Russia considering removal of Russian firms’ depositary receipts from foreign exchanges

The Russian Economy Ministry has proposed delisting Russian companies’ depositary receipts from overseas exchanges, Interfax news agency reported on Tuesday, March 29, citing a source acquainted with the plan. The Ministry of Economic Development informed Interfax that the “process is being explored,” but declined to comment on the specifics of the approach.

After Moscow launched what it calls a “special military operation” in Ukraine on February 24, the price of depositary receipts of key Russian enterprises on the London Stock Exchange (LSE) plummeted – by more than 90% for certain firms. Early in March, the London Stock Exchange (LSE) halted trading in Russian businesses’ depositary receipts (which reflect shares in a foreign company).

According to Interfax, the receipts of Russian enterprises will be converted into Russian securities under the plan of the economy minister. The ministry hopes to “lower the risk of transfer of corporate control owing to non-market sales of such securities” by delisting, according to a source reported by Interfax.

The campaign was launched shortly after the value of depositary receipts issued by the main Russian issuers on the London Stock Exchange (LSE) plummeted upon news of Russian sanctions, prompting the LSE to suspend trading in securities issued by 27 Russian businesses on March 3. Sberbank’s worth of receipts had fallen to one penny as of March 2, while Gazprom’s had fallen 89%, Lukoil’s had fallen 97.2%, Nornickel’s had risen 37%, Rosneft’s had fallen 70.4%, Novatek’s had risen 91%, and so on.

Impact of war on Russian economy

Further, according to the Institute of International Finance (IIF), Russia is on track to erase 15 years of economic gains by the end of 2023 as a result of its invasion of Ukraine, which caused a slew of sanctions and corporations to flee the country. In a preliminary assessment of the war’s impact, economists Benjamin Hilgenstock and Elina Ribakova predicted that the economy would contract 15% in 2022, followed by a 3% decline in 2023, leaving gross domestic product roughly where it was fifteen years ago.

The Russian invasion of Ukraine last month caused the ruble to fall, prompting global supply chains and commodity prices to collapse, as well as a major exodus of enterprises from the country. Even after the immediate blow to Russia’s economy, the country’s economy will be harmed for years by a so-called “brain drain.” The exodus of educated, middle-class Russians with the financial means to leave the country, and by US and EU export controls on technology, including microelectronics, which, according to the IIF, will stymie technological development in Russia for years.

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