Close the gates, everyone stays – Newspaper Kommersant No. 142 (7343) of 08/08/2022

One of the still fundamentally unsolvable tasks in the work of many people who are trying to predict future economic dynamics is to determine the end point, the target state of the rules for the operation of the Russian capital market, which is meant when developing restrictions on foreign investment already made in the Russian Federation. Each new presidential decree, of which there have already been a dozen issued since March 2022, since the beginning of the Russian military operation in Ukraine, changes the possible idea of ​​how the overall structure should ultimately work. And the problem is that on all the decrees such a seal of inconclusiveness shines through that one even wants to believe that “on the other side”, among foreign owners, there is vigorous activity, negotiations, fights among the owners of Shell, Total, Western investment funds around that what to do with the de facto assets frozen in Russia back in March 2022, and the decrees are called upon to intervene in this activity.

Last Friday, a new decree, dated August 5, 2022, gives exactly that impression. Until the end of 2022, the decree prohibits any transactions by foreigners (individuals and legal entities) from “unfriendly” states in respect of shares and shares of oil and gas and oilfield services, energy, strategic (including Gazprom, which is on the banned list several times, and part of the military-industrial complex) and banking joint-stock companies, as well as companies holding licenses for the development of large mineral deposits. Lists of “prohibited entry and exit” shares held by foreigners will be partly compiled by the government (banks and energy companies). Separately, the list mentions the participants of the Sakhalin-1 PSA; the Sakhalin-2 PSA, in respect of which the government is negotiating with Shell, Mitsui and Mitsubishi, is not covered by the decree.

Despite the short period of freezing the stock assets of foreigners in the Russian Federation (until 2023), it can be extended “repeatedly”. There is no point in looking for an answer to the question, “why not immediately freeze for an indefinite period.” It is almost impossible to sell these assets in the Russian Federation to non-residents (at least friendly, at least not spill water) – if only due to restrictions on the movement of capital. Moreover, the sale of these assets in some cases would be beneficial for the Russian Federation as a jurisdiction, and the replacement of some “unfriendly” shareholders with others would change little. And even a hypothetical sale on the over-the-counter non-residential market of stock assets of the Russian Federation could only be welcomed, but it is possible, by decree, only with the personal permission of the president.

And this decree de facto does not change anything. No one is getting out of Russian assets anyway: it makes no sense, they are owned by non-residents and are worth nothing now. There are no big negotiations, no fights on the topic “leave or not leave Russia”, there is no black market for Russian shares, which the decree blocks. We still do not understand what and why is being built in this area – perhaps nothing is being built.