After Russia attacked Ukraine in 2014, the Russian oligarchs or others close to them continued to make money in Ukraine, where they invested in telephone networks, banks, industry, the energy sector and tourism. Many of these businesses have kept bringing money to the Russians even after the February 2022 full-scale invasion.
Russian capital in Ukraine, despite Russia being designated as an aggressor state
The government of Ukraine approved in February the procedure for the sale of Russian assets seized after the invasion of the country. Prime Minister Denys Shmyhal announced the organization of electronic auctions, for dozens of economic entitites that had suspended their activity. The announcement made by the Government in Kyiv was met with great enthusiasm by Ukrainian society, but some critical voices have also been heard, who do not understand why this process is unfolding so slowly.
At the same time, the question of how the free movement of capital of Russian origin in Ukraine has been possible given that Russia was designated as an aggressor state by the Kyiv Parliament as early as 2014 is becoming increasingly relevant. Moreover, around the full-scale invasion of Ukraine, a number of economic entities were bought by Russian oligarchs or companies controlled by them, the economic field becoming an important element in the hybrid war waged by Russia against Ukraine and the West.
Russian interests in mobile phone networks in Ukraine
In 2019, a few months after Volodymyr Zelensky became president, Ukraine's largest mobile phone provider, Kyivstar, became the property of VEON, which belongs to the Russian oligarch Mikhail Fridman. After the invasion of Ukraine, the Russian oligarch - a close associate of Vladimir Putin’s - was included in the EU sanctions list.
Despite the fighting in Donbass in 2014 - 2022, Kyiv did not analyze the potential security risks caused by the transition of the operator Kyivstar under the control of the Russian oligarch, seeming not to question what VEON says - that the Russian oligarch does not influence the decision-making processes at the level of the Ukrainian operator, as he is just a shareholder. Obviously, VEON opposes the idea of nationalization for the mobile phone provider, which could take place in the future.
Another mobile operator, Intertelecom, was for a long time owned by the oligarch Victor Gushan, an alleged former KGB agent who also owns the Sheriff trust - and is the most influential person - in the separatist region of Transnistria, financed and militarily protected by Russia. Intertelecom was suspected of having given Russian special services the opportunity to intercept its subscribers in Ukraine. In 2015, Intertelecom became the main mobile phone provider in the Crimean peninsula annexed by Russia.
Regional energy companies, steel works and hotels
The regional electricity suppliers in Kirovohrad, Rivne, Zhytomyr, Chernivtsi and Kherson, which are enterprises of critical importance in the context of the war, belong to VS Energy group, which is closely linked to the Russian politician Aleksandr Babakov and his partners. On February 24, 2022, VS Energy group condemned the Russian aggression in a statement that also names the owners. Babakov is not mentioned as one of them, but the list includes German citizens, including Marina Yaroslavska, the wife of the Russian oligarch Evhenii Ghiner, Babakov’s partner , and the Latvian Valts Vigants, who was for some time Aleksandr Babakov's adviser. He and his partners used to also own the Dniprospetstal steel works, the Premier Hotels&Resorts hotel network, including two five-star hotels, and the First Investment Bank of Ukraine.
The situation of the regional energy companies showcases the complicated and camouflaged mechanisms used by the Russian oligarchs to control the Ukrainian economy. For this reason, the process of seizing Russian assets takes a very long time, with Kyiv following domestic legal procedures and international norms in this area. The question remains how this process was possible during the period of military confrontations in Donbass and very cold relations between the two states.
In June last year, the first attempt to confiscate Babakov's assets was made. The process, however, was blocked by the court's request for additional evidence, as there were some suspicions of corruption inside the Antimonopoly Committee of Ukraine that allowed the Russian group to enter the Ukrainian energy market.
Banks controlled by Russia, closed only on February 25, 2022
Three banks controlled by various shareholders from the Russian Federation on the territory of Ukraine, which survived the banking sector reform started in 2015, operated without problems until the date of the invasion. Alfa-bank, Sberbank Russia and Prominvestbank belonged to Russian oligarchs, the Russian Ministry of Finance or the Russian Public Development Company. The many protests organized on the territory of Ukraine against these banks did not lead to the withdrawal of their licenses. The 2014-2022 hybrid war between the two states was not sufficient legal ground for those assets to be seized. Political solutions were needed, but they kept being postponed in the hope of a lasting solution to be foun during the peace negotiations.
Russia wouldn’t admit that it was involved in the war in Donbass, but it was designated as the aggressor state in Ukraine after the annexation of Crimea. It was a hybrid legal situation, somewhere between war and peace. And Moscow took maximum advantage of that social and political situation.
On February 25, 2022, the National Bank of Ukraine decided to withdraw the license of Sberbank Russia and Prominvestbank, which were controlled by various Russian state institutions. According to the National Bank, the financial institutions of the aggressor state will no longer operate in Ukraine. However, until the full-scale invasion, the respective banking institutions would fill Russia’s state budget because they were controlled by the government structures in Moscow, not to mention various other aspects related to security, such as personal data collected from customers.
Industrial enterprises and gas stations
Energomashspetsstal in Kramatorsk is the largest enterprise in Ukraine specializing in cast and forged products, and works in close collaboration with steel plants in the east of the country. 93% of the shares of this plant belong to the Cypriot company EMSS Holding Ltd, which has among the main owners the Russian state nuclear power corporation Rosatom. The Kramatorsk plant is very important for Russia's energy projects.
On March 7, the Ukrainian press wrote that even a year after the invasion of Ukraine, the Government in Kyiv failed to make a decision regarding the nationalization of the industrial giant in Kramatorsk, with some journalists wondering why Kyiv had allowed the expansion of Russia's influence on the economy Ukrainians in the last 8 years.
According to Trap Aggressor experts, the Russian state and/or oligarchs control at least 79 enterprises, movable assets (8 planes, 11 ships, 552 wagons and platforms, cars, buses, etc.). For example, the TatNeft gas stations are owned by the President of the Republic of Tatarstan, part of the Russian Federation, Rustam Minnihanov, a supporter of President Putin. This network is operating smoothly in the Poltava region of central Ukraine, and the decision to confiscate its assets had not been made even a year after the full-scale invasion.
A quarter of the shares of the Kriukivski wagon-building plant are owned by the Russian businessman Stanislav Gamzalov, who is close to the Ministry of Trade of the Russian Federation. This enterprise is very important for maintaining the operation of the railway network in Ukraine. Despite the fact that President Volodymyr Zelensky ordered the nationalization of these enterprises, the enforcement mechanism has not been developed by the Cabinet of Ministers to this very day. It is worth mentioning that a number of enterprises in Ukraine have a very sophisticated management structure, and often, the final beneficiaries of the activities carried out by these companies are not known.
Offshore companies
According to the publication Evropeiska pravda (European Truth), while the Ukrainian oligarch Viktor Medvedchiuk, who was exchanged by Ukraine last September for several soldiers captured by Russia, was participating in various debates as a parliamentarian in the Verkhovna Rada, his wife, Oksana Marcenko, a known Ukrainian showbiz star, was receiving money from Russia to ensure favorable conditions for the invasion of Ukraine. At the same time, through the companies registered in Crimea, some sums of money would reach Moscow again as a commission for the support ensured for some political initiatives in Ukraine. A cross-border mechanism of corruption and of financing pro-Kremlin parties functioned for years.
The hybrid war against Ukraine has also been financed through a Cypriot company whose final beneficiary is a Russian citizen. The Cypriot company Ketineo-Management has a branch in Kyiv, in an apartment built during the Soviet period.
This firm would transfer hundreds of thousands of dollars a month to Ukrkapital, controlled by Medvedciuk, for fictitious vacation home rental services in the Transcarpathia region of western Ukraine. The money went to Ukraine and was used for diversions, anti-government protests and to finance pro-Kremlin parties.
A similar scheme was also discovered in the case of the fictitious renting of the Vedmeja Dibrova vacation camp in the Ukrainian Carpathians. The money transferred to Ukraine by the Cypriot company would by-pass anti-Russian sanctions and the rigorous control of the authorities, being presented in official statistics as foreign investments.
Ukrainian journalists are warning that with the authorities taking very slow steps to confiscate the assets of Viktor Medvedchiuk and his wife Oksana Marcenko, the two may sell their properties or transfer them to other offshore economic entities.
The illicit scheme used to finance various pro-Kremlin political projects on the territory of Ukraine appears to have been cloned and widely used in recent years, but many other cases have not yet been discovered.
Russian money, disguised in Ukrainian statistics as “foreign investments”
With the annexation of Crimea and the launch of the war in Donbass, Russia started buying an increasing number of critical Ukrainian enterprises. Where it was not possible for the Russian oligarchs or state institutions to do it directly, various companies registered offshore were used. The foreign investment that was increasing in Kyiv’s official statistics was actually Russian money invested in the preparation of the invasion of Ukraine or its economic occupation.
Moreover, money arrived in Ukraine through various foreign companies that were used to finance political parties and pro-Russian movements, especially those coordinated by Putin's friend, the oligarch Viktor Medvedchiuk.
Russia has also made the most of Ukraine's traditional weaknesses, and the Ukrainian media suspect that the expansion of Russia’s economic influence also occurred due to the corruption existing in some state institutions.
Finally, it is unclear how many (if any) collaborators Russia still has in Ukraine's state bodies. From the former president Viktor Yanukovych to Viktor Medvedchiuk to the officers who have betrayed since 2014 or politicians who got involved in the administration of the territories occupied by Russia, in the last nine to ten years there’ve been enough Ukrainians who opted to take the side of the enemy. Should such Ukrainians also be responsible for delaying the seizing of some Russian assets?
