Leningrad Oblast Looking To Legalise Bitcoin For Estonian / Finnish Trade

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Leningrad Oblast in Western Russia, a region that has significant borders with EU nations, has asked the Russian Federal Bank to legalise the use of Bitcoin. The request has been made to specifically permit the use of Bitcoin in trading with Estonia and Finland. The oblast is bordered by Finland to the northwest and Estonia to the west, as well as five federal subjects of Russia: the Republic of Karelia in the northeast, Volgoda Oblast in the east, Novgorod Oblast in the south, Pskov Oblast in the southwest, and the federal city of Saint Petersburg in the west.

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Leningrad Oblast was established on August 1, 1927, although it was not until 1946 that the oblast’s borders had been mostly settled in their present position. The oblast was named after the city of Leningrad (now St.Petersburg). Unlike the city, the oblast retains the name of Leningrad.

It is understood that unofficial trade in Bitcoin between Leningrad Oblast and Estonia has already reached some €50 million. The three primary movers behind the Russian request are Vladimir Petrov, the Deputy in the regions Legislative Assembly, Viktor Karpenko, the Mayor of Ivangorod, and Marina Chistova, head of the Slantsy district. The trio formally requested for the Bank of Russia to “Legalize the circulation and exchange of cryptocurrencies in the border areas of the Leningrad region.” last week, according to the local newspaper Vesti
Three border districts were named in particular; Kingiseppsky, Slantsevsky, and Vyborgsky. Within the region, the Kingiseppsky and Slantsevsky districts border Estonia whereas Vyborgsky borders Finland. Their administrative centers are the towns of Kingisepp, Slantsy, and Vyborg respectively, while Leningrad Oblast is well connected to Estonia and Finland by Road, Rail and Sea. It can accurately described as part of China’s One Belt One Road initiative and is a major thoroughfare from China and Asia, across Russia and into the EU.

related-readings_rb-rb-icons_2017Related: Russia Agrees Significant Silk Road Projects With China

Petrov was on record as saying “The measures will increase the attractiveness of Kingiseppsky and Slantsevsky districts to neighboring Estonia, and Vyborgsky district which is located near the border with Finland.” Petrov explained that the Leningrad region borders multiple European Union countries, where bitcoin adoption is much further ahead than in Russia and is actively used in both Estonia and Finland. However, transit passengers from border countries arriving in Russia may not have the correct currency to spend, and Russian ATMs do not provide access to large sums of cash. Allowing cryptocurrency payment in border areas “could help boost the number of visitors, both from the European and Russian side,” he said. Estonian and Finnish businessmen and foreigners transiting through these countries to Russia would be able to stay in the border areas, eat and fill their vehicles with fuel. The plan would be to establish cryptocurrency exchange points on the border areas with Estonia and Finland and open special shops and cafes where visitors can pay by bitcoin.

The Russian ombudsman for business rights, Dmitry Marinichev, supports the idea of politicians lobbying for the use of cryptocurrencies in the Leningrad region. “In general, I support the idea of people using cryptocurrencies. Even though the proposal is of a populist nature, I support it because so many people are beginning to understand how it functions, and as it offers a variety of new technological innovations in their lives.”
Russia currently bans Bitcoin from use and has security concerns such as money laundering and the financing of terrorism. It has also been pondering the launch of its own Cryptocurrency.

Consequently, there are complex legal and legislative issues to overcome. However, Russia has been examining Japan’s experience in cryptocurrency regulation and should the Russian Federal Bank be minded to offer Leningrad Oblast the ability to set up a limited pilot scheme for six-twelve months as a test case, it can be expected to follow the Japanese model. Russia can also follow the example of China, which also allows trade in Bitcoin. Customers can exchange RMB at various Bitcoin dealerships in the PRC and obtain Bitcoin credits. Looking further ahead, I recently posed the question “Which currency will be used along the Silk Road?“. Should the Russian Federal Bank decide to give Bitcoin a trial in Leningrad Oblast’s border regions with Estonia and Finland, the implications for not just Russian-EU trade, but for the entire OBOR routes could be highly significant.

Chris Devonshire-Ellis is the Founding Partner and Chairman of Dezan Shira & Associates. He is based in Europe. The firm provides European businesses and governments with strategic, legal, tax and operational advisory services to SMEs and MNCs investing throughout Eurasia and has 28 offices across China, India and the ASEAN nations as well as St. Petersburg and Moscow. Please contact the firm at asia@dezshira.com or visit the practice at www.dezshira.com

 

Russia Briefing is published by Asia Briefing, a subsidiary of Dezan Shira & Associates. We produce material for foreign investors throughout Eurasia, including ASEAN, China, India, Indonesia, the Silk Road & Vietnam. For editorial matters please contact us here and for a complimentary subscription to our products, please click here.

Dezan Shira & Associates provide business intelligence, due diligence, legal, tax and advisory services throughout the Eurasian region. We maintain offices in Moscow and St.Petersburg through our Russian partner firm, as well as our own offices in China, South-East Asia and India. For assistance with Russian issues or investments into Russia and Asia, please contact us at russia@dezshira.com or visit us at www.dezshira.com

 

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Russia Agrees Significant Silk Road Projects With China

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chinarussiaAs predicted, a significant array of economic cooperation agreements were signed between Russia and China during President Xi Jinping’s recent visit to Moscow.

The deals include the creation of the new US$10 billion China-Russia RMB Investment Cooperation Fund, which provides access to RMB financing for Russian projects, including under the One Belt, One Road and Eurasian Economic Union initiatives. China was recently given permission to offer settlement services in RMB in Moscow through the ICBC.

Other deals include commitments from China Development Bank, China National Petroleum Corporation, the Silk Road Fund, China Investment Corporation, the Russian Direct Investment Fund, and from the Russia-China Investment Fund. These are examined as follows:

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Russia & China Agree to US$10 Billion OBOR Fund

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rmb_rubbleRussia and China have agreed to establish a US$10 Billion Russia-China RMB Cooperation Fund following last week’s meetings between the two leaders in Moscow.

Both the China Development Bank and the Russian Direct Investment Fund have signed an agreement to establish a joint investment worth 68 billion yuan (US$10 billion). The fund will invest in projects related to China’s Belt and Road initiative as well as the Russia-led Eurasian Economic Union initiative.

The new fund will make ruble and yuan settlements, with Beijing expecting it to help boost the yuan’s international standing. Continue reading…

Establishing a Foreign Business in Russia – New Issue of Russia Briefing Out Now

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The new issue of Russia Briefing magazine, titled “Establishing a Foreign Business in Russia“, is out now and available as a complimentary download in the Asia Briefing Publications Store.

In this issue:Establishing a Foreign Company in Russia

  • Registering a Foreign Owned Trademark in Russia
  • Setting Up a Representative Office in Russia
  • Setting Up a Branch Office in Russia
  • Setting up a Limited Liability Foreign Owned Company in Russia

Foreign investment in Russia has undergone a metamorphosis over the past few years, from the tit-for-tat placing of sanctions upon Russia by the West, to the alternative development of trade and supply routes with the East. China’s King Long now provides the Scania buses that used to ply the roads of St. Petersburg and Moscow, but there are many other examples of Russia’s changing trade patterns.

At the recent St. Petersburg International Investment Forum, the number of delegates and deals signed hit record highs, showing that Russia’s decision to look East has been entirely justified. The waves of investment coming from China – which is seeking to secure long-term energy, commodities, agriculture, and trade routes to keep its economy on track – are having a highly positive knock-on effect on Russia. Russia also hosts the 2018 FIFA World Cup next year – this new edition of Russia Briefing is a timely one as investors scramble to get into a country that is benefiting from both China’s own One Belt, One Road (OBOR) ambitions and the World Cup.

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EU Extends Russia Sanctions Until 31st January 2018

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eu-sanctionsThe European Union has extended and enhanced economic sanctions against Russia effective until the end of January next year. Speaking at a cabinet session, Russian Prime Minister Dmitri Medvedev expressed regret that “our European partners continue this not very constructive line with regard to our state. Once again, politics takes over the economy and by and large over common sense in general.”

Konstantin Voronov, director of European Political Studies at the Russian Institute of World Economy and International Relations, has said that there are several layers to the EU’s latest sanctions. “I think this is a sort of ‘layer cake.’ Firstly, there is certainly a large ideological component in the foreign policy course of our European neighbors and partners. Continue reading…

Advancing Russian Free Trade with Asia, China, & the Pacific

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With the United States moving away from free trade with Asia, following Donald Trump’s scrapping of the Trans-Pacific Partnership (TPP), Asia Pacific nations have begun to examine alternatives. Japan and Australia, especially, have been vocal about continuing the TPP without the United States, with calls for that agreement to now include China.

Other alternatives include the Regional Comprehensive Economic Partnership (RCEP), which would bring together the members of ASEAN (Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, and Vietnam) and the six countries with which ASEAN has existing free trade agreements – Australia, China, India, Japan, New Zealand, and South Korea.

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Daimler Invests €280 Million in Moscow Mercedes-Benz Plant

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dartz-red-russianIn additional signs that show the Russian economy is rapidly recovering from the sanctions imposed upon it by the West, Daimler is localizing its production of Mercedes-Benz SUVs and sedans due to strong sales and the growth potential of the Russian market.

As we noted last week, Russian domestic auto sales are up 15 percent on the year with “pent up luxury demand”, according to the industry analysts Autostat. The Russian automotive sector has also been boosted by government support measures: comprising 7.5 billion rubles in budget subsidies, these are expected to provide additional momentum. The Russian market is expected to develop and provide sustainable long term growth.

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Russia-United Kingdom 2017 Trade Up 28%

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uk-russia-bahaiDespite sanctions placed upon Russia by the EU, British-Russian trade has increased significantly in the first six months of 2017 in items permitted under the sanctions measures.

Russian exports to the United Kingdom increased by 20.7 percent in January and February, and accounted for US$1.16 billion, whereas imports from the United Kingdom rose by 27.9 percent, and amounted to US$515 billion. In 2016, the volume of trade between the countries fell by 7.3 percent compared to 2015, with the export and imports dropping by 7.1 and 7.8 percent, respectively.
The Russian Trade Mission to the United Kingdom has seen a noticeable increase in trade between the two countries over the course of this year, as Russia’s Trade Envoy Boris Abramov said last week.

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Russia Considers Bridge/Tunnel Connection To Sakhalin Island

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sea_of_japan_map_enRussian authorities are discussing the possibility of constructing a bridge to Sakhalin Island, with estimated costs amounting to about US$5 billion. Russian President Vladimir Putin said during his annual “Direct Line” Q&A session yesterday that “Such ideas existed as long ago as in 1930s-1950s, and even respective plans were developed. But those plans were never implemented. We are currently working on revival of those plans and considering the issue. There were ideas, and we are currently considering them as well, to build a tunnel instead of a bridge, which is possible too,” Putin said, before adding that the decision had not yet been finalized.

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Russian Domestic Auto Sales Up 15%

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russian_car_artSigns of a mini boom in Russia are growing as domestic auto sales increased for the third straight month.
Sales for May were up 14.7 percent compared to May 2016, reaching 124,900 vehicles, according to the Association of European Businesses.

May is the third consecutive month with rapid growth in auto sales, with 129,400 cars sold in April (up 6.9 percent) and 137,800 cars in March (up 9.4 percent). According to AEB, almost all brands, with the exception of UAZ, Lexus, Audi, and Datsun, enjoyed strong growth. AEB representatives told Russian media that the figures indicate an acceleration of the automotive market’s recovery.

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