Russian authorities are taking measures on several fronts to support financial markets and keep liquid assets in Russia, including a new set of countermeasures introduced by President Vladimir Putin. Russia’s Central Bank is also playing an important role in mitigating the effect of recent economic sanctions against Russia.
President Putin issued decree No. 81, “On Additional Temporary Measures of Economic Nature to Secure Financial Stability of the Russian Federation” (Decree), on 1 March 2022, which follows decree No. 79 of 28 February 2022.
The new Decree provides for a number of measures effective immediately or from 2 March:
- Prior clearance by the Government Commission on Control over Foreign Investments (headed by the Russian prime minister) is required for the following transactions between Russian residents (both natural persons and corporates) and foreign persons that are residing/registered or have their main place of business/main source of income in a country that has imposed sanctions against Russian citizens or businesses (affected foreign persons):
- Extending loans and credit facilities in Russian rubles to the affected foreign persons (unless such transactions violate Russian laws).
- Transactions with affected foreign persons resulting in transfer of ownership to any securities or real estate.
- Certain transactions that have been previously banned by the 28 February decree, namely (1) extending loans in foreign currency by Russian residents to the affected foreign persons and forex transfers by Russian residents to their own accounts with foreign financial institutions or (2) making forex transfers with the use of foreign epayment systems without opening a bank account.
- As emphasized in the Decree, the clearance may come with conditions under which the particular transaction must be made or performed. Within five days from the Decree, the Russian government must adopt a procedure for clearance issuance.
- The measures imposed by the Decree also apply to any transaction made between Russian residents and non-affected foreign persons if such transaction relates to securities and/or real estate acquired by non-affected foreign persons from the affected foreign persons after 22 February 2022.
- Transactions (operations) aimed at the acquisition by affected foreign persons of any securities may be made through organized trades at a stock exchange, subject to a permission by the Central Bank upon consultation with the Ministry of Finance. The requisite permission will state the terms and conditions of the permitted transaction (operation).
- Credit institutions are allowed to make forex transfers to their correspondent accounts opened with foreign banks subject to the restrictions imposed by the Decree.
- From 2 March 2022, persons may not carry more than US $10,000 in cash or cash equivalents (calculated at the official exchange rate by the Central Bank) when leaving Russia.
The Decree formalizes the initiative announced by Prime Minister Mikhail Mishustin earlier on 1 March 2022 to restrict foreign investors from exiting Russia.
Since 28 February 2022, the Central Bank has adopted several measures to support financial markets:
- On 28 February 2022, the Central Bank ordered that Russian brokers temporarily halt sales by foreign persons (both natural and corporates) of their positions in any securities. Brokers are to report to the regulator on compliance with such temporary halt.
- Reportedly, the Central Bank has also issued an order to custodians and registrars to temporarily halt transferring dividends and other proceeds from Russian securities to foreign persons for an initial term of six months, and further restrictions on Russian companies to distribute dividends to their foreign shareholders may be expected (no official communication was issued; this information requires verification).
Ukraine Conflict: How to Maintain Global Business Continuity
Our lawyers have long been trusted advisers to clients navigating the complex and quickly changing global framework of international sanctions. Because companies must closely monitor evolving government guidance to understand what changes need to be made to their global operations to maintain business continuity, we offer this centralized portal to share our insights and analyses. To receive the latest updates, subscribe to our Ukraine Conflict: How to Maintain Global Business Continuity mailing list.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
Ukraine Task Force
Giovanna M. Cinelli
Kenneth J. Nunnenkamp
Georgia M. Quenby
Carl A. Valenstein
Jiazhen (Ivon) Guo
Katelyn M. Hilferty
Charles C. Rush