Russian investment boom in Virgin Islands

The call by president of Russian Federation Vladimir Putin to domestic companies to return the funds from off-shore jurisdiction to Russia wasn’t successful. However, almost half of 67 milliard dollars of investments of Russian residents abroad in first quarter of this year is referring to British Virgin Islands according to the figures by Central bank. It is 47 % of 67,2 milliard dollars of Russian investments abroad from January to March. In first three months of year 2013 Russian realised on British Virgin Islands 31,66 milliard dollars of direct investments, what the circumstance of bank crisis on Cyprus- former favourite tax paradise for Russians. The indicators are higher for only 2,1 milliard dollars in first quarter of year 2012, and 4 milliard dollars in fourth quarter last year. second biggest investment is Luxembourg, where Russian invested 13,9 milliard dollars, what is increase of 258 million dollars in first quarter 2012, and 1,8 milliard dollars during last three months of last year. Cyprus made “profit” with modest 2,7 milliard dollars, comparing to 4,8 milliard dollars in the same period a year before, as it says in report by Central bank. “Numbers are, allegedly connected to financial problems on Cyprus”, says Aleksej Devyatov, main economist of Capital UralSib. He added that crisis on Cyprus have occurred only in March, but many investors expected problems, which resulted in redistribution of capital flows between offshore centre in first quarter of this year.” This could last for few years. Cyprus will have to gain the trust of depositors again”, said Devyatov. The fall of system of Cyprus bank system earlier this year left the accounts of many Russian companies and single depositors frozen, after which it is the time for reconstruction of bank of Cyprus and the liquidation of Cyprus State bank is planned, knows as Laiki. The move is the part of plan for salvation, approved by Cyprus government and its creditors of European union which also predicted that the authorities of this island country cuts down on deposits in bank of Cyprus over 100.000 euro by what they will recapitalize depositors. Clients of the Bank from this category will lose

47.5 % of their savings. At the end of year 2012, Russian banks had around 12 milliard dollars stored via Cyprus creditors, while the deposits of companies were 19 milliard dollars. Some analysts consider that the wave of money flow on other off-shore jurisdiction could be the result of agreement between Rosneft and Alfa-Access-Renova, which sold its 50% share in TNK-BP over state control of oil giant for 28 milliard dollars. British Virgin Islands are traditionally competent for making the agreement in energetic sector, said Dmitrij Belousov, analyst of Centre for macroeconomic analysis and short-term programming. Rosneft bought a part of Alfa Petroleum Holdings Limited and OGIP Ventures, to the company registered on British Virgin Islands. At the same time Alfa Group, which is a part of consortium AAR, invested 15,36 milliard dollars rose from business in LetterOne Holdings SA, registered in Luxembourg. In December, Putin espouses for “non off shoring” of domestic economy in order to return the capital placed on off-shore jurisdiction. He complained that nine out of ten contracts by Russian companies are not under national authorization. Later he called billionaire owners of Alfa-Access-Renova consortium-Viktor Veklberg, Mihail Fridman, German Khan and Leonard Blavatnik- to invest money given by sale of its 50 % of share in TNK-BP in Russian economy. But, even without Rosneft’s businesses, investments by Russian residents reached 39 milliard dollars, while during whole last year it was invested nearly 48,2 milliard dollars. “This can be the resultsof buying cheap properties in Europe, hit by debt crisis, by Russian companies. It is clear that European funds, like those from Germany and Eastern Europe, was underestimated during the time of crisis, and investors hope that their value will increase when the turmoils finish “, considers Belusov.

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