Russia releases list of ‘hostile countries’ – has implications for overseas remittances

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The Russian government on Monday approved a list of foreign states and territories deemed to have committed hostile actions against Russia, its businesses and its citizens.

The list includes the United States and Canada, all states of the European Union, the United Kingdom (including Jersey, Anguilla, the British Virgin Islands, Gibraltar), Ukraine, Montenegro, Switzerland, l Albania, Andorra, Iceland, Liechtenstein, Monaco, Norway, San Marino and North Macedonia. In Asia, the list includes Japan, South Korea, Australia, Micronesia, New Zealand, Singapore and Taiwan (considered a territory of China, but ruled by its own administration since 1949).

There are new Asian trade implications with Singapore and South Korea in particular. South Korea had negotiated a free trade agreement with the Eurasian Economic Union (EAEU) and this will likely be suspended. Singapore has signed an FTA with the UEE, but the finishings are still in progress, they will probably also be suspended. This leaves Vietnam as the only Asian country to have a free trade agreement with Russia.

The Russian government has stated that under this decree, Russian citizens and companies, the state itself, its regions and municipalities that have currency obligations to foreign creditors on the list of hostile countries will now be obliged to pay them in rubles rather than other currencies. This achieves two things; this saves Russia’s foreign exchange reserves and forces these countries to accept payment in a massively devalued currency that is currently difficult to trade – no one currently wants to hoard Russian rubles. It should be noted, however, that this is not aimed at small businesses but only applies to payments above 10 million rubles (72,202 USD) per month. This also applies to holders of foreign bonds, even for amounts denominated in foreign currencies, and could lead Russia to default on US dollar-denominated debt. The country has about $700 million in public debt repayments due in March, debtors will now receive rubles.

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Briefing Russia is written by Dezan Shira & Associates. The company has 28 offices across Eurasia, including China, Russia, India and ASEAN countries, assisting foreign investors in the Eurasian region. Please contact Maria Kotova at [email protected] for Russian investment advice or assistance with market information, legal, tax and compliance issues throughout Asia.

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