News about the possible development of a centralized mechanism for the exchange of blocked assets of residents abroad and assets of non-residents inside the Russian Federation has repeatedly appeared in the media since late spring 20231. In the end of summer, on 22 August 2023, the Minister of Finance of the Russian Federation at a meeting of the Council for Strategic Development and National Projects indicated that now the assets of more than 3.5 million Russian citizens in the amount of RUB 1.5 trillion are blocked2. Earlier the Bank of Russia reported that the amount of assets of non-residents in the Russian Federation on restricted accounts of type “C” exceeds RUB 280 billion3.
On 8 November 2023 Presidential decree No. 844 “On Additional Temporary Measures of Economic Nature Related to the Circulation of Foreign Securities" (“Decree No. 844”) was published, which provides for the procedure of “exchange of blocked assets” and other new measures.
1. “Exchange of blocked assets”
Under the Decree No. 844, an “exchange of blocked assets”4 provides for a deal made by bidding between:
residents owning foreign securities held in NSD’s accounts with foreign depositories
non-residents using funds belonging to them and held in “C” accounts
In addition, Decree No. 844 provides for the specifics of such transactions:
- the total starting value of foreign securities owned by one resident may not exceed RUB 100 thousand5;
- for resident-individuals the trades are free of charge (the organizer of the bidding, professional participants of the securities market, management companies of unit investment funds do not charge a fee for transactions)6.
The terms and conditions of trading and transactions are set by the Government Commission7. The Board of Directors of the Bank of Russia, in turn, establishes the procedure for interaction of all participants of the securities market, determines the specifics of identification of non-resident buyers and regulates the regime of a special transit depo account opened for a non-resident for the purposes of asset exchange8.
2. Deals with foreign securities are allowed
Also, Decree No. 844 cancels9 the restrictions on deals with foreign securities made with “unfriendly” non-residents introduced earlier by Presidential decree No. 81 of 1 March 2022 and allows residents to carry out such deals without the consent of the Government Commission. In this case, the following conditions should be met10:
- foreign securities are held or stored outside the Russian Federation in a foreign organization;
- settlements on such deals are made on accounts opened in the name of residents in foreign banks or other organizations; and
- information on such accounts is disclosed to the Russian tax authorities.
These rules do not apply to transactions with Russian securities, as well as Eurobonds that are accounted for or held outside the Russian Federation – such transactions are made only with the consent of the Government Commission11.
4 Paragraph 1 of Decree No. 844
5 Paragraph 2 of Decree No. 844
6 Paragraph 6 of Decree No. 844
7 Paragraph 4 of Decree No. 844
8 Paragraph 5 of Decree No. 844
9 Paragraph 8 of Decree No. 844
10 Paragraph 9 of Decree No. 844
11 Paragraph 9 of Decree No. 844