Economy

Ukraine has nationalized almost 100 companies from Russia: what happens to them now?

Since the beginning of the full-scale war, the Ukrainian government has taken control of about 100 companies that previously belonged to Russian owners. However, the effectiveness of the state’s management of these assets remains questionable, Komersant ukrainskyi reports citing Forbes.

In 2022, amid the war and increased sanctions pressure, the Ukrainian government began a large-scale process of seizing property associated with Russians. The main reason given was the need to exclude Russian capital from strategic industries and prevent the financing of aggression against Ukraine.

Among the most famous:

• Mykolaiv Alumina Plant (MGZ) – previously owned by Russian billionaire Oleg Deripaska;
• Oblenergos in a number of regions of Ukraine, including Chernivtsi, Zhytomyr, Kherson, Rivne, and Kropyvnytskyi, which were controlled by Russian owners;
• Industrial and metallurgical enterprises with ties to Russian business.

Despite loud statements about the need to protect national interests, serious problems arose in the management of these assets.

One of the most striking examples of mismanagement was the state of the Mykolaiv Alumina Plant (MAP). The plant, which used to operate as part of global supply chains and provide aluminum production, has been frozen since its confiscation.

The key reasons for the plant’s downtime are

1. lack of new investments. The state does not invest in modernization or restarting production, which makes nationalized assets liabilities rather than assets;

2. loss of sales markets. Many enterprises operated in international chains, and the severance of ties with Russia has led to the absence of key buyers;

3. weak state management strategy. Companies have been transferred to the management of government agencies, but they have no experience of doing business in a competitive environment.

Does the state work effectively with confiscated assets?

As early as 2022, the head of the Servant of the People faction, David Arakhamia , emphasized that “the assets of Russians should not be turned into liabilities on the state’s balance sheet.” However, almost three years later, we can say that Ukraine has faced difficulties in managing these resources.

In practice, it turned out that the nationalized companies were unable to effectively integrate into the Ukrainian economy, and their future fate remains uncertain.

What problems did Ukraine face in the course of nationalization of Russian assets?

Ukraine has faced a number of additional challenges in managing the confiscated Russian assets, which make it difficult to use them for the country’s economic recovery.

These include:

• Difficulties with privatization and finding investors. Despite the intention to transfer some assets to private hands through transparent auctions, many investors are in no hurry to invest in companies with uncertain legal status. Long-term litigation and possible claims from former owners pose additional risks.
  Limited production capacity and staff shortages. Most of the confiscated enterprises were in a state of disrepair and require large-scale investments for modernization. The war caused a significant outflow of personnel, with many specialists leaving the country or being mobilized, which exacerbates the problem of restoring enterprises.
• Problems with product exports. Before the war, some Ukrainian companies exported goods through Russian logistics routes. Now these supply chains have been disrupted, and Ukraine needs to look for new ways to enter foreign markets. Additional tariff barriers and sanctions also limit trade opportunities.
• High corruption risks. Nationalization of assets opens the door to abuse if government agencies use confiscated enterprises for personal gain. Lack of transparent governance mechanisms can lead to inefficient spending of resources or transfer of assets to businessmen loyal to the government without any real benefit to the economy.
• Political pressure and external factors. Ukraine’s Western partners are closely monitoring the process of confiscation of Russian assets, demanding greater transparency and legality in these actions. Some EU and US companies are concerned about the possible legal consequences of working with nationalized assets, which makes it difficult to attract foreign investment.

What will happen with the nationalization of Russian assets?

Economic analysts are now identifying several possible scenarios:

1. Transfer of assets to private investors. The sale of enterprises through transparent auctions could help restore their operations and attract capital.

2. Establishing partnerships with international companies. Introducing mechanisms for joint management and attracting strategic investors.

3. State funding for the restart of critical industries. If an enterprise is of strategic importance, a plan should be developed for its modernization and integration into the Ukrainian economy.