SERGEY DROBYSHEVSKY ON THE GOVERNMENT DECISION ON RESTRICTIONS FOR FOREIGN INVESTORSG

Prime Minister Mikhail Mishustin announced the introduction of temporary restrictions on foreign investors' withdrawal from Russian assets at a meeting dedicated to improving the sustainability of the Russian economy. I think that despite its temporary nature, the media and investors are in solidarity that this measure has a massive and long-term effect on the economy. Let's look into whether it is really as unprecedented and infringes investors' rights as many might think.

Do we need to explain the threat of foreign investors withdrawing from Russian assets? It is obviously fraught with withdrawal of funds from the sale of assets abroad, resulting in increasing pressure on the ruble exchange rate. Thus, reducing this pressure right now is the most important task for the government and the Bank of Russia, that must be solved. The exchange rate is the psychological state of the Russian economy, let’s put it this way, which needs to be kept up.

This is the financial context. What about business? It is clear that domestic companies will have to adapt and will be helped. However, at the same time, the government is clearly not anxious to lose at once everything accumulated by our economy and profited from foreign capital. The Prime Minister said that those who invested in this country should have the opportunity to continue working there. Well said, but how does this correlate with the solution described at the beginning of the text? Let's look from the perspective of the foreign investor.

Neither of them wants to make a decision under any kind of pressure, they want to run their business quietly and generate profits as far as possible. However, the situation as it stands does not give them that opportunity. They will be pressured politically and psychologically appealing to their conscience and ensuring their reputation, not in Russia, of course, but in the country of origin. Asset owners simply will not be able to get a fair price for their investments and will be forced to withdraw funds at a loss, at a low price, and leave the well-loved market. However, does an investor really want to burn all the bridges at once?

It seems that the decision to restrict the investments’ exit is like a life-saving wand for the investor in this situation. It will help the investor to avoid unwanted damage legally, as the government took the responsibility for the ban. In turn, the investor gets rid of an unnecessary hassle and remains at least temporarily indebted to no one.

Is there a risk that a temporary ban will escalate into something more? It is unlikely that the authorities will "shoot themselves in the foot". The aim here is precisely to stall for time. Once the dust settles, the ban will be lifted and investors will be able to settle their affairs in a relaxed manner and, as they say, with a cool head. In this sense, temporarily restricting foreign investors' exit is similar to the widespread practice of suspending trading on the

stock exchange when a crisis arises and share prices fall. Moreover, there is no law enforcement practice or legal basis for imposing perpetual sanctions or restrictions on legal entities in Russia. In other words, the restrictions imposed are, by definition, temporary.

The government's decision, however odious it may seem at first glance, in no way falls into the category of "bureaucratic arbitrariness". On the contrary, it is not emotional, cold-blooded and strategic in nature, killing two birds with one stone. The first is to minimize damage to the financial market and stabilize the currency. The second one is to secure relations with investors. After all, sooner or later the sanctions pressure will subside, and those who will not curtail their projects in Russia by succumbing to short-term slogans will benefit.

In turn, the sanctions imposed by Western states amidst such actions are far more emotional and destroy the very principles of the Western financial system, which is built on trust. Their meaning is not to punish certain companies or individuals, but to demonstrate the omnipotence of the countries making such decisions on the world stage. In the long run, it sends a signal to other countries, whether it is worth integrating with this system, investing and join this world? After all, there has been a consensus for years based on the formula that the more connected the world is, the lower the risk of major conflicts.