Russia is trying to help its stranded retail traders claw back frozen investments

• The Kremlin proposed a swap of frozen Western funds and Russian assets, the Financial Times reported.
• In 2022, Russia froze "unfriendly" non-resident bank accounts, worth $3 billion at the time.

Moscow has offered terms on how both Russian and Western retail investors could recover investments frozen since the war in Ukraine began over two years ago.

Under the Kremlin's proposal, Western investors would be allowed to access funds trapped in Russia, but solely for the purpose of buying European securities owned by their Russian counterparts, the Financial Times outlined.

In 2022, Russia froze bank accounts belonging to non-residents from countries it considered unfriendly, in retaliation for sanctions imposed by the US and other Western countries. At the time of their freezing, these "type C" accounts held around $3 billion.

Meanwhile, the country's retail investors hold a total of $16.5 billion of Western assets, including popular blue chip stocks such as Apple and Amazon. However, access to these securities was lost as sanctions clamped down on Russian brokerages.

The proposed terms are the first update on how President Vladimir Putin's government aims to compensate its citizens for economic hardship since Russia invaded Ukraine in February 2022, having laid out intentions to do so in a November decree.

If the West were to accept the terms, Russian investors would be allowed to offer their Western assets to outside investors, who could bid for the securities using "type C" funds. Investors would be restricted to selling around $1,000 worth of assets, the finance ministry said.

While it's unclear whether Western regulators will permit this, the Kremlin has tapped Investitsionnaya Palata, a domestic broker, to facilitate the trade. The firm is not under sanctions, and its assets under management have soared 50 times since 2022, the FT said.

The freezing of retail assets is a separate dilemma from the $300 billion worth of Russian reserves locked up by Western nations.

The funds, similarly seized at the start of the war, have stirred controversy in recent months, as the Group of Seven considers whether they can be used to finance Ukraine. As global leaders have become more vocal about unlocking the reserves for this purpose, Russia has warned of legal consequences.