The problem turns out to be caused by a problem in normalizing
the locale name, see the output of  this test program:

mfabian@ari:~
$ cat ~/tmp/mike-test.py
#!/usr/bin/python2

import sys
import os
import locale
import encodings
import encodings.aliases

test_locales = [
    'ja_JP.UTF-8',
    'de_DE.SJIS',
    'de_DE.foobar',
    'sr_RS.UTF-8@latin',
    'sr_rs@latin',
    'sr@latin',
    'sr_yu',
    'sr_yu.SJIS@devanagari',
    'sr@foobar',
    'sR@foObar',
    'sR',
]

for test_locale in test_locales:
    print("%(orig)s -> %(norm)s"
          %{'orig': test_locale,
            'norm': locale.normalize(test_locale)}
    )

mfabian@ari:~
$ python2 ~/tmp/mike-test.py
ja_JP.UTF-8 -> ja_JP.UTF-8
de_DE.SJIS -> de_DE.SJIS
de_DE.foobar -> de_DE.foobar
sr_RS.UTF-8@latin -> sr_RS.utf_8_latin
sr_rs@latin -> sr_RS.UTF-8@latin
sr@latin -> sr_RS.UTF-8@latin
sr_yu -> sr_RS.UTF-8@latin
sr_yu.SJIS@devanagari -> sr_RS.sjis_devanagari
sr@foobar -> sr@foobar
sR@foObar -> sR@foObar
sR -> sr_RS.UTF-8
mfabian@ari:~
$ 

I.e. “sr_RS.UTF-8@latin” is normalized to “sr_RS.utf_8_latin” which
is clearly wrong and causes a fallback to sr_RS when using gettext
which gives the cyrillic translations.