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Russia Proposes US$1 Billion Asset Swaps with Western Investors

Russia’s finance ministry has set terms for a proposed swap of Russian and western investors’ frozen assets in each other’s jurisdictions, allowing each side to claw back value lost to sanctions. Moscow hopes the potential exchange, announced by the ministry on March 11, will unblock ₽100 billion (US$1.1 billion) in European securities, mostly owned by Russian retail investors, by letting western investors buy them with their own funds stranded in Russia.

Russian retail investors can submit offers to swap western securities from March 25, while western investors can bid for them starting from June 3, according to Investitsionnaya Palata, the Russian broker appointed to organise the trade.

Russia currently has about US$300 billion frozen in mainly European accounts, while Western companies also have an undisclosed amount of money currently frozen in Russia. It is unclear whether the Russian proposals will be met with approval by the EU and United States. However, if not, business pressure upon their respective governments – leading to potential claims for damages – could be levied on them by companies wanting to exit the Russian market in accordance with political wishes but being expected at the same time to be absorb significant losses while doing so.

However, if Russia’s proposals are accepted, it is likely to lead to addition asset swaps and reduce the burden of possessing inaccessible frozen assets on balance sheets by both Russian and Western corporates and traders.

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