EXCLUSIVE Moscow controls on foreigners trading Russian assets raise write-down concerns

Steam rises from chimneys of a heating energy plan over the skyline of central Moscow, Russia November 23, 2020. REUTERS/Maxim Shemetov/File Picture

LONDON/NEW YORK, March 17 (Reuters) – Russia laid down strict new guidelines for foreigners looking for permits to purchase and promote Russian property starting from securities to actual property, a consumer memo by Citigroup (C.N) confirmed, elevating contemporary issues Western buyers may face giant write-downs.

Russia quickly stopped foreigners buying and selling Russian property this month, saying it needed to make sure selections to exit have been thought of and never pushed by political stress, following Moscow’s invasion of Ukraine. learn extra

It has now revealed the small print of an utility course of that have to be adopted earlier than the Finance Ministry will determine if property could be traded, together with disclosure of any beneficiaries and strategic investments comparable to defence.

“Western buyers are going to be extremely agitated and deeply involved,” mentioned Eric Schiffer, chief govt at California-based non-public fairness agency Patriarch Group and a specialist in danger administration. “That is possible one step of many future steps till Russia has readability by itself monetary safety.”

Funds with tens of billions of {dollars} in publicity to Russia have been awaiting particulars on the restrictions they’ll face as they search to dump property, towards a backdrop of accelerating financial isolation for President Vladimir Putin.

“I do not suppose anybody in Russia dares inform Putin the monetary issues that lie forward,” mentioned Alastair Winter, a worldwide funding strategist at Argyll Europe, predicting “mass write-offs” for a lot of foreigners uncovered to the nation.

The invasion, which Moscow calls a “particular army operation” to demilitarise Ukraine, has triggered an exodus of worldwide companies and has largely minimize off Russia’s financial system from the remainder of the world.

The Russian authorities printed Decree 81 this month that stipulates that any transaction between Russians and international counterparties requires permission from Russia’s Authorities Fee for Management of International Funding. learn extra

Successfully this implies international buyers, who had acquired Russian shares and bonds with out restrictions, have been left caught with these holdings whereas the financial system lurches from an attractive oil-rich funding vacation spot to a monetary pariah.

“Russian authorities have introduced the order for acquiring permits to hold out operations decided by Decree 81. An authorised physique empowered to take selections on the issuance of permits has been established,” the Citigroup memo says.

The method includes an utility and associated paperwork to be submitted to the Russian finance ministry, within the Russian language, containing “data on the aim, topic, content material and important circumstances of the transaction.”

Candidates should additionally disclose full data on beneficiaries and helpful homeowners, the memo says, in addition to particulars on any investments in corporations in a “strategic sector” comparable to aviation, house, manufacturing of pure assets or work with weapons or army gear.

“That is only a mechanism to manage which entities can transact foreign exchange and it will not be corporations from hostile nations which can be exiting the nation,” mentioned one banking supply in regards to the guidelines.

Citigroup declined to remark past confirming the authenticity of the memo.

A second financial institution supply mentioned they’d suggested shoppers towards buying and selling below such phrases, flagging fears in regards to the sharing of delicate knowledge and the dearth of transparency on utility approvals or rejections. Nonetheless, some buyers will possible comply within the hope of avoiding losses, consultants say.

“If in case you have the potential of shedding all of your property versus sharing knowledge, I believe you will have some that may need to think about it,” mentioned Patriarch’s Schiffer.

(This story fixes typographical error in headline to make it “increase” as an alternative of “raises”)

Further reporting by Megan Davies; modifying by John O’Donnell, Edmund Blair, Elaine Hardcastle and Jonathan Oatis

: The Thomson Reuters Trust Principles.