Experts explained the position of the Europeans by the fear of sanctions from the US and the desire to profit from Russian assets themselves
The European Commission (EC) has banned EU individuals and legal entities from participating in the asset exchange scheme proposed by Russia. This conclusion can be drawn from the explanations of the Union's Directorate General for Financial Stability, Financial Services and Capital Markets, which is published on the website of this organization. The ban is explained by the presence in the exchange chain of the National Settlement Depository (NSD), which is under EU and US sanctions. MK found out from experts how to understand the demarche of the European authorities.
Let us recall that statements from high tribunes about the need to exchange assets between Russians and foreigners began almost immediately after their blocking in the spring of 2022, when the international depositories Euroclear and Clearstream stopped operations with NSD due to the start of the SVO. Due to the aggressive actions of the EU authorities, the securities of investors, both individuals and companies, were frozen abroad, and payments on them ceased to be received. All types of investors from Russia — both individuals and legal entities — have not received income from their shares of foreign companies since the end of February 2022.
Our country responded to the illegal actions of the European authorities in a mirror-like manner: Western assets in Russia were blocked. These funds were concentrated in two types of accounts — «I» and «C». Accounts of type «I» are used to ensure the payment of income on Russian sovereign bonds in favor of foreign owners. And account «C» is special, it was opened for a foreign investor in a bank, with a broker, in a depository for crediting only rubles there, for example, dividends on shares and coupons on bonds. It is impossible to withdraw funds from it, but the money there could be used in the manner prescribed by the Russian authorities: to pay taxes or buy OFZ.
The situation remained in this form until March 25, 2024, when the Russian side decided to launch a mechanism for exchanging frozen assets between Russians and foreigners. EU citizens received the right, after completing all the procedures, to take back the blocked assets using funds stored in type «C» accounts. The size of transactions was limited to 100 thousand rubles per investor, but this was enough to protect the interests of most individuals affected by the sanctions.
By May 8, the first stage of the frozen asset exchange was completed, during which Russians submitted more than 1 million applications for assets that they would like to sell to foreigners. The total amount of assets offered to non-residents for exchange was 35 billion rubles. The second stage of the exchange began on June 3 and ended on July 5. During this period, foreign buyers submitted applications for the purchase of foreign assets that had already been divided into lots. According to the organizer of the auction, asset exchange transactions between Russian and foreign investors should take place on August 12, 2024. All analysts unanimously recognized this step on the part of Russia as friendly. However, the European Commission did not comment on this proposal for a long time, which caused concerns among observers. And then on July 25, Europe announced that there would be no exchange. “All funds and economic resources owned, held or controlled by NSDs shall be frozen and no funds or economic resources may be made available for this exchange directly or indirectly,” the EC clarifications emphasized.
The exchange of assets was not easy under previous decisions within the framework agreed upon with such difficulty. The EU ban adds a new level of complexity to this issue. “It is not yet clear whether there is room for dialogue here,” says BitRiver financial analyst Vladislav Antonov. “We must understand that all decisions of this kind are connected exclusively with the political plane. It is pointless to look for financial logic here.”
The assets will remain frozen until all parties are willing to make real efforts to resolve the issue. According to Oleg Kalmanovich, chief analyst at Neomarkets, the European Commission's decision is most likely dictated by two considerations. Firstly, to exert another act of political pressure, that is, to complicate the process of exchanging assets with the Russian side, despite the organization of the exchange procedure using type «C» accounts. At the same time, the interests of their own citizens who invested in Russian securities and found themselves hostages of the situation are not pursued. The reason for setting up obstacles also does not stand up to criticism and is formal — the National Settlement Depository, which was sanctioned, is not a direct participant in the process and performs registrar functions. And this is known to the authors of the next unfriendly initiatives.
Secondly, Western financial institutions earn money by holding Russian assets. The amounts of earnings have already reached significant levels. “Europeans will try to hold on to Russian assets for as long and as much as possible, which bring them significant profits,” continues Alexander Shneiderman, Head of Sales and Client Support at Alfa-Forex. “Thus, in 2023 alone, the Belgian depository Euroclear earned 4.4 billion euros from operations with Russian assets. We believe that by the end of 2024, the amount will be even higher, due to the reliability of investments in the context of their irrevocable nature.” In the long term, such measures may have undesirable consequences for European investors themselves. Further escalation of sanctions and countermeasures may lead to even greater complications in financial transactions and asset exchanges in the international arena.
«In general, this ban is expected and predictable, in addition, Euroclear has already announced that it will not re-register assets acquired as a result of the exchange,» recalls Irina Bondarenko, a consultant at the law firm O2 Consulting. «The ban is a reminder of the EU's ongoing sanctions policy. It would be strange if the EU allowed its own sanctions to be circumvented. In addition, political motives cannot be ruled out, since the initiative for the exchange came from the Russian side and provided a solution to some problems for Russian individuals.» The exchange procedure could indeed help solve the problem of foreign investors whose assets are frozen in «C» accounts, however, the problems that foreigners face in connection with the introduction of sanctions are not usually emphasized outside of Russia, the lawyer noted.
It is undeniable that there may be investors willing to take risks and try to exchange assets, contrary to the EC's instructions. It is also possible to obtain individual licenses for unblocking or exchange, but it is possible that they may be denied. «Although the European Commission is not a legislative body, unlike the EU Council, it prepares legislative acts for their adoption,» explains Valeria Zibareva, a lawyer at Tomashevskaya & Partners. «Therefore, if the European Commission takes the position that such transactions are not allowed, the chances of success are slim.»
Most likely, the EU authorities, as in other cases, are simply trying to please the United States, which does not accept any concessions, even in relation to small investors who could participate in such transactions. According to Ekaterina Novikova, Associate Professor of the Department of Economic Theory at Plekhanov Russian University of Economics, the parties will now have to look for intermediaries through whom the relevant transactions can be carried out. In any case, having frozen shares is better than having frozen rubles in accounts: the value of shares can grow over a certain period of time.