The Central Bank supported the restriction of trading in securities of companies of the defense industry of unfriendly countries
The Bank of Russia is developing a legal mechanism to restrict trading on Russian stock exchanges in securities of defense industry companies from unfriendly countries. This is stated in a letter from the first deputy chairman of the Central Bank Vladimir Chistyukhin dated March 15 to the deputy from United Russia Alexander Yakubovsky (Vedomosti got acquainted with the document). Earlier, in a request dated February 14, the deputy proposed to the Chairman of the Central Bank, Elvira Nabiullina, to impose restrictions on trading in shares of defense industry companies from unfriendly countries, including those supplying weapons to Ukraine (Vedomosti wrote about this on February 15).
The Central Bank “shares the position that, given the current geopolitical conditions, the continued circulation of securities of these companies in Russia and supports the introduction of restrictions on such circulation,” Chistyukhin said in a letter. In order to develop “necessary legal solutions” to restrict the circulation in Russia of securities of companies from unfriendly countries that produce military or dual-use products, the Bank of Russia sent its proposals to “competent state bodies,” First Deputy Nabiullina said in a letter. The document does not specify which authorities are involved. The representative of the Central Bank declined to comment to Vedomosti.
In a letter addressed to Nabiullina, Yakubovsky indicated that transactions for the purchase / sale of shares are available through mobile applications of Russian brokers, for example, Tinkoff Investments (no complaints were commented there). Among the shares of companies traded on the Russian stock market, Yakubovsky named Lockheed Martin Corporation, Raytheon Technologies Corp., Boeing. These are the three largest public military-industrial companies from the United States, they supply various weapons to Ukraine from grenade launchers to multiple launch rocket systems (MLRS) and drones. Capitalization of Raytheon since February last year has grown from $139 billion to $148 billion (+7%), Boeing - from $122 billion to $132 billion (+8%), and Lockheed Martin - from $105 billion to $123 billion (+17%).
The deputy emphasized that due to the HIMARS MLRS delivered to Ukraine by Lockheed Martin, 89 mobilized on New Year's Eve in Makeevka near Donetsk died after being hit by the Ukrainian military at the point of temporary deployment of military personnel. In addition to it, stocks of seven more large American companies are available on the SPB Exchange - Northrop Grumman (radar, guided missiles), General Dynamics (armored vehicles, machine guns, grenades, etc.), L3Harris (radio stations, rocket launchers), Aerojet Rocketdyne (pistols, machine guns), AeroVironment (drones), V2X (military lend-lease supplies), and Sturm & Ruger (firearms). The only non-American paper on the site is the German company Rheinmetall, which supplies howitzers and mortars.
Russian trading floors could preventively, “for reasons of elementary honesty towards those who are now at the front, and civilians under missile attacks from the Armed Forces of Ukraine”, limit the circulation of these securities, Yakubovsky told Vedomosti. He supported the position of the Central Bank, adding that his approach would make it possible to secure a ban on trading in the securities of such companies in Russia at the level of legal mechanisms. “We will work together with the Central Bank and, if necessary, we are ready to introduce additional legislative restrictions to implement such a ban,” the deputy says.
If desired, investors can find ways to buy securities of defense companies even in the event of a ban, said Anatoly Aksakov, Chairman of the State Duma Committee on the Financial Market (Fair Russia). “If there is a ban, they can directly or through intermediaries enter foreign exchanges - new systems of electronic interaction allow this,” he says. But, according to the deputy, the majority of investors will listen to the regulator and its actions and will be “attentive to those instruments that they acquire, including on the American market.” “But the majority of investors, the majority of participants in this market, they are still overwhelmingly patriots of the country, and this factor in such a decision by the Central Bank will also have a moral impact,” Aksakov believes.
The representative of the SPB Exchange referred to the fact that all securities from unfriendly jurisdictions are securities that are not admitted (from the end of 2022 - Vedomosti) to public circulation and are available only to qualified investors. This also applies to the shares of these companies, he noted, and their share in the total trading volume "makes hundredths of a percent." SPB Exchange provides access to the secondary securities market, where the shares of more than 1,700 companies from different regions of the world and all sectors of the global economy are traded, the site representative added, emphasizing that "the secondary securities market has nothing to do with financing [иностранных военных] companies."