Russia’s Response to Western Sanctions Steps Up

On Wednesday, Russian President Vladimir Putin signed a decree providing special economic measures to counteract the unfriendly actions of some foreign states and international organizations.

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According to a document published on the official government portal, the new decree introduces a temporary procedure for distributing profits of national companies to non-friendly countries that had imposed punitive sanctions on Russia since February 24, when the country launched its special military operation in Ukraine.   

The document says that if a Russian company decides to distribute profits, by default, residents of non-friend countries will receive their share in a special C-type bank account, from which funds are not allowed to be withdrawn. The funds can only be used for a restricted set of purposes, including paying taxes or purchasing OFZ. A separate permit to transfer funds to a regular account may be provided by the Central Bank and the Ministry of Finance.  

The document stresses that, should it be decided to distribute profits to foreign creditors, payments will be made from now on in line with the decree of early March. This decree, signed by President Vladimir Putin, introduced a temporary procedure for fulfilling obligations to foreign creditors from countries having imposed sanctions on Russia. 

This applied to debt obligations, be they credits, loans, bonds of Russian regions and municipalities, as well as to individuals and legal entities making payments of more than 10 million rubles a month or the equivalent in hard currency.
 
Under the decree, a Russian borrower who has foreign currency obligations to foreign creditors can pay them in rubles. As for loans in Russian banks, foreign creditors or nominal holders of securities were required to open a C-type account. 

To meet obligations related to the issuance of securities, a Russian borrower may open a C-type account with the Russian Central Securities Depository. Afterward, the borrower can transfer the funds in the equivalent of rubles at the Central Bank's exchange rate on the day the payment is effected.