Ukraine: Authorities commandeer major companies for the war effort, Nov 2022

In early November, under the auspices of martial law, the Ukrainian authorities commandeered privately held stakes in five prominent companies, handing responsibility for wartime management of the businesses to the Ministry of Defence.

Of the five, significant shares in Ukrnafta (the country’s largest oil-producer) and in Ukrtatnafta (oil refining) were held by Ihor Kolomoyskyi, who heads the Private Group. For Zaporizhzhia’s Motor Sich, which makes aircraft engines, Vyacheslav Bohuslayev was the main shareholder. The vehicle producer, AvtoKrAz, was linked to Kostyantyn Zhevaho of the Finance and Credit group, while Zaporizhtransformator, which makes parts for electricity plants, was owned by Kostyantyn Hrihorishin. All of these figures may be described as “oligarchs”—that is, business leaders who, over a lengthy period, have been able to use their wealth and business networks to tilt political and economic rules and outcomes in their favour.

Oleksiy Danilov, the secretary of Ukraine’s National Security and Defence Council, stressed that this wartime measure was necessary to meet the energy and transport needs of the country’s military. He was at pains draw a distinction between the takeover of the businesses under wartime legislation—to be returned or compensated for after the war—and “nationalisation”.

However, this development could also be seen as part of a continuation of the pre-invasion “de-oligarchisation” reforms pursued by the government of the Ukrainian president, Volodymyr Zelenskyi, which were passed into law in September last year. At that time, the framing of the policy appeared to underestimate to the scale of the problem faced, and it was feared that the law would be used selectively to undermine political rivals rather than initiate long-term institutional change.

So, alongside the recent requisition of oligarchs’ business assets, since the onset of the Russian invasion of late February 2022, a string of incidents, developing into a pattern, could include:
  • the placement of restrictions on the political activity of oligarchs, or even their arrest, especially of those regarded as having very close links to the Russian leadership (such as Viktor Medvedchuk, Vadym Novynskyi and, more recently, Bohuslayev);
  • reining in oligarchs’ media outlets (a traditional source of their political influence);
  • depriving some oligarchs of Ukrainian citizenship (eg Kolomoiskyi); and
  • the announcement in October 2022 of a tender for software for the registry of oligarchs envisaged in last year’s de-oligarchisation law.
Moreover, since the onset of war, the domestic business wealth of these leading business owners will have been severely hit, both by the depressing impact of soaring risk on asset valuations, as well as by the physical destruction of their property during the fighting.

Overall, therefore, while the seizure of companies by the Ukrainian authorities is very likely to be motivated mainly by wartime necessity, it is also be part of a profound and ongoing change in the relative power of state to business organisations. Simultaneously, this is one of the key changes necessary to enhance the chances of success of recovery and reconstruction, post-war—which, in turn, will be crucial for Ukraine’s survival an independent state in a hostile neighbourhood.

Comments

Post a Comment

Popular posts from this blog

Ukraine: The politics of institutional reform: Zelenskyi’s “de-oligarchisation” drive, Dec 2021

The president's “de-oligarchisation” drive addresses issues vital for Ukraine’s development, but is unlikely to produce lasting change (December 2021, for the EIU) The president’s claim that a Russian-linked coup is being organised against him may be part of a wider domestic political struggle set off by his “de-oligarchisation” drive.  De-oligarchisation addresses the key developmental issue facing Ukraine. This is that, by restricting political and economic competition, the collusive, behind-the-scenes politics of Ukrainian elites has acted as a fetter on economic growth, helping to explain the country’s low living standards. Concerns have been raised that the policy could be applied selectively to damage the president’s political rivals.  The measures may be too limited to produce lasting change. Moreover, Zelenskyi appears to lack both the resources and the durable domestic political alliances that would be required to affect a long-term transformation of national governan...
Read more

Falling between two stools

A review of Marko Bojcun’s Towards a Political Economy of Ukraine: Selected Essays, 1990-2015; Ukrainian Voices, vol 3; Ibidem-Press, Stuttgart. A. The history of post-Soviet Ukraine could be written as that of a succession of self-serving political leaderships, and of inspiring but failed popular protests, resulting in chronic economic underperformance that has left the country’s dwindling population among the poorest in Europe. A glance at IMF data, for example, shows the country vying for bottom place in the European income rankings with Moldova. In these essays, written close on the events they analyse, Marko Bojcun reminds us that this need not have been the case, and that other trajectories at times seemed possible. One example is to be found in an article from 2001, in which the prospect of Russia’s European integration is still in the air, just about, whereas from the vantage point of today, this is almost unthinkable. B. The collection covers key waypoints in the politic...
Read more

Ukraine: EU begins to disburse next tranche of financial assistance, Oct 2022

In late September, EU bodies approved an additional €5bn in macro-financial assistance (MFA) to Ukraine, and in early October, Ursula von der Leyen, the president of the European Commission, announced that the first payment, of €2bn, would be made shortly, with the rest to follow by the end of 2022. This is the second instalment of a €9bn package first announced in May, and follows the delivery of €1bn in early August. It is designed to address the substantial budgetary shortfalls facing the Ukrainian government linked to the ongoing war with Russia, which has closed off access to capital markets, but led also to agreements with creditors for delays in debt repayments. The latest EU funding comes in the form of “highly concessionary” long-term loans—that is, at a low interest rate, but still adding to the stock of public debt. The form of the final €3bn of the facility—whether it will be offered as a loan or a grant—has yet to be decided among the 27 EU member states. As the EU Commiss...
Read more