How new sanctions against NSD will affect the unlocking of investor assets in Europe
- Elena Ruzleva Forbes Editorial
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Photo by Samuel Corum/Getty Images The National Settlement Depository of the Moscow Exchange, two years after falling under European sanctions, also found itself on the American SDN list and under UK restrictions. All this makes it almost impossible to unlock the assets of Russian investors in European depositories, for which they have been fighting for two years
It couldn't be more difficult
Two years after the start of the “special operation”*, Russian investors are trying to regain access to their assets, which were blocked after the interaction between the National Settlement Depository (NSD, part of the Moscow Exchange) and the European depository Euroclear was stopped. Now, after the imposition of sanctions against NSD by the UK (in addition to US sanctions), the Belgian depositary Euroclear decided to take a break in the process of unblocking the assets of Russian investors. Officially stated goal: to analyze how American sanctions, which the Moscow Exchange and NSD fell under on June 12, will affect this process.
Let us recall that in June 2022, the Russian depositary came under blocking sanctions of the European Union, which led to investors from Russia losing access to their foreign assets. After this, the unblocking process proceeded extremely slowly, mainly through obtaining individual permits from the Belgian Treasury. And now this already not very successful process has stopped – new sanctions further complicate the unlocking of assets. How close are the chances of Russian investors to zero now?
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Three licenses
Obtaining individual permissions from the Belgian Treasury to release assets has so far been the most effective way to regain access to securities and money held abroad. US sanctions are unlikely to affect the process of issuing permits on the part of Belgium, but they may affect their implementation in practice, says Kira Vinokurova, partner at the Pen&Paper Bar Association. That is, when it comes to unlocking, you will need not only permission from the Belgian Treasury, but also OFAC (Office of Foreign Assets Control).
Euroclear has previously referred to the need to obtain an OFAC license if there were brokers subject to American sanctions in the chain of custody, but now, most likely, American permission will be required for any case of individual unblocking, adds Tatyana Neveeva, senior partner at the law firm Verba Legal. At the same time, it is difficult to say in which cases and at what stage OFAC permission may be needed, says Evgeniy Konovalov, senior lawyer at Delcredere Bar Association.
In the worst case, an investor may need not two licenses – from Belgium and the USA – but three, says NSP lawyer Gleb Boyko. The third is from the UK regulator, which introduced blocking sanctions against NSD following the United States. However, Euroclear does not comply with British sanctions as strictly as American ones, and there is room for maneuver in the UK sanctions regulation itself – not every unlocking requires permission from OFSI, the agency that regulates sanctions.
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Sanctions without conditions
After the Moscow Exchange, together with its subsidiaries, came under US blocking sanctions, OFAC allowed the termination of legal relations with the exchange until August 13. For this purpose, two general licenses have been issued – permission to complete this process. “The problem is that they are formulated in such a way that they actually depend significantly on OFAC’s discretion and assessment of the current situation, and the US secondary sanctions policy is becoming increasingly stringent,” says Kira Vinokurova of Pen&Paper. < /p>
In principle, OFAC allows Euroclear to conduct transactions with NSD until August 13 without the risk of falling under secondary sanctions, says Valeria Zibareva, a lawyer at the law firm Tomashevskaya and Partners. However, this is in theory. “I would like Euroclear to become more active in executing transfers under the licenses that are already on their desk, but given that the depositary is very careful in carrying out each transaction, the pause taken looks expected,” says Zibareva. According to her, the main question is whether Euroclear will use OFAC's permission to complete transactions before August 13 or will immediately refuse transactions with NSD.
Neveeva from Verba Legal says her company's clients have obtained licenses that are in the execution stage. And there have been no objections from Euroclear yet, she says. At the same time, Neveeva considers it quite likely that Euroclear will immediately begin to comply with US sanctions, not paying attention to the deadline until August 13, during which transactions with NSD can be carried out. “This is exactly what the counterparties of the St. Petersburg Exchange did, refusing to carry out transactions despite having permission,” says Neveeva.
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Is everything gone?
The need to obtain OFAC permission for unlocking, along with permission from the Belgian Treasury, will significantly lengthen the process for Russian investors, says Evgeniy Konovalov from Delcredere. At the same time, he believes that contacting an American regulator is somewhat simpler than interacting with a Belgian one. According to him, in the case of OFAC, there is no need to look for a guarantor and fulfill the requirement to leave assets in Europe, as required by Euroclear and the Belgian Treasury.
“On the other hand, OFAC is an even busier agency than the Belgian Treasury, so the review period for such applications can exceed a year,” says Konovalov.
The process of unlocking assets after the introduction of American sanctions is becoming more complicated, but private investors have no other way, says Vinokurova from Pen&Paper. This opinion is shared by Evgeniy Konovalov from Delcredere.
“At the same time, the task of investors will be to structure the unblocking in such a way that as few sanctions regimes as possible are applicable to their situation, but this, of course, is not possible in all cases,” summarizes Gleb Boyko from NSP.  ; While lawyers are waiting for Euroclear's position after it studies the impact of US sanctions on unblocking.
* According to the requirement of Roskomnadzor, when preparing materials about a special operation in eastern Ukraine, all Russian media are required to use information only from official sources of the Russian Federation. We cannot publish materials in which the ongoing operation is called an “attack,” “invasion,” or “declaration of war,” unless this is a direct quote (Article 57 of the Federal Law on the Media). In case of violation of the requirement, the media may be fined in the amount of 5 million rubles, and the publication may also be blocked.
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Elena Ruzleva
Forbes editorial staff
#investments #ForbesInvestments #“special operation” in Ukraine #Euroclear Forbes newsletter The most important things about finance, investments, business and technology Subscribe Copy link Share Add to favorites Materials read by Marusya – voice assistant from VK Listen Mode for the visually impaired