UPDATE 1-Russian broker hopes to free up $500 mln with frozen asset swap

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This content was produced in Russia where the law restricts coverage of Russian military operations in Ukraine

(Adds detail on frozen Russian assets in pars 7-9, sanctions in pars 12-14)

By Elena Fabrichnaya

MOSCOW, April 19 (Reuters) - The Russian broker organising an asset swap scheme that could free up frozen funds for Russian and foreign investors would consider unblocking around $500 million worth of funds a good result, its head told Reuters on Friday.

Moscow presents the plan as a way for both Russian and foreign investors to free up assets that have been blocked by Western sanctions and Russian countermeasures since the start of the conflict in Ukraine more than two years ago.

Under the swap deal, foreign investors would have the opportunity to use funds frozen in Russia to buy the assets of Russian companies that have been immobilised in Europe - and vice versa.

No specific targets have been set, but Alexey Sedushkin, CEO of Investitsionnaya Palata (Investment Chamber), the broker appointed by the finance ministry to run the scheme, told Reuters he hoped that at least half of the broker's clients would participate.

"If we talk about figures, these are our subjective, approximate estimates, that potentially individuals could submit for the redemption of securities in the range of 30-50 billion roubles," Sedushkin said.

"I would say that a positive scenario is if we end up in the range of 40-50 billion roubles ($430-$537 million)," he said.

The Russian-owned foreign securities would be pooled into lots which foreign buyers can bid for from June 3 to July 5, and pay for using funds from special "type-C" accounts in Russia, which are otherwise effectively blocked.

The scheme is progressing while the Group of Seven (G7) major powers discuss the possibility of using some $300 billion of sovereign Russian assets, frozen in the West, to help fund support for Ukraine.

The outcome of those discussions should not affect foreigners' money held in type-C accounts, Sedushkin said, as separate legislation has been written for the special transit accounts.

"If you have such fears, then you should participate in the exchange sooner rather than later," he said.

SANCTIONS CONCERNS

Sedushkin said the scheme was a way for foreign investors to effectively exchange currency risk for market risk, with Western regulators needing to ultimately give approval before assets could be transferred.

"In Russia, these securities will be free from capital restrictions," Sedushkin said. "Most importantly, this is a chance for foreigners to reduce their exposure to Russia, to Russian assets, which is important to many."

Some Russian investors have expressed concern that U.S. sanctions on Russia's National Settlement Depository (NSD) may dissuade foreign investors from taking part.

But Sedushkin said the scheme was designed so that only Russian investors would deal with the NSD, while foreigners will deal with the relevant authority in their own jurisdiction.

"Everyone's jurisdiction is different," said Sedushkin, suggesting foreigners may require permission or a licence to take part depending on where they are located.

Investitsionnaya Palata is not under Western sanctions.

Up to 50% of the broker's clients have already submitted applications, Sedushkin estimated, expecting the picture to become clearer by the May 8 deadline.

Demand from foreigners - tens of billions of roubles from more than 20 foreign institutions, including U.S. funds and banks - is outstripping offers from Russians at present, Sedushkin said. ($1 = 93.0940 roubles) (Reporting by Elena Fabrichnaya; Writing by Alexander Marrow; Editing by Christina Fincher and Hugh Lawson)