Russia Investments: What Investors Can Do Now

by Stephan Haberer, Euro on Sunday

So some investors know this: Because of the sanctions against Putin’s war in Ukraine, securities of Russian companies can no longer be traded on Western stock exchanges. Affected are investors who bought shares or depositary receipts – ADRs or GDRs – from companies such as Gazprom, Rosneft, Norilsk Nickel, Sberbank, Yandex or Qiwi before the start of the war or shortly afterwards. There are also difficulties in trading with ETFs or funds with a focus on Russia, in many cases this is no longer possible – neither via the stock exchange nor via a fund company. “Russian papers” can no longer be traded in Germany via off-exchange trading venues either.

So what can affected investors do? In the meantime, numerous readers who are affected have reported to the editorial team. Here are the answers to the most important questions.

Although the stock exchange in Moscow has been open again since the end of March, foreigners are no longer allowed to sell Russian securities there. In addition, practically all western banks and brokers are no longer active in Moscow. A variant would be the direct sale to other investors. Until the beginning of June, some investors nationwide, such as Trimax, Daniels or Metafina, offered to buy up Russian securities or fund shares. However, for Gazprom, for example, the prices offered were in the low cent range. On the day of the Russian invasion, the rate was EUR 4.50. Those who responded to this suffered heavy losses. Such offers are published in the Federal Gazette. However, not all banks and brokers forward these offers to affected investors.

However, such a loss, which in practice should be very close to 100 percent, can be claimed for tax purposes. However, it is not certain whether the tax authorities will also recognize the losses for tax purposes if Russian securities are booked out of the portfolio as worthless. Because the Russian corporations are not broke and their papers are not worthless either, there is just no trading taking place at the moment. It is possible that the tax authorities will point out in this case that investors may be able to trade the titles on the stock exchange again in some time.

It’s different with ETFs

The last way private investors can deal with their direct “Russian investments” is to sit it out and hope that trading will resume in a few months or years. Whatever the course. Here, too, high losses cannot be ruled out – unfortunately.

The situation is somewhat different for some Russia ETFs: At the end of May, for example, the asset manager Blackrock announced that it would completely liquidate two Russia ETFs: the iShares MSCI Eastern Europe Capped ETF and the iShares MSCI Russia ADR/GDR ETF. One wants to protect the fund value through “orderly and controlled sales” and distribute proceeds to the shareholders.

“The Russian securities will remain in the Funds until it is possible, practicable and appropriate to liquidate each of the positions in an orderly and controlled manner,” Blackrock said. This can take time, and what will ultimately come of it cannot be estimated at the moment. It is possible that other providers will follow Blackrock and act similarly.

Investor info

Gazprom
hope remains

During the commodities boom around 2007, the depositary receipt for shares in the Russian energy giant peaked at around EUR 30. The paper is miles away from that. Until shortly before the start of the war on February 24, 2022, it was quoted at around eight euros. After the suspension of trading, offers often amount to a total loss. Investors should wait until the stock trades again at some point.

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