Russians and foreigners will have the opportunity to exchange frozen assets

However, the ability of individuals to return their funds will not change attitudes towards Russia

From March 25, Russians and non-residents (foreigners) will have the opportunity to exchange frozen assets. This is stated in the materials on the website of the Ministry of Finance of the Russian Federation. The Investment Chamber company became the organizer of trading for the repurchase of foreign securities (MS). She was appointed to this role by the government commission for monitoring foreign investment. It is curious that previously they talked about domestic assets abroad only in connection with the desire to confiscate them or even transfer them to Ukraine. What is evidenced by the announced initiative for the exchange of assets – in the material “MK”.

Let us recall that in March 2022, the international depositories Euroclear and Clearstream interrupted operations with the National Settlement Depository (NSD) due to the imposition of sanctions against Russia due to the start of the SVO. As a result, the securities of our investors were blocked, and payments on them ceased to be received. In addition to the funds of private investors, shares purchased by management companies that were part of various mutual investment funds were also frozen. As a result, all types of investors – both individuals and legal entities – have not received their income since February 2022.

But Russia did not remain in debt either. The unfriendly actions of Euroclear and Clearstream were followed by mirror steps: as a result, in 2022, their assets were also frozen in our country. These funds were concentrated on type “I” and type “C” accounts. A type “C” account is a special account opened for a foreign investor in a bank, with a broker, or in a depository, into which only rubles can be credited, for example, dividends on shares and coupons on bonds in rubles. It is impossible to withdraw funds from it, but the accumulated money can be used to pay a limited range of bills, for example, to pay taxes or buy OFZ. At the same time, the Central Bank of the Russian Federation and the Ministry of Finance have the right to separately issue permission to credit this profit to a regular account or convert rubles into foreign currency.

And now, from March 25, the government commission for control over foreign investment has decided to launch a mechanism for the exchange of frozen assets between Russians and foreigners. The Investment Chamber was appointed as the operator of the process according to the scheme of the Ministry of Finance of the Russian Federation. Acceptance of applications from Russians will begin on March 25 and end on May 8. Non-residents wishing to exchange assets will also be able to submit applications, but later than from June 3 to July 5. And the settlements themselves as part of the exchange of assets must take place before September 1. “If the securities are not sold, they will not be written off from the accounts of their owners, and the funds of non-residents not used in the redemption will in this case be returned to their ruble accounts, including type “C” accounts,” explained investment adviser Yulia Kuznetsova. Russian investors are expected to receive no less than the market value of the assets at the time the exchange commences. As Deputy Head of the Ministry of Finance of the Russian Federation Alexey Moiseev previously clarified, only funds frozen in the NSD fall under the exchange mechanism.

Individuals will be able to present more than 3.5 thousand exchange objects for redemption. Foreigners have the right to take blocked assets at the expense of funds stored in type “C” accounts. At the same time, the transaction limit is limited: registration of only up to 100 thousand rubles per investor is allowed. However, this amount is enough to satisfy the majority of individuals affected by sanctions. It should be understood that we are not talking about the release of public funds or the assets of large companies, but only about the property of private investors.

“There is no talk of a warming of relations between Russia and the West,” says financial analyst Andrei Vernikov. — The EU has published permission to unfreeze the frozen assets of investors from Russia, guided by mercantile considerations. The West is trying to help its investors withdraw assets from Russia, so it is necessary to organize a “two-way street.” About 3.5 – 5 million retail investors may take part in the first wave of exchange. Now the main thing is to launch and debug the mechanism, so the low threshold of the amount does not surprise me.” At the moment, it is difficult to say how successful this exchange will be. Much will depend on the activity of foreigners. Perhaps there will be few Western investors willing to buy lots of shares. The fact is that the pool may contain assets of persons from the SDN list (US blacklist), and then the non-resident who bought these assets may be accused of circumventing sanctions against Russia. This issue needs legal elaboration, the expert pointed out.

According to the Ministry of Finance itself, in total, due to the termination of interaction between NSD and Euroclear and Clearstream, the funds of private Russian investors in the amount of 1.5 trillion rubles were blocked. The very fact of the exchange of assets of private investors is a positive signal, but this is a drop in the ocean. Unfortunately, we are in no way talking about resolving the issue of unlocking the state assets of our country, which are also frozen in Western countries.