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:
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.
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.
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.
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