Page 16 - RusRPTOct23

2.7 “No deprivatisation”
“No de-privatization is going to happen, I can assure you of that," Putin said at this week’s Vladivostok Economic Forum. But the number of re-nationalizations has already ticked into double digits. Ilya Shumanov, former director of Transparency International in Russia, has counted 17 lawsuits initiated by prosecutors seeking businesses to be seized by the state this year alone. In several cases, these suits involved assets privatized over 30 years ago, writes The Bell.
One case earlier this month, the state seized 94.2% of methane producer Metafrax Chemicals. A court declared the 1992 privatization of the company illegal. Back in the 1990s, a series of deals saw the company acquired by future billionaire Dmitry Ryboloblev. Until this month, Metafrax belonged to Rybolovlev’s ex-business partner, Seyfeddin Rustamov.
Prosecutors offered a very significant justification for this nationalization: the original Metafrax privatization, they claimed in case materials, was done “without a government decision” and was “a violation of the economic sovereignty of the Russian Federation and its defecse capability.” The wording is important. It casts doubt on the competence of regional authorities involved in arranging privatizations (in the 1990s, state property was managed (and disposed of) at regional level, not federal). This raises the legal possibility of challenging many of the deals that were done in that era.
In January, Putin flagged the return of strategic enterprises to state control as a priority for prosecutors. By the summer, there was a full list of requisitioned assets. Assets had been seized from various owners: for example, Boris Mints, a former colleague of Russia’s 1990s “privatization tsar” Anatoly Chubais who left Russia after the full-scale invasion of Ukraine; ex-officials like Andrei Korovaiko and Oleg Sorokin; as well as Western companies.
Russia’s richest man, Andrei Melnichenko, was another who had assets seized. The Prosecutor General’s Office demanded the seizure of his Sibeko energy company, which Melnichenko purchased from former minister Mikhail Abyzov in 2018 for 31.8 billion rubles (about $500 million at the time). Within a year, Abyzov was jailed on corruption charges. Now, the Prosecutor General’s Office believes that the Sibeko deal was corrupt.
In Russia, pretty much any major sector can be regarded as “strategic.” But prosecutors are especially interested in enterprises that can generate a reliable cash flow and have export potential: energy, fertilizers, transport and logistics. “Recently we have seen increasing state interest in port infrastructure,” the head of the Russian Union of Industrialists and Entrepreneurs Alexander Shokhin told RBC earlier this month. “The Prosecutor General’s Office is putting a lot of work into the area, and some private logistics assets are being returned to the treasury over some mistakes during the 1990s privatization.” Since the start of this year, ports in Perm, Kaliningrad and Murmansk have been nationalized, along with 92.4% of the shares in the Far Eastern Shipping Company.
16 RUSSIA Country Report October 2023 www.intellinews.com