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Government bonds as guarantees

Гособлигации как гарантии

The Russian big business will be able to secretly return capital from abroad.

As stated by the President of Russia Vladimir Putin, the state is ready to help domestic businesses on a Pro Bono basis to return capital from abroad by issuing foreign currency bonds. This good for the part of entrepreneurs the news the President announced on December 21 at a meeting in the Kremlin. The issue of the “bonds of external loans denominated in foreign currency” is scheduled for next year. According to the President, the government and the Central Bank has already elaborated this issue, it remained for the technical issues – issue details and conditions.

That big business representatives asked the government to provide a secure channel the repatriation of funds, including through foreign currency bonds, reported Reuters citing several authoritative sources at the beginning of December 2017. Then the Ministry of Finance has considered such a measure inexpedient, because there is already Eurobonds, and does not make much sense to “drive” the money between similar types of securities, shifting the currency risk on “ordinary” taxpayers.

Now the proposed measure, in fact, is a palliative: as reported December 21, Anton Siluanov, the Finance Minister, for those wishing to bring a large capital on the “historical homeland” to be issued a conventional Eurobond of up to $ 3 billion, and the program of external loans will be left unchanged. In the budget for next year will be on 3 billion, it is possible to release up to $ 4 billion for the exchange of already traded securities.

Yet, as reported by the representative of the Ministry of Finance, requests from large businesses wishing to reclaim their savings, he enrolled for a smaller amount, but the details are still unknown. The only thing the official said: this Eurobond issue will be different from the standard that the “new” securities will not take into account in the Euroclear and Clearstream systems. In other words, taken into account the previously announced desire of business to maintain the confidentiality of their accounts. The fact that the registration of Eurobonds in the aforesaid systems, these information will automatically go to the U.S. Treasury, then the Ministry will require the blocking of accounts – so says the head of the UK “Sputnik – capital management” Alexander Losev.

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In may 2016, when it carried out the issuance of Eurobonds, the National settlement Depository has carried out a suitable clearing. In the case of non-proliferation Department of information on holders of securities this information will remain confidential. Another way to preserve anonymity – the use of brokers, managers Eurobonds in the interests of the client. Currently, the Depositary has all the necessary tools for clearing the updated reality, however, as the expert believes, is a double-edged sword. The fact that the securities do not fall into Euroclear and Clearstream, have a limited ability to turnover on the foreign market, accordingly, appropriate partial Eurobond “system” so that the remainder was intended only for Russian investors.

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It should be noted that after the expansion of anti-Russian sanctions from the United States for many domestic large businesses increased the attractiveness of investment at home. Alan Kartashkin, partner, Debevoise & Plimpton, says that secondary sanctions may be applied to any counterparty of the company under the primary blocking sanctions, which creates the risk. It is known that the list of wealthy businessmen and politicians, which may apply sanctions, which will be published before the end of January 2018. And the issue of Eurobonds is the most simple form of protection from the risks associated with new sancionada events, however, the interest rate on these securities promises to be low – about the same which at the moment everyone Eurobonds.

Sergey Kalinin, head of tax practice at “Egorov, Puginsky, Afanasiev and partners”, also notes the limited investment opportunities for the planned Eurobond. According to him, the preservation of anonymity may lead to claims of FATF, in addition, automatic exchange of information requires knowledge of the final beneficiary of the financial product.


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