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EXCLUSIVE Moscow sets out strict new controls on foreigners trading Russian assets

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EXCLUSIVE Moscow sets out strict new controls on foreigners trading Russian assets

Steam rises from the chimneys of a heating scheme on the skyline of central Moscow, Russia, November 23, 2020. REUTERS/Maxim Shemetov/File Photo

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Russia temporarily stops foreigners selling assets

LONDON/NEW YORK, March 17 (Reuters) – Amid a massive exodus of international companies, Russia has lashed out at foreigners seeking permission to buy and sell Russian assets ranging from securities to real estate, a Citigroup (CN) client memo shows. Strict new rules were instituted in response to Western sanctions.

Russia this month temporarily stopped foreigners from trading Russian assets, saying it wanted to ensure that the withdrawal decision was considered rather than driven by political pressure after Moscow invaded Ukraine.read more

It has now revealed details of the application process it must follow before the Treasury Department decides whether assets can be traded, including disclosing any beneficiaries and strategic investments such as defence.

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Funds with tens of billions of dollars in exposure to Russia have been waiting for details on the restrictions they will face as they seek to sell assets against the backdrop of President Vladimir Putin’s growing economic isolation.

Alastair Winter, global investment strategist at Argyll Europe, said: “I don’t think anyone in Russia would dare to tell Putin about future financial problems.

Moscow called the invasion a “special military operation” to demilitarize Ukraine, sparking an exodus of international companies and largely severing the Russian economy from the rest of the world.

Russian authorities issued Decree No. 81 this month, requiring that any transactions between Russians and foreign counterparties require a license from the Russian government’s Foreign Investment Control Board.read more

In practice, this means that foreign investors have unfettered acquisitions of Russian stocks and bonds, trapped in these assets as the economy slips from an attractive oil-rich investment destination to financial pariah. superior.

“The Russian authorities have announced an order to obtain a license to carry out the business identified by Decree No. 81. An authorized body with the power to make decisions on the issuance of licenses has been established,” the Citigroup memo said.

The process involves filing an application and related documents with the Russian Ministry of Finance in Russian, containing “information on the purpose, subject, content and basic conditions of the transaction.”

Applicants must also disclose full information on beneficiaries and beneficial owners, as well as details of any investments in companies in “strategic sectors” such as aviation, aerospace, natural resource production or the use of weapons or military equipment, the memo said.

“It’s just a mechanism to control which entities can do foreign exchange transactions, not companies from a hostile country pulling out of the country,” a banking source said of the rules.

Citigroup declined to comment other than to confirm the authenticity of the memo.

Another banking source said they had advised clients not to trade under such terms, citing concerns over the sharing of sensitive data and a lack of transparency in applications for approval or rejection.

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Additional reporting by Megan Davis; Editing by John O’Donnell, Edmund Blair, Elaine Hardcastle

Our Standard: The Thomson Reuters Trust Principles.

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