Russia preparing to remove restrictions on non-residents' new money on stock market without friendly/unfriendly distinction

MOSCOW. Dec 12 (Interfax) - Russia's Finance Ministry and the Central Bank of Russia have prepared a draft presidential decree to guarantee new foreign investors the opportunity to withdraw investments, Deputy Finance Minister Alexei Moiseyev said.

"We believe that it is not a fantasy that foreign investors could enter the Russian market. We know very well, as do those who have been working on the financial market for a long time, that greed conquers all despite everything else. Moreover, the high level of profitability that could be realized here would certainly lead to the fact that when the regulatory environment is such that people are confident that they will be able to withdraw their funds safely at the moment they want, then I am sure that we will have an influx of foreign investment," Moiseyev said at parliamentary hearings to discuss the draft of the Main Focus to Develop the Financial Market of the Russian Federation in 2025-2027.

Moiseyev is certain that investors from both friendly and unfriendly countries will enter the Russian market "under the guise of friendly ones through a chain of intermediaries."

"There is absolutely no doubt that this will happen. I am confident that we will see the first signs of the influx next year," he said.

"In order for these people to feel at ease, a draft presidential decree has now been drafted together with the Central Bank of Russia, in which we plan to provide this type of guarantee for new foreign investors regardless of their origin," Moiseyev said, expressing hope that the measure would assist in increasing the volume of the stock market.

The proposed measures will apply to all new investors, regardless of their jurisdiction, Moiseyev later said when speaking with journalists. "The idea is that if a new non-resident, whether from a friendly or unfriendly country, comes to invest money in our stock market - not in direct investments, but specifically in portfolio investments - then they would not be subject to the decrees limiting non-residents' withdrawal of funds from Russia as of March 2022," he said.

When asked whether this includes dividends or bond coupon payments, Moiseyev said, "Anything at all. Essentially, we are separately labeling funds that were present before [the introduction of anti-Russian sanctions and corresponding restrictive measures in the capital market] and those coming in again." At the same time, the authorities do not intend to limit the amount of funds that new investors can withdraw.

Recently, the Russian authorities have repeatedly discussed the need to make the stock market more attractive to foreign investors. In particular, both the Central Bank and the Finance Ministry support creating conditions for foreign investors from both friendly and unfriendly countries, Central Bank Governor Elvira Nabiullina said. "If they invest after the beginning of 2022, we should give them the opportunity to repatriate profits and so on if they continue to invest in the Russian economy," she said.

The idea to ease restrictions on capital outflows for new investments from abroad began to be publicly discussed in the spring of last year. Director of the Finance Ministry's Department of Financial Policy Ivan Chebeskov said that the authorities were considering lifting capital restrictions for new investments from friendly jurisdictions, as well as for Russian investors who wish to return their capital to Russia.

At the congress of the Russian Union of Industrialists and Entrepreneurs in March 2023, which was attended by the head of state, then First Deputy Prime Minister Andrei Belousov said there was the possibility of lifting capital outflow restrictions for new investments that entered Russia after February 2022. "The issue is that if foreigners invest, they should be able to withdraw this money from Russia," Finance Minister Anton Siluanov told journalists when explaining the essence of the changes being discussed. Questions remain about which investors should be given relief and how to identify their funds, Alexei Moiseyev said.

The idea had government support overall, and the Finance Ministry was exploring the technical possibilities for identifying these funds, Chebeskov later said in April. "The discussion is going well; conceptually we feel support at all levels. Everyone understands that to attract foreign money, we need to lift restrictions on capital outflows. The key issue is the administration of these funds. Since we don't have a digital ruble yet, how can we color them so that they can be withdrawn later? Right now, we are working on the technical aspects of this, but in general, we feel support for this initiative. I hope that we will be able to implement it soon," he said.

Later, in July 2023, sources said that Russian authorities wanted to provide foreign investors who invested in the Russian economy after April 1, 2023, with the opportunity to withdraw not only these funds but also up to 50% of the profit earned from their investment without additional permits. At the time, the Finance Ministry said that it was working with the Central Bank on the president's corresponding directive.