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Russia bans Western investors from selling banking, key energy stakes

Written by Javed Iqbal

Russian President Vladimir Putin chairs a meeting on the development of the country’s metallurgical sector via video link at the Kremlin in Moscow, Russia August 1, 2022. Sputnik/Pavel Byrkin/Kremlin via REUTERS

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  • This content was produced in Russia, where the law restricts coverage of Russian military operations in Ukraine

MOSCOW, Aug 5 (Reuters) – Russia has banned investors from so-called unfriendly countries from selling shares in key energy projects and banks until the end of the year, increasing the pressure of sanctions against the West.

Western countries and allies, including Japan, have imposed economic restrictions on Russia since it sent troops into Ukraine in late February. Moscow retaliated by barring Western companies and their allies from leaving Russia, and in some cases seizing their assets.

That decreesigned by President Vladimir Putin and published on Friday, immediately prohibits investors from countries that supported sanctions against Russia from selling their assets in production sharing agreements (PSA), banks, strategic entities, companies that produce energy equipment, as well as in other projects, from oil and gas production for coal and nickel.

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Putin could issue a special dispensation in certain cases for the deals to go ahead, the decree said, and the government and central bank should draw up a list of banks for the Kremlin’s approval. The decree did not mention any investors by name.

TAKING THE HIT

The ban covers almost all major financial and energy projects in which foreign investors still have a stake, including the Sakhalin-1 oil and gas project.

Thursday, Russian state oil major Rosneft (ROSN.MM) blamed Exxon Mobil for declining production at the Sakhalin-1 group of fields after the US energy major said it was in the process of transferring its 30% stake “to another party.” Read more

Separately, a government decree signed on August 2 allowed foreign investors in the Sakhalin-2 liquefied natural gas (LNG) project – Royal Dutch Shell and Japanese trading houses Mitsui & Co. (8031.T) and Mitsubishi Corp (8058.T) – one month to claim their share in a new entity that will replace the existing project.

The new decree does not cover the Sakhalin-2 project, it said.

Exxon declined to comment. On Thursday, before the ban, Exxon said it had made significant progress in exiting the Sakhalin-1 project and that the withdrawal was a complex process. As a former operator, Exxon “has an obligation to ensure human safety, environmental protection and operational integrity,” spokesman Casey Norton said Thursday.

Shell looked for options to withdraw from the project, while the Japanese government reiterated its desire for the Japanese companies to maintain their stake there.

Italy’s UniCredit (CRDI.MI) and understanding (ISP.MI)the American group Citi and Austria’s Raiffeisen (RBIV.VI) continue to search for opportunities to leave Russia, while others such as Societe Generale (PARISH.PA), (ROSB.MM) and HSBC has found a way out. Read more

Citigroup declined to comment on Friday, but on Thursday the bank said in a filing that it will continue to reduce its operations and exposure to Russia.

Citigroup has stopped looking for new business or new customers in Russia, it said.

Citigroup disclosed $8.4 billion in Russia exposure as of June 30 compared with $7.9 billion at the end of the first quarter. The exposure increased due to an increase in the value of the ruble. Read more

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Report from Reuters; Editing by Mark Potter, Frank Jack Daniel and David Evans

Our standards: Thomson Reuters Trust Principles.

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Javed Iqbal

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