The Central Bank allows the use of special bonds when settling with exiting companies

The Bank of Russia will consider the proposal of the deputies to pay off the departing foreign companies instead of currency with special Central Bank bonds tied to frozen reserves. This was announced by the Chairman of the Central Bank Elvira Nabiullina during a report in the State Duma.

Deputy Vladimir Koshelev (LDPR) took the initiative at the meeting. He noted that such a measure “stabilizes the exchange rate, reduces volatility, and for Russian business this is fundamental, the main thing is stability and predictability.”

“You made this proposal just during the meeting with the faction, we managed to see in a very short time how this initiative could be treated. It needs to be further developed. But in principle, such an initiative can be considered as one of the measures to protect Russian assets frozen abroad,” Nabiullina noted.

According to her, it will be necessary to take into account several factors. Linking bonds to frozen assets may result in the disclosure of information about Russian reserves, their structure, and the structure of the Central Bank’s assets abroad. “We would not want this,” Nabiullina stressed. And it is unlikely that it will be possible to forcefully impose bonds, and even more so to force foreign regulators to release frozen assets, even if the owners of the bonds are their citizens, non-residents.

“But as an alternative, instead of C-type accounts, you can look. Someone will want to wait for the weather by the sea, as they say, when funds from accounts of type “C” are unfrozen, and someone can go for such a scheme. But this requires discussion, ”the head of the Central Bank emphasized.

Now there is a temporary procedure for fulfilling obligations to foreign creditors from countries that have imposed sanctions against Russia. Such a decree was signed by President Vladimir Putin in March last year.

Earlier, the Bank of Russia explained in its documents that creditors from Russia and countries that have not joined the sanctions will be able to receive funds in rubles, and with special permission – in the currency of the debt. For creditors from “unfriendly” countries, the procedure is different: they can open a special type “C” ruble account in a Russian bank in the name of a foreign creditor and transfer payments to it in ruble equivalent at the Central Bank exchange rate on the day of payment. Account type “C” will involve the implementation of any transactions with securities, tax payments and transfers between such accounts.

Despite the freezing of assets, the jurisdictional immunity (the right of the state not to obey the national procedural rules of other countries – Vedomosti) of the assets of the Central Bank has not yet been challenged, Nabiullina points out. “And the question, of course, is what the Central Bank will get in return. Therefore, we will be ready to discuss this topic in detail, we are interested in finding and working out various options for solving the problem of frozen assets,” added the chairman of the Central Bank.

Vedomosti sent inquiries to the Bank of Russia and the Ministry of Finance.

Against the backdrop of a special operation in Ukraine, Western countries imposed large-scale sanctions against the Russian Federation, and also froze Russian assets abroad. Of the $640 billion of the country’s gold and foreign exchange reserves, almost half is now frozen – about $300 billion. In November 2022, the head of the European Commission, Ursula von der Leyen, proposed creating an investment fund from these funds, and using the profits for compensation payments to Ukraine. At the end of October 2022, the press secretary of the President of the Russian Federation Dmitry Peskov said that the blocking of assets abroad is contrary to international law.

On April 13, the German newspaper Die Welt, citing an internal document, reported that the European Commission had come to the conclusion that it was necessary to return the frozen assets of Russia after the end of the conflict in Ukraine. At the same time, European officials are considering the possibility of investing blocked assets of the Central Bank in European government bonds with an annual yield of 2.6%.

Earlier, Nabiullina said that the Bank of Russia intends to return the country’s gold and foreign exchange reserves and will sue those who blocked them. The EU responded to this statement that the Bank of Russia has the right to challenge the freezing of assets in court – persons subject to sanctions can appeal to the Court of Justice of the European Union.