2023-09-17 15:00:23
par Kasper Goossens
published on Sunday September 17, 2023 at 5:00 p.m. •
5 min reading
Over the past year in Russia, Vladimir Putin has brought a host of Russian companies back into state ownership. In doing so, the country harkens back to the days of the Soviet Union, when the government still owned 80% of all businesses in the early 1990s.
The essential : In the 1990s, Russia sold many of its state-owned enterprises to raise cash. Today, some thirty years later, Putin is completely reversing this decision.
“There will be no nationalization, I can assure you.” Putin was categorical at the Vladivostok Economic Forum. However, the reality is slightly different. This year alone, Russia has launched as many as 17 legal proceedings aimed at nationalizing private companies, according to Ilya Shumanov, former director of the Russian branch of the anti-corruption organization Transparency International. Remarkably, some of the companies involved were first sold by Russia in the 1990s. Earlier this month, for example, Russia decided to take back 94.2% of the shares of Metafrax Chemical. The methane producer was sold to Dmitri Ribolovlev in 1992. The latter is also the owner of the country’s largest fertilizer producer, Uralkali. He had sold his shares in Metafrax to his business partner Seifeddine Roustamov. Russia now considers that the sale to Ribolovlev was “illegal” and demands the return of the shares. Prosecutors in the case argue the sale took place without federal approval. At the time, local authorities were designated to oversee the operation. They are therefore today held responsible for this “failure”. But most importantly, using this formulation, the Kremlin can theoretically recover all the companies that were privatized at the time.
Russia is Putin
Implied : Putin doesn’t trust anyone, that seems clear. All “strategic” companies must return to state control. And “the state is Putin”.
In January, Putin expressed his desire to return a large number of companies to state control. Shumanov published at the end of August the list of companies which have since been nationalized. These operate in just about every sector possible, from fishing to chemicals to port and rail businesses. The list includes a large number of companies owned by people that Putin would rather get rid of than see them get richer. Boris Mints, for example, one of the architects of privatization in the 1990s and subsequently a very vocal opponent of the Russian president’s policies, is losing his business. Russian subsidiaries of Western companies are also seized and placed under the management of Putin’s allies. This is what happened with Danone and Heineken, among others. But, remarkably, Putin does not spare his friends. For example, Russia’s richest businessman, Andrei Melnichenko, must sell his energy company Sibeko. He only bought it in 2018 for half a billion dollars from former Transparency Minister Mikhail Abizov. The latter was convicted of corruption in absentia in 2020.
Extremely unpredictable
In summary : Russia can actually deem just about any company “strategically important” and confiscate it.
However, prosecutors are primarily interested in businesses that have the potential to bring in a lot of money for the state. They must also have export potential: those active in the fertilizer, energy, transport and logistics sectors are therefore particularly sought after. Since January this year, for example, the ports of Perm, Kaliningrad and Murmansk have already been nationalized, as has 92% of the Far Eastern Shipping Company (FESCO). There is little the oligarchs can do to preserve their assets. “The state is extremely unpredictable. We no longer know very well what can attract attention and cause you to confiscate your property,” an oligarch told The Bell. For his part, another oligarch affirms that the situation “does not yet seem too serious”. For example, FESCO shares were confiscated because the owner, Ziyavoudin Magomedov, was sentenced to 19 years in prison for fraud. Another source particularly warns foreign companies and Kremlin critics. They would be the first on the list of assets to be confiscated.
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