Russians Transfer Assets Worth US$50 billion From Europe to Russia

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Mistrust over asset management in Europe is driving investors away

While much of the focus on Russian assets in Europe has been on sanctioned properties and frozen bank accounts, there has also been a reaction to the perceived threat to overseas property being held by the EU in particular. Many of the assets and bank accounts seized and frozen by the EU were done so without recourse to legal procedures or arbitration.

That is now creating legal problems for the EU as many Russians without normal access to their EU assets mount legal challenges. These include Roman Abramovich who claims his assets were sized purely because he is a high-profile individual rather than being a member of the Russian government responsible for the Ukraine conflict.

The UK and EU has frozen US$7 billion of his assets and forced him to sell the Chelsea football club with the money raised given to benefit Ukraine.

In response, Russians have transferred at least US$50 billion from Europe to Russia since February 2022. The transfer of assets registered in jurisdictions such as quasi-offshore jurisdictions such as Cyprus, Jersey and Switzerland to Russia and countries considered friendly by the Kremlin, such as the United Arab Emirates and Kazakhstan, began shortly after the start of Russia’s special military operation in Ukraine.

The trend to move assets away from the UK and EU will almost certainly have spread to other global investors unhappy with the new risks associated with their assets being based in Europe.

According to Bloomberg, among the first repatriates from Switzerland and Cyprus to Russia were the family assets of billionaire Andrei Guryev and steel magnate Viktor Rashnikov. Others, like billionaire Igor Altushkin, followed later. Among the latter are Igor Shilov and Mark Kurtser, who control United Medical Group CY Plc and MD Medical Group Investments Plc, whose shareholders last month approved the relocation of the companies from Cyprus to Russia.

“The shift breaks up the decades-long practice of Russian billionaires keeping their assets in Europe, taking advantage of investor-friendly legal systems, the ability to receive dividends in foreign currencies and low taxes. The richest Russians now have fewer and fewer places to park their wealth, as many they are under sanctions from the US, UK or Europe,” Bloomberg notes.

This year, 115 companies moved to Russian offshore zones, bringing the total to 254, First Deputy Minister of Economy Ilya Torosov said at recent Far Eastern Economic Forum. Vladivostok has a Free Trade Zone offering competitive corporate income tax rates of 15% in addition to additional benefits.

Meanwhile, a number of the largest Russian raw materials and technology companies are still registered in Europe. Fertiliser maker EuroChem Group AG, founded by billionaire Andrei Melnichenko, is based in Zug, Switzerland, while agricultural firm Ros Agro PLC has moved its listing to Kazakhstan and is working to re-register from Cyprus, the company said last month, without disclosing details.

Other regions of interest include stock exchanges in the Middle East, as well as the other Central Asian bourses depending on the corporate specifics.

Source: Finam 

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