Russia offers to swap frozen assets with the west

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Russia is offering to swap western investors’ stranded assets in the country for some Russian assets frozen by the west following President Vladimir Putin’s invasion of Ukraine.

Under the proposal, Moscow would give interested western investors the opportunity to buy the assets of Russian companies that have been immobilised in Europe by using their own funds held in restricted accounts in Russia that cannot be spent outside the country, the central bank said on Wednesday.

Western officials told the Financial Times that they were not aware of the proposal and that no talks were taking place on a potential asset swap.

The proposed deal is aimed at unblocking Rbs100bn ($1.1bn), mostly owned by retail investors, of a total Rbs1.5tn of Russian-owned holdings in the west, finance minister Anton Siluanov told Putin on Tuesday.

Moscow’s offer would compensate retail investors for their investments in western securities that have been frozen under western sanctions and stranded at settlement houses such as Belgium-based Euroclear — while allowing some western companies to retrieve stranded funds from Russia, according to a person briefed on the matter.

Russia has yet to release details of the proposed swap, which Siluanov and the central bank said would be outlined in a decree to be signed by Putin.

The exchange will be “voluntary,” the central bank said, appearing to rule out possible expropriation of western-held assets to compensate Russian investors, while the volume of assets would be “limited.”

On Wednesday, Russia’s finance ministry also eased restrictions on western companies’ corporate dividends. Under the new rules, they will be allowed to withdraw amounts equivalent to their investments in their Russian subsidiaries’ production and technology.

But any potential agreement would be complicated by the legal and compliance difficulties for western investors in disposing of their assets in Russia, according to the person briefed on the offer.

There are no negotiations between the EU and Russia over any potential swap of financial assets, four senior European officials told the FT. One official added that they saw little possibility for detailed talks on such a deal taking place in the near future.

Western governments are unlikely to agree to any deal that equates Russian assets frozen in response to Putin’s full-scale invasion of Ukraine with western assets stranded in Russia whose confiscation they view as illegal.

The proposal comes as western governments, led by the G7 group of advanced economies, wrangle over whether and how they should seek to monetise Russia’s frozen assets to support Ukraine.

Almost €200bn of Russian assets have been frozen by sanctions at Euroclear, the world’s biggest settlement house, €180bn of which are Russian central bank reserves, according to the Belgian government.

Western officials are exploring ways to legally skim off the profits of those assets and offer them as financial aid to Kyiv.

Any seizure would run the risk of Russia expropriating more stranded western assets in response following the nationalisations of four European companies’ local subsidiaries earlier this year. Germany and Finland’s energy companies Uniper and Fortum were hit, as well as France’s dairy giant Danone and Denmark’s beer maker Carlsberg.

Though hundreds of western companies are struggling to agree exit deals from Russia or have written off their assets there, many of their Russian businesses continue to generate profits that can only be held inside the country under Russian law.

Energy major BP, which held a near 20 per cent stake in Russia’s state oil champion Rosneft, has had about $1.4bn in dividend payments placed by Moscow in escrow accounts since the invasion, covering the end of 2021 and 2022. 

But the company, which took the decision to exit its stake with a $24.4bn writedown in February 2022, said in December that it had not received any dividend payments and had “no expectation of receiving any in the future”. The sale of its Rosneft stake has been complicated by sanctions and the right of the Kremlin to in effect approve any buyer.

Additional reporting by David Sheppard in London