Indian problems: The Ministry of Finance announced the influx of "cowboy money" into the Russian Federation

The Ministry of Finance has recorded the inflow of "cowboy money" from foreign hedge funds to Russia. This was stated at the forum "Strategic Session of the financial Market" by Deputy Finance Minister Ivan Chebeskov. According to him, so far this is a very small amount of investment. Whether it will increase and what Russia could do to attract such investments is in the Izvestia article.

Increased profitability

Deputy Finance Minister Ivan Chebeskov did indeed announce at the plenary session the trend towards the inflow of funds from foreign investors into the Russian economy, even despite all the risks and limitations of the sanctions regime, Pavel Mitrofanov, CEO of the Expert Business Solutions analytical company, who moderated the forum, told Izvestia.

— The reason why this trend has appeared and, as it seems to me, will intensify is simple. The ruble has now become much less volatile than it was until recently, and the returns that foreign investors can receive from Russian assets, given the relatively stable ruble, are incomparable compared to the returns from assets of Western markets, he believes. — Therefore, capital, which will always look for increased returns, even being ready to accept increased risk, will certainly flow into the conditions that our market and our economy give it.

Photo: TASS/Zuma

The influx of foreign capital into the country should increase many times when the process of resolving the Ukrainian conflict is completed and the dismantling of sanctions restrictions begins, especially those directed against the stock exchange infrastructure and commodity exports of the Russian Federation, Alexander Shepelev, an expert on the stock market at BCS World Investments, said in an interview with Izvestia.

— We see that even hints of geopolitical improvements stimulate increased attention of foreigners to ruble assets. Of interest to non—residents may be the opportunity to make money on the difference in interest rates (carry trade strategy) — the currency is brought to the Russian market through friendly jurisdictions and converted into rubles, which are then used to purchase domestic debt securities, the expert explained.

Photo: IZVESTIA/Dmitry Korotaev

In turn, Daniil Petukhov, PhD in Economics, Associate Professor of the RANEPA Department of National Economics, believes that the increase in such funds, if any, is very small.

— These funds specialize in such operations, and they played back the news about the warming of relations between Russia and the United States. If the warming continues, investments may also increase. Regarding their involvement, I don't think Russia is interested in this," he stressed. — These are too fast short-term investments, which, apart from increased market volatility, have no positive impact on the economy. But a global, significant increase should be expected only after the lifting of sanctions.

The process is underway: Russians were able to unblock more than half of their assets

But it will be more difficult to unfreeze funds further - what other options do investors have?

The return of the Russians

The Russian authorities are developing safeguards for foreign investors interested in investing in the Russian economy. As Chebeskov noted, the document will apply to both partner and unfriendly jurisdictions. It is expected that the initiative will allow for the free entry of capital into the country and its unhindered withdrawal.

Chebeskov also stressed that the Russian Federation expects an influx of funds not only from foreigners, but also from wealthy Russians.

Photo: RIA Novosti/Maxim Bogodvid

"It will be not only foreign money, but also the money of our rich citizens, which used to be stored abroad in Swiss banks and so on. In my opinion, in 2021, we analyzed that at that time, about $500 billion in equivalent was held abroad by Russian citizens in foreign assets. We believe that some of this money will also go to the capital market," the deputy minister said.

However, the lifting of sanctions would bring a real influx of "cowboy money" to the Russian capital market.

Photo: IZVESTIA/Dmitry Korotaev

In March, the media reported that the Donald Trump administration had significantly reduced its participation in measures to monitor compliance with anti-Russian sanctions. According to Bloomberg sources, Washington has practically eliminated the work of several international groups created by the allies in order to prevent attempts to circumvent sanctions restrictions.

Weimar public: EU and UK consider new sanctions against Russia

What did the leaders of the leading European countries come to at the next anti-Russian summit

In particular, the United States has shown almost no activity in the team involved in blocking the supply of components and equipment that can be used in the Russian military industry. In addition, Washington, according to officials, has not taken significant steps within the framework of the group monitoring compliance with the G7 countries' price restrictions on Russian oil.

Photo: TASS/Egor Aleev

In addition, the media also reported that Donald Trump's advisers are considering possible ways to ease sanctions pressure on Russia, including reviewing the mechanism for limiting oil prices. In particular, the White House administration instructed the State Department and the US Treasury to prepare a list of sanctions measures that may be reviewed. The agencies responsible for sanctions policy are working on a proposal to partially lift restrictions on a number of companies and individuals.

In Europe, the position on restrictive measures has not yet been changed. The European Union has approved the 16th sanctions package, which is formally considered one of the largest. According to the EU, these measures have a broad scope and affect key sectors of the Russian economy.

Photo: RIA Novosti/Vladimir Sergeev

At the same time, the head of the government of the federal state of Saxony, Michael Kretschmer, representing the CDU, made a proposal to consider the possibility of easing sanctions pressure on Russia. In his opinion, the German government's position on this issue is outdated and does not correspond to the current course pursued by the United States. However, the current German government considers sanctions against Russia "justified, expedient and effective."

However, despite the extensive EU sanctions measures against Russian energy resources, including oil and coal, supplies of liquefied natural gas (LNG) from Russia to Europe continue. The restrictions only prohibit the financing of new LNG projects in Russia, the use of European ports for transshipment to third countries, as well as imports through terminals not integrated into the gas infrastructure of the European Union.

Izvestia sent a request to the Ministry of Finance, but no response had been received at the time of publication.