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National security. Who and why did Zelensky nationalize?

11/25/2022 03:55:00 pm
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For the first time since the imposition of martial law, President Volodymyr Zelensky used a law allowing the forced expropriation of property for defense purposes during this period. The decision was made on November 7 at a meeting of the Headquarters of the Supreme Commander-in-Chief.

PJSC Ukrnafta, PJSC Ukrtatnafta, PrJSC Zaporizhtransformator, PJSC Motor Sich and PrJSC AvtoKrAZ passed to the management of the Ministry of Defense. Previously, these companies were owned by 3 oligarchs and a "red director".

With regard to each of these assets, the country's leadership had its own considerations, which are discussed below.

Kolomoyskyi: it's time to "retire"

Ukrtatnafta was created in 1994 on the basis of the Kremenchuk oil refinery plant, according to the agreements between the then President of Ukraine Leonid Kuchma and President of Tatarstan Mintimer Shaimiev.

The idea was to process Tatar oil in Kremenchuk. At first it worked. But in the early 2000s, the share of Tatar shareholders (a total of 47.1%) was "snatched" by the informal financial-industrial Privat Group of Ihor Kolomoyskyi.

It was easily done by issuing additional shares, which were bought by the Privat structures. The CEO of the enterprise, appointed by the Tatar side, was simply thrown out of the office by strong guys in sweatpants and leather jackets.

Kazan tried to find protection first in Ukrainian, and then in international courts. In 2014, the Tatneft state-owned company won the London arbitration, which ordered to pay it $112 million in compensation for the loss of shares plus interest.

The bitter irony is that Kolomoyskyi, together with his partner Hennadiy Korban, "snatched" the Kremenchuk oil refinery from the Tatars, but the state of Ukraine should pay this money because it did not provide protection for foreign investment. So in addition to considerations of national importance, there is also some sacred justice in the decision to nationalize Ukrtatnafta. Since the state is the defendant in the case of this company in international courts anyway.

The Tatar side has not yet been able to receive compensation, but the process is underway. Last February, District of Columbia Court (USA) ordered Ukraine to disclose confidential information, including financial information, in order to secure the recovery of Tatneft's lawsuit. Moreover, over the past years, the amount of the payment managed to reach $172.9 million.

As for the enterprise itself, Tatar oil has ceased to flow there since 2004. At that time, the Kremenchuk plant was one of 6 oil refiners in Ukraine.

But it just so happened (another long and sad story) that by 2013, it remained the only producer of gasoline, diesel fuel and jet fuel. This gives an understanding of the president's motives regarding the nationalization of Ukrtatnafta.

Fuel is a strategic resource not only for the economy and life support (you can’t deliver bread from the factory to shops on bicycles or in railway cars), but also for the army.

Firstly, this is the same logistics, only for military needs. Secondly, fuel is needed for Ukrainian tanks and military aircrafts.

It is also obvious that Kolomoyskyi's position forced Zelensky to nationalize Ukrtatnafta. Let's recall that back in April, the Kremenchuk oil refinery became the object of russian missile attacks, having been seriously damaged.

Over the past six months, the Privat Group, which controlled the enterprise, did not express a desire to restore it, preferring to shift all the costs to the state (which, represented by NJSC Naftogaz of Ukraine, had about 43% of PJSC Ukrtatnafta's shares).

Now it will really be done by the state. At a briefing on November 7, Prime Minister Denys Shmyhal assured that the enterprise would resume operation (although he did not even announce an approximate time frame). But in this case, it is logical that Privat, headed by I.Kolomoyskyi, will "retire".

At the same briefing, Secretary of the National Security and Defense Council Oleksiy Danilov noted that after the war, the nationalized assets could be returned to their owners or a compensation will be paid.

Undoubtedly, the cost of its restoration must be deducted from the compensation for the Kremenchuk refinery. And in this case (given the scale of the destruction) I.Kolomoyskyi and his partners are unlikely to be able to claim any compensation.

But perhaps, they will be able to get something for the loss of about 43% in PJSC Ukrnafta. The nationalization of this company should be considered in the context of the fact that it is the largest supplier of raw materials for the Kremenchuk refinery.

And if it continued to remain under the Privat’s operational control (which would not be happy about the presidential decision regarding the nationalization of its shares in Ukrtatnafta), there would certainly be problems with loading the production capacities of the refinery.

Boguslayev: the finish line for the "red director"

Vyacheslav Boguslayev treaded a difficult path from a design engineer to a general director at the Zaporizhzhia Motor Plant. And he always had an enviable ability to make decisions ahead of time.

Thanks to a good personal relationship with Leonid Kuchma, he acquired his native enterprise as his personal property in 1994. Moreover, it happened 4 years prior to the start of large-scale privatization, when no one else had time to figure out that state property, including large factories, can simply be torn apart.

The then president issued a decree on a special procedure for the privatization of the Motor Sich plant, one of the world’s largest manufacturers of aircraft engines.

The procedure turned out to be so special that most of the shares ended up bought by the companies associated with the director.

The then MP (from the area in which Motor Sich is located) and former employee of this plant Fedir Sudnitsyn repeatedly tried to challenge the privatization arguing that the rights of the workforce were violated.

According to his statement, the Prosecutor General’s Office of Ukraine opened a criminal case, which was successfully closed a few years later.

Historically (i.e. since the Soviet period), Motor Sich was connected to russia within the framework of industrial cooperation. And after the collapse of the USSR, for a long time, it remained the only supplier of engines for the russian helicopters, including military ones.

Therefore, Boguslayev’s pro-russian views can be easily understood. However, they have not changed even when putin started breaking the previous cooperative ties with Ukraine.

On his instructions, the Russian Helicopters state corporation was created, and over time, its enterprises managed to master their own production of engines. After that, Motor Sich started to get significantly less orders.

Hence Boguslayev’s subsequent attempts to establish alternative cooperation with the Chinese, to whom he eventually sold a controlling interest of the plant in 2019.

The deal caused negative reaction from the Americans: they feared the transfer of Ukrainian aircraft-building technologies to the Chinese. Therefore, Beijing Skyrizon Aviation Industry Investment Co Ltd. never received a 56% stake in Motor Sich.

The Antimonopoly Committee of Ukraine rejected the approval of the deal, and the Security Service of Ukraine opened criminal proceedings on the sale of a strategically important enterprise to foreigners. As part of the investigation, Motor Sich’s shares were arrested.

Actually, this episode alone convincingly shows that such a plant should absolutely not be privately owned. Under no circumstances, not only in times of war.

However, President Zelensky came to the decision to nationalize Motor Sich much later, when the results of the Security Service’s investigation were ready.

According to them, at the direction of Boguslayev, the plant continued to supply engines for the russian military helicopters Mi-8AMTSh-VN Sapsan, Ka-52 Alligator and Mi-28N Night Hunter even after the start of a full-scale military invasion of the russian federation in Ukraine. This was done through controlled companies registered in Bosnia and Herzegovina, as well as in the Middle East.

Thus, the "red director" simply did not leave the country’s leadership any choice regarding further actions.

And let’s not forget that the Armed Forces of Ukraine also have Mi helicopters. It would be reckless to let a collaborator decide on the spare parts for their engines.

Zhevago: did not get in touch

AvtoKrAZ manufacturer of heavy trucks was rightfully considered the hallmark of the Soviet automobile industry. But by the time, an "effective private owner" (the Finance and Credit group’s owner Kostyantyn Zhevago) showed up there, the plant had lost its former power.

As it follows from the data, the private owner turned out to be not so effective after all. Production volumes in 2000 and 2014 are practically the same.

After the start of the war in the Donbas, the situation at the Kremenchuk automobile plant worsened even more: due to the loss of the russian market, long downtime began.

Nevertheless, KrAZ remained the main supplier for the needs of the Armed Forces of Ukraine. In 2014, the plant produced about 700 trucks for the Ministry of Defense. That is, around half of the total production consisted of government orders.

Since 2015, KrAZ has lost these orders: the military and the National Guard began to buy Belarusian MAZs. They were understaffed at the Cherkasy automobile plant of the Bogdan corporation of the then president-businessman Petro Poroshenko, so the rejection of KrAZ trucks is easy to explain.

But even after Porshenko left the presidential post, there were no improvements at KrAZ due to the same "effective private owner".

His Finance and Credit bank went bankrupt in 2015. According to the investigation, Zhevago and the bank’s management stole UAH 2.5 billion by issuing loans to the controlled companies.

However, the billionaire was officially charged only at the end of September 2019, when President Zelensky came to power. By that time, Zhevago managed to flee abroad and has not appeared in Ukraine since then.

Probably, Zelensky was ready to conclude a settlement agreement with the oligarch: to stop prosecution in exchange for the return of stolen billions to the state (refinancing loans received by Zhevago’s bank from the National Bank of Ukraine). In early March 2020, the president personally came to KrAZ and requested the owner of the enterprise to "get in touch" with him.

The administration of the plant, represented by General Director Roman Chernyak, complained about the lack of the government orders. In turn, the president (quite rightly) noted the unacceptability of a situation where "the state gives money to an enterprise whose owner is on the wanted list".

Despite this, KrAZ still received state orders. However, the downtime continued and the enterprise failed the fulfillment of the order for the Ministry of Defense in 2020. As a result, the Ukrainian military had to buy Czech Tatra trucks for the Neptune coastal missile system.

It is obvious that during a full-scale war, the continued existence of such a strategically important enterprise in the hands of an "efficient private owner" and his equally "efficient" managers is absolutely unacceptable.

Grigorishin: double citizen

Zaporizhtransformator plant, the only manufacturer of power transformers in the post-Soviet space, for a long time was part of the Energy Standard group of Konstantin Grigorishin. He is a native of Zaporizhzhia and a graduate of the Moscow Physics and Technology University.

In the first half of the 2000s, Grigorishin was considered one of the main raiders in Ukraine, alongside with Kolomoyskyi. They used to have a confrontation for control over a number of regional energy companies.

Grigorishin had an extensive business in russia as well. And when criminal cases were opened against him there, he returned to Ukraine, where he flaunted Ukrainian citizenship. When criminal cases were opened in Ukraine, he remembered about his russian passport and fled to moscow.

However, in recent years, Grigorishin’s business empire has been melting like an iceberg. According to OstroV’s sources, due to his serious health problems. According to other (also unofficial) data, the former oligarch simply rethought his life values and is not interested in business anymore.

Whatever the reason, the fact remains: in recent years, Zaporizhtransformator was idle more than it was operating.

This enterprise gained strategic importance after russian missile attacks on the energy system of Ukraine in October. The speedy restoration of a large number of destroyed transformer substations was needed.

Obviously, it is impossible to resolve this issue if Grigorishin still owns the plant. Hence the transfer of the enterprise to the state administration.

Commenting on the measures taken, Zelensky did not rule out new decisions on the nationalization of strategically important enterprises.

That is definitely something to think about for R.Akhmetov and I.Kolomoyskyi, whose top managers threaten the government with shutting down plants in the event of an increase in electricity tariffs for industry and an increase in tariffs for cargo transportation.

Vitaliy Krymov, OstroV