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. Last Updated: 07/27/2016

Russia to Approve Projects For Holders of GKO Debt

Foreigners who were stuck with frozen Russian ruble debt last year will be allowed to invest in any infrastructure or industrial project approved by the government, a Finance Ministry official said Thursday.

Securities Department head Bella Zlatkis told the Kommersant daily in an interview that foreigners who held GKO treasury bills and OFZ bonds would have to submit bids on investment projects and would not be allowed to cash out for three years.

The GKO market was worth nearly $40 billion before the ruble crashed and the government defaulted on the debt.

Some investors have swapped for new securities and others hold the old ones, which mature by the end of this year. But none can easily repatriate profits, which has led the ministry to agree to such projects as investment alternatives.

Zlatkis said some 14 billion rubles of paper, now worth around $530 million, including 8 billion rubles held by foreigners, remained unswapped.

"The [project] company must be a Russian one," Zlatkis said. "It must be in the real sector of the economy, that is, it must be industry or infrastructure, not the financial sector." She said investments could begin by Dec. 1, though the government has not yet formally approved the idea.

"The profitability of the project must be calculated, and a bid sent to the Economy Ministry, which will consider it along with the Finance Ministry. And if it is approved, then all the documents will be sent to the central bank and it will transfer money from the investor's account to a [partner] bank," she said.

The Central Bank has long worried that if the frozen funds are freed up too fast, the ruble could be hit again.