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Exactly the same sanctions
The Central Bank data showed that assets in non-resident accounts with Russian brokers fell for the first time in more than two years. By the end of the second quarter of 2024, the volume had fallen by almost 10%. This trend is only partly due to the decline of the Russian stock market. US sanctions against the Moscow Exchange also had a negative impact.
According to Kommersant estimates based on Central Bank data, the total number of non-resident accounts of Russian brokers increased by slightly more than 2% in the second quarter, with assets in these accounts reaching almost 30.5 thousand. A decrease of 9.6%, a decrease of almost 189 billion rubles, or to 1.77 trillion rubles. The increase in accounts was guaranteed by individual investors (from 0.55 thousand to 28.96 thousand rubles), while the assets of legal entities decreased (from 189.3 billion rubles to 1.712 trillion rubles).
The last time these assets declined was in the third quarter of 2022. Then, against the backdrop of new Western sanctions and high turmoil in the stock markets, assets fell almost threefold - to 0.5 trillion rubles. In subsequent quarters, growth fluctuated from 6% to 46% per quarter. This was facilitated by increased investment and revaluation of securities. According to the results of six quarters ending March 31, 2024, the Moscow Exchange Index rose by 70% to 3,333 points. The correction began in the second quarter: the index fell by 5.5% to 3,154 points.
The situation was aggravated by US sanctions against the Moscow Exchange Group (including the National Clearing Center (NCC) and the National Settlement Depository (NSD); see Kommersant, June 13). “Sanctions from the exchange and the NCC have affected the desire of global offshore companies to do anything within the borders of Russia. At the same time, it should be understood that most of these accounts are controlled in one way or another by friendly non-residents or citizens of the Russian Federation,” says a market source. Some left the market due to the risk of secondary sanctions, others because currency trading became impossible, says Gleb Boyko, a lawyer at the law firm Nektorov, Saveliev and Partners. On June 13, the Moscow Exchange suspended trading in dollars and euros, and trading in other currencies also declined.
The assets of brokers' clients' accounts in foreign regions, as well as in neighboring countries, are significantly decreasing. Among the offshore ones are the Virgin Islands, Panama and Belize. At the same time, the assets of clients from Azerbaijan fell by 65% to 500 million rubles, and the assets of clients from Uzbekistan - by 30% to 59.7 billion rubles. Kazakhstan - 185.8 billion rubles, an increase of 20%. "After the introduction of sanctions against NSD, many professional players from neighboring countries do not want to continue to consider Russian assets, so their residents will have to withdraw these assets into Russian circulation," says Gleb Boyko.
The withdrawn funds are partly directed to domestic and offshore companies, as well as to countries with more loyal regimes. Accordingly, assets in the accounts of clients of the SAR region (i.e. domestic foreign companies) increased by 30% to 414.9 billion rubles. Assets of clients from Hong Kong increased by 9% to 28.1 billion rubles, assets of clients from the Cayman Islands increased by 18% to 14.5 billion rubles. In each case, the growth was also due to the corporation. Countries of the far abroad, such as Singapore, Seychelles and Saudi Arabia, remain popular, and clients from these countries have seen a decrease in assets by 8-9%. "The Seychelles is a friendly jurisdiction and remains popular for structuring the assets of Russian investors. Corporate services are on average cheaper than, for example, in the UAE," says Ruslan Klyshko, Director of the Asset Management Department at Astero Falcon.
With sanctions against the Moscow Stock Exchange coming into effect on Sunday, the outflow of clients from foreign brokerage firms is expected to be reflected in the third quarter data. Maria Agranovskaya, managing partner of the Grad Bar Association, does not rule out that the outflow may increase in the third quarter after OFAC licenses are extended until October 12. “Nobody wants to find themselves in a situation of secondary sanctions and quarantine, so the last few months have been a continuous desire to move to other jurisdictions and find a good and correct solution,” says Agranovskaya. The impact of this factor will decrease already in October. “After the expiration of the OFAC license, the outflow will most likely weaken, because everyone for whom the OFAC license is important has already made transactions with Russian assets,” says Tatyana Simonova, portfolio manager at General Invest.