Russian Court Freezes Goldman Sachs Holdings

Russian Court Freezes Goldman Sachs holdings Amid Ongoing Legal Battle with Otkritie Bank

In a recent development, a Russian court has taken the decision to freeze approximately $36 million worth of assets belonging to Goldman Sachs within the country. This decision comes in response to a lawsuit filed by state-owned bank Otkritie, which is currently under western sanctions. The lawsuit alleges that Goldman Sachs has failed to meet debt obligations totaling Rbs 615 million ($6.4 million) under derivatives agreements between the two financial institutions.

Goldman Sachs, in its defense, pointed to the sanctions imposed by the United States and other western countries on Otkritie, citing these sanctions as a hindrance to fulfilling its debt obligations. The court documents, released earlier this month, shed light on this intricate legal battle.

Otkritie has further claimed that Goldman Sachs intends to exit the Russian market, a move that could potentially complicate the process of debt collection. In light of this concern, Otkritie requested the court to temporarily seize Goldman Sachs’ assets until a resolution is reached in the case. As of now, Goldman Sachs has refrained from commenting on the court’s ruling.

Among the temporarily frozen assets is a 5% stake valued at $27 million in Detsky Mir, Russia’s largest retailer specializing in children’s goods. Notably, Goldman Sachs played a significant role as a bookrunner during the company’s listing in Moscow back in 2017.

Additional details from the court documents reveal that the court has ordered the temporary seizure of smaller stakes in various Russian companies owned by a Luxembourg-registered fund, Goldman Sachs III SICAV. These holdings encompass shares in prominent Russian financial institutions such as Sberbank and VTB—both of which are under sanctions due to their connection with Otkritie—alongside other notable entities like Gazprom, Lukoil, Aeroflot (Russia’s largest airline), and the prominent retailer Magnit.

Curiously, the market value of these assets, despite having been written down to zero in the Goldman Sachs fund’s 2022 annual report, currently surpasses $9.3 million based on the latest share prices of the respective companies.

The legal saga takes place against the backdrop of Goldman Sachs’ decision to wind down its operations in Russia, a move announced in March 2022. The decision to withdraw came shortly after Moscow’s controversial full-scale invasion of Ukraine. However, the wind-down process has encountered obstacles, with Vladimir Putin imposing restrictions on foreign owners from “unfriendly” nations, effectively putting a brake on swift exit strategies. This list of affected companies encompasses 45 banks with subsidiaries within Russia.

As the legal proceedings continue, the outcome of this dispute could have significant implications for both Goldman Sachs and Otkritie Bank, potentially reshaping the dynamics of their involvement within the Russian financial landscape.

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