/ world today news/ Israeli banks blocked shares of Russian citizens
Israeli banks restricted the rights of Russians to dispose of their own shares. Now the brokerage accounts of the holders of Russian passports are separated into separate accounting and transactions on them can be carried out only for amounts not exceeding 100 thousand euros. In fact, it is about limiting property rights and, in essence, about a kind of arrest of foreign shares that are owned by Russian citizens.
As reported by RBC and Forbes, the basis was the requirement of one of the largest European depositories, the Belgian Euroclear.
This institution was a kind of “bridge” between Russian buyers of foreign shares and the largest exchanges – London and New York. That is, a huge part of foreign securities in which Russians have invested are stored and accounted for there.
According to the founder of the investment-consulting company SmartGen Mark Oigman, the first calls to clients of his company started coming from banks about 10 days ago. Furthermore, the upcoming restrictions were announced exclusively orally, without formal and properly formatted notices.
The information was confirmed by the managing partner of the Israeli law firm “Kovalenko and Partners” Alexey Kovalenko. Israeli banks, he said, notified their customers about the possibility of restricting the use of accounts by Russians as early as July, but since then negotiations have been ongoing about how exactly the plan will be implemented and who exactly will be subject to the restrictions.
And according to lawyer Alexander Zernopolski, customers learned about the impending separation of accounts by contacting the bank.
There are no alternative systems
Euroclear has been creating obstacles for Russian investors since March 2022, acting (or not acting) both on its own initiative and as part of various European Union “sanctions packages”. And now his “long arms” extended to Israel.
Earlier, HSE professor and investment banker Yevgeny Kogan noted in an interview with IA Regnum that the depository “has been very active with the Russians and is trying to reach them all over the world.” The expert defined these actions as persistence, which it is “a bit manic and quite tiring to say the least ‘, as it is about fighting people who are not sanctioned.
Financial analyst Vladimir Levchenko notes that this depository registers ownership rights to many types of securities, and their total value is at least not less than the total value of all real estate in the world. “As far as Europe is concerned, the lion’s share of all securities and property rights are held in the two largest depositories – Clearstream and Euroclear,” says the expert. “Securities that belong to Russian citizens in the West are registered with them.”
Through what structure, from which broker or bank it was purchased and how it is accounted for – this is the next step in the accounting of property rights. Some securities are posted through Russian banks, by our brokers, some through European banks, through the UAE and some through Israel.
And now, in fact, the property rights of Russian citizens in Israel are being restricted – this is just the next step in a big sanctions war against all people who have a Russian passport, notes the interlocutor of IA Regnum.
Ivan Rodionov, a professor from the Economics and Finance Department of the National Research University Higher School of Economics, points out that Euroclear is a private company. There are few alternatives in the world and all these structures are also private.
„Why are Euroclear and Clearstream critical to investing in Europe and many other countries? Because there are no other systems”says the expert. “These are obvious shortcomings of international law. “
Although this is disadvantageous for the company from the point of view of business interest, at the initiative of the European authorities, Euroclear decided that the Russian shareholders will not be represented in Europe, Rodionov points out. And now the company is gradually expanding these measures to other countries outside the European Union. This is basic discrimination based on nationality. “I own all the air on earth and forbid the Russians to breathe,” mocked the interlocutor of IA Regnum.
The actions of the depository signal that Russians should not own shares in Israeli banks, the expert believes. Most likely, the property will be confiscated. This happened to the European banks, now it is the turn of the Israeli ones. “Some banks refuse to follow this decision,” says Rodionov. “But the Israelis agreed.”
Professor Rodionov does not rule out that the unspoken conditions for providing military aid to Israel by the European Union for the hostilities in the Gaza Strip may include joining the anti-Russian sanctions. And they open up opportunities for discrimination based on nationality, which has long been considered absolutely unacceptable neither from the point of view of business ethics nor from the point of view of international law.
Whether the country’s displeasure with Russia’s apparent pro-Palestinian stance contributed to the compliance of local banks or whether it was just an unfortunate coincidence – history is still silent. However, the trend, as they say, is obvious.
The scale of the problem
Now our citizens in Israel, who find themselves in this situation, no longer have the opportunity to fix anything, says the lawyer and specialist in international law Maria Yarmush: “It is no longer possible to resell anything and any transactions after the written order of November 13th may firstly be blocked and secondly declared void. It turns out that the Russian passport gives reason to simply take the money of its holder and block it for the time being. That is, ownership of the investments is completely suspended for an indefinite period of time.
However, the total number of Russian citizens who may suffer from banking arbitrariness in Israel is hardly significant, according to Professor Rodionov. Most likely, we are talking about several hundred investors with significant investments.
Analyst Levchenko doubts that it is possible to find in the public space the number of Russian citizens who may suffer from the actions of the depositories in Israel: “This, of course, is a bank secret, but I think that the number is small, because yes working in Israel is generally quite difficult.
Those who do business in Russia, while holding an Israeli passport, as well as those doing business in Israel, with a 99% probability will not store financial assets in Euroclear, as long as they purchase them through Israeli structures. Those who live permanently in Israel but have kept Russian passports and are subject to Euroclear restrictions are few, Levchenko believes.
Will the investment return?
Lawyer Yarmush agrees that the situation surrounding the Israeli accounts once again highlights how dangerous it is now for Russian citizens and organizations to invest their funds in foreign securities in foreign jurisdictions.
„The behind-the-scenes talks about the decision to limit the accounts of Russians in Israel to amounts of 100 thousand euros have been going on even before November 13, when an official written notification arrived for banks in Israel to determine which investment accounts are linked to Russian citizens, “, notes the expert.
But the freezing of Russians’ assets by the banks, as noted by Professor Rodionov, can stimulate the return of Russian investments to their homeland. But not to all, as there are two categories of investors.
The first represents large sums of depersonalized money that have long been held by trust funds in other jurisdictions. This money “walks” around the world, going where it is more convenient.
But there are also investors who think they can now live in a “rentier mode” by taking advantage of the income from securities. “It’s good to feel smart. If you managed to make money, you follow the market – what can go up and what can go down. You sell something through the same Euroclear system, if we are talking about European shares, and now also about Israeli ones,” explains the expert. There are several tens of thousands of such investors.
The current development of the situation was already evident in February 2022, insists Levchenko. And the story with the accounts in Israel is purely symbolic, it will not affect the Russian economy in any way. But, alas, it strikes at specific people.
As a result, there will practically be no financial institution left in Russia itself that is not subject to Western sanctions, the expert is convinced.
„Every bank, every investment company in turn will fall under these sanctions, it’s time to figure that out,” says Levchenko. ” And it makes no sense to run from one structure to another, wasting time and money. Most investors, however, act on the principle “the mice cried, stung, but continued to chew the cactus”.
As we see new escalation points in the world, and by all accounts we are heading towards it, the West will have to somehow freeze the conflict in Ukraine. And this can only be done by increasing the pressure on that part of the Russian elite, which is receptive to theft and the export of money abroad. Which still keeps most of its funds outside of Russia. “
At the same time, there are prospects for restoring justice through the courts, lawyer Maria Yarmush is convinced. In theory, any specific investment block can be appealed, arguing that these are excessive measures unrelated to the sanctions. It is not necessary to negotiate with the bank, but to act through the court. But it’s a long process that can take several years and ultimately still result in forfeiture.
Therefore, actions in foreign jurisdictions began to bring unacceptable problems to the Russian investor, the expert concludes. It is still impossible to predict how the Russians will behave next, but it is already clear that the time has come for them to return their assets.
„This is actually the reliable defense against “sanctioned” confiscations, against the fact that only on the basis of your nationality you will be blacklisted and your property will at least be frozen”summarizes the expert.
Translation: ES
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