Swordsmyth
09-22-2018, 01:48 PM
A recent flurry of Russian sanctions put in place by the United States are causing Russia's oligarch billionaires to repatriate more of their offshore assets, perversely aiding a long-held ambition for Vladimir Putin, who has been trying to encourage such repatriations for the past two decades according to a new Bloomberg report (https://www.bloomberg.com/news/articles/2018-09-21/u-s-sanctions-are-driving-russian-billionaires-into-putin-s-arms).
While sanctions were first put into place during the Obama era as a result of the conflict in Ukraine, which however resulted in a muted financial response, as a result of the Trump administration‘s unpredictability and Trump's desire to demonstrate his anti-Kremlin stance to Mueller, Russian billionaires - increasingly at risk from a hostile financial regime - have been forced to move some of their assets back to state-run banks and out of an offshore system that has been a popular tax haven since communism has collapsed.
And with new anti-Russia sanctions announced by the US and its allies at an increasingly rapid pace, the accelerating repatriations to Russia have been prompted by the desire to keep assets out of the reach of the United States Treasury, which with its implied near monopoly on the Swift financial transfer network, means that the only place "safe" is back in Russia, and under Putin's watchful eye.
It's not just the billionaires: numerous Russian exporters have moved their assets out of United States and European banks, as well.
While Russia's central bank doesn’t publish statistics on repatriated funds, and so getting an exact number is difficult, Russia’s largest lender, Sberbank PJSC, reported a 17% rise in corporate holdings and all currencies in January through August of this year, equating to about $90 billion. Additionally, balance of payment data indicates that the private sector in Russia brought more financial assets home then it sent overseas in the second quarter - only the second time this has happened since 2014.
https://www.zerohedge.com/sites/default/files/inline-images/chart1_16_0.png
Here one can argue that raising sanctions on Russia, and the accelerated repatriation wave, is playing right into the Russian president's hands: in June, Vladimir Putin said that he wanted wealthy Russians to move their capital back to "where it’s earned", with the billions in offshore funds meant to reinforce the weakening Russian financial system. However, absent external interference, there simply weren't enough economic opportunities in Russia to prompt repatriation at the level that Putin seeks during his final term, which ends in 2024.
Instead, net capital outflows are expected to be over $50 billion this year, which is double last year‘s total. This total includes foreigners selling Ruble bonds, corporate foreign currency debt payments and Rubles that have been converted to dollars, as well as Euros held inside Russia. One sanctioned shareholder of a Kremlin-linked company told Bloomberg that he was told by his asset manager that he had a good year because he hadn't invested anything, resulting in him having nothing to lose.
Other steps taken by Russia haven’t had encouraging results on their own, either. For instance, in March, the sale of a new Eurobond raised just $200 million - just 5% of its amount targeted - and there has been limited interest in two newly created "offshore" zones inside of Russia that the government set up to encourage repatriation in exchange for tax-free dividends.
And since the Russian government has offered little help with the repatriation process companies have been left to fend for themselves.
As Bloomberg notes, the penalties on Deripaska led to an aftershock across the country, prompting boardrooms in Russia to take action. The billionaire's aluminum supply giant, Rusal, was almost forced to halt production after international banks froze his accounts regardless of what currency they were in. Slava Smolyaninov, a strategist at BCS Global Markets in Moscow, told Bloomberg: "It showed how any international business can be brought to its knees in a second. That was a real eye-opener for many tycoons."
In addition to money coming back to Russia, corporate registrations are also being repatriated. Billionaires like Alexey Mordashov and Alisher Usmanov are transferring stakes in enterprises they own to Russia registered companies.
More at: https://www.zerohedge.com/news/2018-09-22/how-russian-sactions-are-helping-putin-achieve-his-most-desired-goal
Is this actually the intended result?
If so who's plan is it? Trump's? or the Demoncrats'?
While sanctions were first put into place during the Obama era as a result of the conflict in Ukraine, which however resulted in a muted financial response, as a result of the Trump administration‘s unpredictability and Trump's desire to demonstrate his anti-Kremlin stance to Mueller, Russian billionaires - increasingly at risk from a hostile financial regime - have been forced to move some of their assets back to state-run banks and out of an offshore system that has been a popular tax haven since communism has collapsed.
And with new anti-Russia sanctions announced by the US and its allies at an increasingly rapid pace, the accelerating repatriations to Russia have been prompted by the desire to keep assets out of the reach of the United States Treasury, which with its implied near monopoly on the Swift financial transfer network, means that the only place "safe" is back in Russia, and under Putin's watchful eye.
It's not just the billionaires: numerous Russian exporters have moved their assets out of United States and European banks, as well.
While Russia's central bank doesn’t publish statistics on repatriated funds, and so getting an exact number is difficult, Russia’s largest lender, Sberbank PJSC, reported a 17% rise in corporate holdings and all currencies in January through August of this year, equating to about $90 billion. Additionally, balance of payment data indicates that the private sector in Russia brought more financial assets home then it sent overseas in the second quarter - only the second time this has happened since 2014.
https://www.zerohedge.com/sites/default/files/inline-images/chart1_16_0.png
Here one can argue that raising sanctions on Russia, and the accelerated repatriation wave, is playing right into the Russian president's hands: in June, Vladimir Putin said that he wanted wealthy Russians to move their capital back to "where it’s earned", with the billions in offshore funds meant to reinforce the weakening Russian financial system. However, absent external interference, there simply weren't enough economic opportunities in Russia to prompt repatriation at the level that Putin seeks during his final term, which ends in 2024.
Instead, net capital outflows are expected to be over $50 billion this year, which is double last year‘s total. This total includes foreigners selling Ruble bonds, corporate foreign currency debt payments and Rubles that have been converted to dollars, as well as Euros held inside Russia. One sanctioned shareholder of a Kremlin-linked company told Bloomberg that he was told by his asset manager that he had a good year because he hadn't invested anything, resulting in him having nothing to lose.
Other steps taken by Russia haven’t had encouraging results on their own, either. For instance, in March, the sale of a new Eurobond raised just $200 million - just 5% of its amount targeted - and there has been limited interest in two newly created "offshore" zones inside of Russia that the government set up to encourage repatriation in exchange for tax-free dividends.
And since the Russian government has offered little help with the repatriation process companies have been left to fend for themselves.
As Bloomberg notes, the penalties on Deripaska led to an aftershock across the country, prompting boardrooms in Russia to take action. The billionaire's aluminum supply giant, Rusal, was almost forced to halt production after international banks froze his accounts regardless of what currency they were in. Slava Smolyaninov, a strategist at BCS Global Markets in Moscow, told Bloomberg: "It showed how any international business can be brought to its knees in a second. That was a real eye-opener for many tycoons."
In addition to money coming back to Russia, corporate registrations are also being repatriated. Billionaires like Alexey Mordashov and Alisher Usmanov are transferring stakes in enterprises they own to Russia registered companies.
More at: https://www.zerohedge.com/news/2018-09-22/how-russian-sactions-are-helping-putin-achieve-his-most-desired-goal
Is this actually the intended result?
If so who's plan is it? Trump's? or the Demoncrats'?