March 14, 2024

Nationalize It


Nationalize It
Industry in Russia. Alt-n-Anela, Wikimedia Commmons

A study conducted by Novaya Gazeta Evropa and Transparency International Russia reveals that, since the onset of Russia's War on Ukraine, Russian courts have received an unprecedented 40 demands for the nationalization of more than 180 private companies. The total assets of these companies amount to approximately 0.6% of Russian GDP.

The most commonly nationalized enterprises are those in the military-industrial complex, mechanical engineering, food, and fishing industries, as well as ports and real estate.

Ilya Shumanov, general director of Transparency International Russia, said that the state's interest in the defense sector stems from its need to control enterprises supporting the war. Additionally, real estate and land, particularly in key regions such as Moscow, the Moscow region, St. Petersburg, and the southern regions, are targeted due to their high value. In the fishing sector, nationalization serves to acquire fishing quotas.

Part of the privatization process entails accusing business owners of illegally possessing property and violating anti-corruption laws. In some instances, prosecutors seek to nullify transactions or business formations, citing violations of Russian Federation laws. However, some claims remain unpublished or classified, leaving the motivations of the Prosecutor General’s Office ambiguous.

There have also been cases where enterprises were nationalized following allegations of financing the Armed Forces of Ukraine by the companies' owners. For instance, the Investigative Committee of Russia demanded the seizure of assets belonging to Metinvest Eurasia, controlled by Ukrainian billionaire Rinat Akhmetov, citing funds that were transferred to the First International Ukrainian Bank.

Although cases of nationalization occurred sporadically in Russia before this surge, they were much less frequent. Throughout the 2010s, there were few claims for nationalization, and in 2020 and 2021, the Prosecutor General’s Office filed only three claims per year. The ongoing conflict has expedited the nationalization process, with claims being processed swiftly, sometimes within a month.

Ilya Shumanov highlighted three key features of this wave of nationalization. First, the Prosecutor General’s Office targets "risk groups," meaning individuals with dual citizenship, owners of offshore companies, and Russians residing abroad. Second, the FSB is clearly involved in nationalization cases, with its personnel and materials surfacing in multiple trials. Finally, the privatization wave is the consolidating core economic assets into fewer hands.

Shumanov identifies signs of consolidation in sectors such as the chemical industry, machine tool manufacturing, defense enterprises, ports, and the fishing industry. For instance, in the chemical industry, a significant portion of assets are now managed by the Roschim group, associated with the Rotenberg brothers, close allies of Russian President Vladimir Putin.

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