Sergey Tarasevich has explained to RBC how the EU ban on participation in asset swaps with Russians could affect foreign investors

In November 2023, the Russian President signed a decree allowing Russian and foreign private investors to exchange blocked assets. The transactions are scheduled for 12 August 2024, with Russian investors offering to redeem about 2,500 assets worth a total of RUB 35 bn.

However, on 24 July 2024, the European Commission banned citizens and legal entities from EU from participating in the procedure due to the presence in the chain of the National Settlement Depository (NSD), which is under the EU and the US sanctions. At the same time, according to the organiser of the exchange, NSD’s role is technical and consists in keeping records of transactions, while cash settlements during the exchange will take place outside NSD.

At RBC’s request, Sergey Tarasevich, Senior Associate of Tax & Administrative Law practice at Maxima Legal, explained whether the EU ban will create additional difficulties for asset exchanges.

In particular, Sergey noted that ‘non-residents will have to somehow withdraw the received securities from Russia in order to dispose of them at their own discretion. In the conditions of the European Commission’s ban, such a withdrawal seems difficult to realise’.

At the same time, the expert did not rule out that for the sake of participating in the exchange, interested foreigners may try to challenge the European Commission’s position or try to obtain individual licences for unblocking. ‘I do not think that non-residents will be satisfied with the fact that under the conditions of the possibility of withdrawal of part of the funds frozen by the Russian Federation such withdrawal is prohibited to them by the European Commission, and will simply accept it. The decision is, to put it mildly, unpopular. Besides, it is more favourable to have frozen securities received as part of the exchange, rather than frozen rubles on C-type accounts. Securities can potentially grow in value, while the purchasing power of cash is gradually falling,’  Sergey Tarasevich commented.

To read the full article (in Russian), please, see RBC website >>>