haircuts would almost certainly make a comeback in some form if the Russians refused to help. Stealing deposits from only the rich won't be enough - the government is going to have to dip into ordinary people's deposits to meet the target 5.8 billion euros.

This is going to be a real walk the plank moment for Cypriot lawmakers. If Cyprus is forced back to "Plan A" and the depositor haircuts, another vote in parliament will be necessary. This time, with the ECB ultimatum staring them in the face, they will be forced to choose between political suicide and an economic meltdown.

Since the alternative is unthinkable, unless some miracle occurs and Cyprus figures out a way to satisfy the EU without taking money from depositors, it is likely that the haircuts will pass sometime before Monday.