How the state property fund will sell confiscated assets of Russian oligarchs

Ukraine is gradually nationalising the assets of Russian oligarchs, and the state property fund is getting ready to put them up for open privatisation.

The list of oligarchs includes Mikhail Shelkov, who supplied titanium raw materials from the Demurinsky mining and processing plant to Russia. According to Ukraine’s security service, SBU, the titanium was used there to produce Kalibr missiles, MiG-35 and SU-35 combat aircraft, and Ka-52 helicopters.

Last winter, the high anti-corruption court seized Mr Shelkov's property in Ukraine, and then the government transferred it to the state property fund for privatisation or lease.

In August, the fund plans to hold the first privatisation auction for one of these assets – the agricultural company Investagro. Then, it will put up for privatisation the rest of the property of the Russian oligarch – such as Tai Minerals, the Demurinsky mining and processing plant, and other assets.

In March 2023, the high anti-corruption court confiscated a 66.65-percent stake in the Ocean Plaza shopping mall in Kyiv, which had previously been owned by Russian oligarchs Arkady and Igor Rotenberg. In June, the government transferred it to the state property fund. The fund is currently auditing the asset and will soon order an assessment of its market value.

If the Ukrainian private co-owner of Ocean Plaza refuses to buy out the state’s stake at the market price – which it has the right to do under the company's charter and Ukrainian law – the fund will put the asset up for privatisation.

The fund also plans to sell the seized property of another Russian oligarch, Vladimir Yevtushenkov, to private investors. In December 2022, the government transferred his Ukrainian assets to the fund’s management, including 17 real estate properties in the Zaporizhzhia region and stakes in five companies in Kyiv and Zaporizhzhia.

Hyundai, Siemens, and other foreign firms ordered specialised transformers of any complexity from Mr Yevtushenkov's Ukrainian companies.

How will the state property fund put the sanctioned assets up for privatisation?

We will not invent anything new. We will hold all privatisation auctions following the example of how we sell assets in small-scale privatisation.

The auctions will be held online on Prozorro.Sale. Anyone bar those representing the aggressor state will be able to compete for the sanctioned assets. In the first half of 2023 alone, the state property fund held 210 privatisation auctions with more than 1,000 entrepreneurs taking part. On average, five investors participated in each auction.

Significant competition led to the fact that the highest bid at all auctions exceeded the starting price by 3.5 times. For instance, 39 entrepreneurs competed for the buildings of the Hermitage Hotel in the centre of Kyiv. The final price increased fifteen times, to UAH 311 million. As a result, the first half of 2023 was a record year for privatisation proceeds over the past 10 years, with the state budget having received UAH 1.8 billion.

The Ukrainian privatisation of sanctioned assets of Russian oligarchs should become an example for other countries to follow.

It is necessary to put an end to the debate on whether to sell the seized Russian assets. The only conclusion is that it should be done, and the proceeds should be used to rebuild Ukraine.