Russian President Vladimir Putin issued a decree imposing an total ban on transactions with sure belongings, corresponding to securities in sure Russian corporations and pursuits in sure Russian funding tasks, if these securities and pursuits are owned by individuals from the so-called “unfriendly states” or individuals managed by such. Property embrace shares in sure Russian main entities, power and subsoil corporations and tasks, and Russian banks. The brand new ban restricts the flexibility of traders to exit from their Russian investments or to restructure their Russian holdings with out particular permission of the Russian president. 

This ban is along with a number of present restrictions issued as a part of the Russian counter-sanctions measures.

Decree No. 520, “On Software of Particular Financial Measures in Monetary and Gas and Vitality Sectors in Reference to Unfriendly Actions of Sure Overseas States and Worldwide Organizations” (the Decree), took impact instantly upon its publication on August 5.

GENERAL PROHIBITION

The Decree typically prohibits any transaction (operation) ensuing, instantly and/or not directly, in acquisition, modification, termination, or creation of any encumbrance over the rights to personal, use, or eliminate:

1. securities issued by Russian authorized entities;
2. participation pursuits within the constitution (share) capitals of Russian authorized entities; and
3. participations pursuits, rights and obligations held by events to manufacturing sharing agreements, joint working agreements, or different agreements below which funding tasks are carried out in Russia.

The Decree applies if the above belongings are owned by non-Russian individuals related with the so-called unfriendly states or by individuals who’re below management of such.

The prohibition is efficient till December 31, 2022, and could also be prolonged additional by the Russian president quite a few occasions.

The Decree directs that any transaction (operation) executed in violation of the prohibition is null and void. An proprietor of an asset which was the subject material of such transaction have to be denied of all its rights whether or not below Russian legislation, an settlement, or different authorized association.

ACTUAL SCOPE

Regardless of the final prohibition, the Decree specifies that it solely applies to shares and pursuits in particular corporations and tasks. Specifically, the Decree is said to use to:

1. Shares within the so-called “strategic inventory corporations” listed in Presidential Decree No. 1009 dated August 4, 2004, “On Approval of the Record of Strategic Enterprises and Strategic Inventory Firms”. The record at present contains greater than 40 inventory corporations together with Gazprom, Rosneft, Transneft, Zarubezhneft, Rosneftegaz, VTB Financial institution, Promsvyazbank, Alrosa, Aeroflot, Sheremetyevo Worldwide Airport, Russian Railways, Sovcomflot, Rosseti, RysHydro, Inter RAO, Federal Grid Firm of Unified Vitality System, and United Grain Firm.
2. Shares (participation pursuits) in entities during which the above strategic inventory corporations personal any shares (participation pursuits), instantly or not directly.
3. Participation pursuits, rights, and obligations of the individuals within the following manufacturing sharing agreements (PSA):
   1. Sakhalin-1 PSA (Chayvo, Odoptu, and Arkutun-Dagi oil and fuel condensate fields)
   2. Kharyaga PSA (Kharyaginskoye oil area).
4. Shares (participation pursuits) in entities which:
   1. produce tools for organizations working within the gas and power sector and supply service upkeep for and restore such tools,
   2. generate and provide warmth and/or electrical power, or
   3. refine oil or feedstock and produce refined merchandise.

   The record of such entities is but to be accepted by the president, based mostly on the proposal to return from the Russian authorities by August 15, 2022.

5. Shares (participation pursuits) in Russian credit score organizations (e.g., banks). The record of such credit score organizations is but to be accepted by the president, based mostly on the proposal to return from the Russian authorities and the Russian Central Financial institution by August 15, 2022.
6. Shares (participation pursuits) in entities that are customers of subsoil blocks that are:
   1. positioned in Russia:
      1. have hydrocarbon deposits containing at the least 20 mln tons of oil, 20 bln cubic meters of pure fuel or 35 mln tons of coal, or deposits of uranium, high-purity uncooked quartz deposits, yttria group of uncommon earths, nickel, cobalt, tantalum, niobium, beryllium, or copper
      2. major diamond, gold, lithium, or platinum group steel deposits
   2. positioned within the inland sea waters, territorial waters or on the continental shelf of Russia.

Given the precise scope, it stays to be seen but whether or not the Decree can be prolonged to use to different varieties of securities or different corporations or funding tasks carried out in Russia.

SPECIFIC APPROVAL FROM THE PRESIDENT

The Decree instantly states that the Russian president can particularly approve any in any other case prohibited transaction.

EXEMPTIONS

The Decree comprises two restricted exemptions from the brand new prohibition for transactions (operations) executed pursuant to:

1. President Decree No. 416, dated June 30, 2022, “On Software of Particular Financial Measures within the Gas and Vitality Sector in Reference to Unfriendly Actions of Sure Overseas States and Worldwide Organizations”, which regulates altering the operator below Sakhalin-2 PSA to a Russian entity and different associated issues.
2. Federal Legislation No. 320-FZ dated July 14, 2022, “On Modification of Federal Legislation ‘On Privatization of State and Municipal Property’, Sure Authorized Acts of the Russian Federation and On Regulatory Concerns of Property Relations”, which pertains to sure privatization transactions and transactions related to necessary conversion of a international firm department or consultant workplace right into a Russian entity in sure instances.

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