Russian Cabinet Member to Repatriate Assets as Restrictions Loom

(Bloomberg – bloomberg.com – Olga Tanas & Scott Rose – April 12, 2013) Russian First Deputy Prime Minister Igor Shuvalov and his wife, the second-biggest earners among families of Cabinet members, plan to move their assets under Russian jurisdiction to comply with new restrictions.

Shuvalov and his wife Olga are planning to shift their foreign holdings, Alexander Machevsky, a spokesman for Prime Minister Dmitry Medvedev’s only first deputy, said by phone today, confirming a report in the Vedomosti newspaper.

Russian officials have come under greater scrutiny after President Vladimir Putin backed anti-corruption legislation that would put limits on ownership of foreign bank deposits and securities. Government officials and heads of state companies have until July 1 to close any foreign accounts, Sergei Ivanov, head of the presidential administration, said this month.

Shuvalov, who has faced corruption allegations, and his wife last year declared 374.6 million rubles ($12.1 million) of income in 2011, a 3 percent decrease from 2010 and second in the Cabinet to the family of Deputy Prime Minister Alexander Khloponin. Shuvalov last year denied any activities inappropriate for a government official after the Financial Times and the Wall Street Journal reported that his family benefited from buying shares in state-owned OAO Gazprom in 2004.

Shuvalov and his wife owned a Jaguar and three Mercedes- Benz cars, according to their declaration published on the government’s website last year.

Their assets also included seven properties owned or rented by the first deputy premier and his spouse, who lease a house in Austria that is almost 1,500 square meters (16,000 square feet), a 424-square-meter apartment in Britain and a 753-square-meter apartment in the United Arab Emirates.

Blind Trust

In June 2012, Shuvalov and his family placed their holdings in a blind trust registered in the British Virgin Islands after publications disclosed his wife’s earnings from her Bahamas- based company, according to Vedomosti. Financial information leaked last week showed Olga Shuvalova as the owner of Severin Enterprises in the British Virgin Islands, the Guardian newspaper reported April 3, citing files it obtained on the offshore bank accounts and shell companies in tax shelters. Shuvalov’s spokesman, Machevsky, declined to comment.

Shuvalov’s family unsealed their blind trust at the end of last year and is gradually shifting accounts and assets to Russia, Vedomosti said, citing two unidentified people with knowledge of the matter.

Ownership Limits

A draft law banning officials from owning bank deposits and assets abroad, excluding foreign property, passed the first reading in February in the State Duma. Uproar over property holdings abroad have dogged senior members of the lower house of parliament this year, felling lawmakers including Vladimir Pekhtin from the ruling United Russia party after bloggers published documents showing he owned luxury real estate in Florida.

Putin, who returned to the Kremlin last year for third term, has ordered the government to draft proposals to bring about the “de-offshorization” of the economy, backing efforts to repatriate as much as $1 trillion in capital held by companies and high ranking officials abroad. Russia recorded $54.1 billion in net capital outflows last year, according to the central bank.

Last month, Shuvalov said Russia may ultimately benefit from Europe’s decision to target deposit holders as part of a bailout plan in Cyprus. By setting that precedent, Europe has cast doubt on the reliability of its banks and makes Russia’s financial system look comparatively more attractive, he said.

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