Due to Russian aggression, Ukraine lost its annual GDP of $564.9 billion. Is it possible to compensate for this loss with the funds of Russian oligarchs?
The world is actively hunting for the assets of Russian oligarchs. This is probably why Roman Abramovich was granted the status of a ‘neutral negotiator’ in the talks between Ukraine and Russia. Someone has to represent the position of Russian oligarchs who are suffering from sanctions imposed by Western countries.
What about Ukraine? Less than a month ago, a law was passed that provides for the seizure of property of legal entities operating in Ukraine that are wholly or partially owned by Russia.
The Russian oligarchs, many of whom have businesses in Ukraine, breathed a sigh of relief. Unlike in the US, UK and EU countries, the risk of confiscation concerned only Russian property, not that of Russians or other citizens.
However, Russian oligarchs and agents of Russian influence have another reason to worry, especially those with assets in Ukraine. The parliament has prepared draft law No. 7169.
What can be confiscated
Currently, it is possible to get hold of the property of Russian companies in which it is a founder or beneficiary or directly or indirectly holds a share in the authorised capital.
These assets include the banking, gas and oil sectors. For example, Prominvestbank, 99.77% of which is owned by the Russian state corporation VEB.RF. The latter is 100% owned by the Russian Federation (on 25 February, the NBU revoked the bank's licence).
The list also includes the International Consortium for the Management and Development of the Gas Transmission System of Ukraine, Gazpromneft Lublicants Ukraine, Gazprom Zbut Ukraine, Lisichansk Oil Investment Company, Nuclear Fuel Production Plant, Energomashspetsstal, Tatneft-AZS-Ukraine. The NACP added to this list Yuzhniygiprogaz, the 13th Shipyard of the Black Sea Fleet and a number of other companies.
Thus, ‘official’ Russian assets will not be enough to cover the damage caused by the aggressor. Therefore, the parliament decided not to stop at state assets but to move on to supporters of the Putin regime.
Who else will ‘donate’ to Ukraine
The Verkhovna Rada is currently considering a draft law amending the law ‘On the basic principles of compulsory seizure in Ukraine of property owned by the Russian Federation and its residents’. According to it, property owned not only by Russia as a state, but also by Russians - by passport and ‘in spirit’ - will be subject to seizure.
It is not news that there are many agents of Russian influence in Ukraine and abroad. For years, they have been making money off Ukrainians by maintaining strong ties with the Russian authorities and extolling the values of the ‘Russian world’. Now these people deny or support the war, and their companies continue to do business in Russia.
Often, these people are not Russian citizens. Many wealthy supporters of the Russian Federation have passports of more attractive countries, such as Israel, Cyprus, Portugal and even Ukraine. But the era of impunity may end with the adoption of the new law.
What does the draft envisage?
First, MPs plan to deprive everyone, regardless of citizenship, who is closely associated with the Russian Federation of their property. In particular, they have a place of residence in Russia or are engaged in the main activity there.
Secondly, the NSDC or the court will be able to include any individual or legal entity, regardless of citizenship, place of residence, place of stay and main activity, among such ‘lucky ones’. Who are we talking about?
Firstly, people who deny or support Russia's armed aggression against Ukraine and the establishment of a temporary occupation of part of Ukraine's territory.
Secondly, persons who did not cease economic activity in Russia during the period of martial law in Ukraine. We are talking about Russian, Ukrainian and other public figures, politicians and oligarchs.
What assets in Ukraine belong to Russians
For example, Russian citizen Mikhail Fridman lives in London, but is directly involved in a number of companies, including Kyivstar and Alfa-Bank.
Russian Mikhail Voevodin is considered to be a beneficiary of VS Energy. Its main business is the management of five electricity distribution system operators in Ukraine: ‘Kirovohradoblenergo, Rivneoblenergo, Zhytomyroblenergo, Chernivtsioblenergo and Khersonoblenergo.
The group also operates a hotel business (Premier Hotels & Resorts), owns a stake in the Dniprospetsstal plant in Zaporizhzhia, and Metrograd and Metropolis shopping centres in Kyiv.
Russians have a lot of assets and businesses in Ukraine: from Sportmaster to Brocard. Even the much-loved Morshynska is produced by IDS Borjomi, a company owned by Mikhail Fridman and Heinrich Khan's Alfa Group.
And the industrial sector is another story: Kramatorsk Ferroalloy Plant, Mykolaiv Alumina Plant, Energomashspetsstal, Hlukhiv Quartzite Quarry, Mykolaiv Alumina Plant, VSMPO Titan Ukraine...
It is no surprise: for Russian businessmen, Ukraine was the next platform for business development after Russia. They felt at home here.
How the confiscation will take place
1. The National Security and Defence Council decides on the seizure of property.
2. The President enacts this decision by decree.
3. Within six months after the end of the war, this decision is approved by the law of Ukraine.
Thus, the procedure has several stages and takes place at the highest levels. Most likely, it will concern ‘big fish’ who do not fall into the nets of law and justice because they solve their issues at the political level.
What are the risks?
Despite the fairness of such confiscation for Ukrainians who have lost everything to Russian henchmen, there are legal nuances: the legality and effectiveness of such decisions.
Every arrest, let alone confiscation, must have a solid legal basis. Otherwise, countries will not only have to return the confiscated assets, but also pay compensation for unjustified sanctions.
The Convention on Human Rights protects the rights of even villains. In particular, the right to property. Any interference must be lawful, justified and proportionate to achieve a legitimate aim in the public interest.
It is the failure to comply with these principles that the ‘victims’ of these measures will point to with an army of lawyers when the world's attention is not so focused on Ukraine's affairs.
How to avoid problems
The first step is to adopt a relevant law. Simultaneously with Ukraine, the United States, Canada, the United Kingdom and other European countries are developing such laws.
The second is to clearly define the proportionality between the means used and the goals pursued. Proportionality is the most problematic element, so it is important to reflect the connection between the persons whose property will be confiscated and the Kremlin regime responsible for the war and the deaths of Ukrainians.
This may be the subject's connection with the Russian authorities, financial or other benefits, or support for the regime.
Third, the concept of ‘public interest’ should be clearly defined in the law.
Unlike other countries, for Ukraine, everything is clear: confiscation should become a mechanism for compensating the losses of persons affected by Russian aggression. It is desirable to define this through the use of the seized funds. By the way, the same goals are declared in the draft laws of the United Kingdom and the United States.
Fourth, the law must ensure independent judicial oversight, i.e. the possibility of at least a judicial appeal of such decisions. For this purpose, independent courts will soon be needed, not ‘wolf’ justice, which will help impoverished oligarchs and Russian agents of influence for a penny.
This needs to be done faster. The Russians have a lot of assets, and Ukraine's goal is to have them confiscated and used to rebuild Ukraine.
The UK, in whose assets Russian oligarchs close to Putin have invested more than £1.5 billion, is now being criticised for taking too long to pass a sanctions law. This gives Russian oligarchs the opportunity to sell or dilute their assets. Abramovich wanted to take advantage of this.
This also applies to Ukrainian assets: Friedman is trying to transfer IDS Borjomi to the widow of Georgian businessman Badri Patarkatsishvili. If Ukraine wants to compensate for more than 0.08% of its losses, it needs a good law. And a victory.
‘The Institute of Legislative Ideas continues to analyse the legislation adopted during the war and make sure that each law is another step towards Ukraine's victory.
Tetyana Khutor, Head of the analytical centre ‘Institute of Legislative Ideas’
Source: Ekonomichna Pravda