The vampire state

Hungry for funds to fuel its war in Ukraine, the Kremlin’s expropriation spree shows no signs of slowing

The Kremlin’s expropriation campaign, which began alongside its invasion of Ukraine just over two years ago, appears to be gaining steam: over 220 private companies with assets collectively worth €12.7 billion have become state property since February 2022.

In a speech given at the St. Petersburg International Economic Forum earlier this month, Vladimir Putin said in no uncertain terms that the state had the legal authority to seize private assets — a statement that signalled an accelerating trend in Russia since the full-scale invasion of Ukraine.

In his speech, Putin denounced the “criminal schemes” employed in the post-Soviet privatisation era of the 1990s that saw valuable state assets ending up in private hands and stressed that, even three decades later, the Russian Prosecutor General’s Office had the right to step in if it determined that certain assets had been “stolen”.

This was a startling rhetorical shift for Putin, who as recently as September had been reassuring businesses that deprivatisation was not on the cards in Russia.

By mid-June, Russian courts had received 50 demands for the nationalisation of more than 220 private companies, with a total value of nearly €13 billion.

“There’s no point in denying the redistribution of assets now, as dozens of enterprises are being seized,” Ilya Shumanov, head of Transparency International Russia, explained.

By mid-June, Russian courts had received 50 demands for the nationalisation of more than 220 private companies, with a total worth of nearly 1.15 trillion rubles (€13 billion), or approximately 0.7% of Russia’s GDP in 2023, Novaya Europe and Transparency International Russia have calculated.

The owners of about half of the seized businesses live abroad, which seems to be one of the main contributing factors for the seizure of assets, Shumanov said. Throughout this, the formal reasons for asset seizures have remained the same: the illegal ownership of property and corruption allegations.

The government’s appetite is only growing. In March, Novaya Gazeta Europe and Transparency International Russia estimated that in the two years since the invasion of Ukraine, the Russian state had expropriated or launched bids to expropriate 180 companies with assets collectively worth over 1 trillion rubles (€10.1 billion). In just three months since then, the total sum of seized assets has risen by 10%, reaching 1.2 trillion rubles (over €12.7 billion).

Get-rich-quick schemes

In 2024, prosecutors seem to have chosen the path of least resistance, mainly seizing assets that are easy to sell — primarily land and real estate. About half of the most recent cases are tied to land and real estate assets, while the other half seek to deprivatise food and agriculture enterprises, companies that own vast swaths of land or numerous properties.

Such a rush to seize “easy” assets can be explained by the need to replenish Russia’s war budget at any cost.

“Land and real estate are liquid assets that can be sold quickly,” Shumanov said, adding that the government is able to quickly replenish the budget by selling those types of assets.

Such a rush to seize “easy” assets can be explained by the need to replenish Russia’s war budget at any cost and to find new sources of revenue.

The most in-demand real estate and properties are located in Moscow and the Moscow region, St. Petersburg, and in southern Russia’s Krasnodar and Stavropol regions, as well as in larger Russian cities, Shumanov said, adding that over half of the cases considered by the courts since March have involved assets from those regions.

This marks a change compared to the last two years, when the prosecutors “favoured” military production and mechanical engineering assets the most, followed by food and fishing enterprises, ports, and real estate.

Sweeping seizures

Another recent trend is seizing all assets owned by one businessman in back-to-back court cases, Shumanov noted, which is just what happened to Russian metal tycoon Yury Antipov. After the Chelyabinsk Electrometallurgical Plant was seized from Antipov, the authorities moved on to his other main asset, a company that owned wineries and 13,000 hectares of land in Russia’s southern Krasnodar region.

The government didn’t stop at seizing assets in the case of the Chelyabinsk plant, and also brought criminal charges for having sexual relations with a minor against Pavel Khorovsky, the director of one of its factories. Lawyer Leonid Tarabahchik told independent media outlet Agentstvo that the criminal case was likely a “reprisal” for Antipov’s attempt to appeal the seizure of his assets.

Up to 50 enterprises can be seized by the Russian Prosecutor’s Office annually “if it operates at full capacity”, Shumanov said.

In other cases, expropriation followed a criminal case against a business owner. This was what happened to the former owner of Yugra Bank, Alexey Khotin, who was sentenced to nine years in prison for embezzlement in March, only for the authorities to come for his properties in Moscow, including the famed Four Seasons Hotel, three months later.

Up to 50 enterprises can be seized by the Russian Prosecutor’s Office annually “if it operates at full capacity”, Shumanov said, adding that real estate owners, as well as owners of military industrial enterprises, chemical companies, energy and mining enterprises, and ports, are at a higher risk of asset seizure, especially if the assets are owned by individuals with foreign citizenship or controlled through companies based outside Russia.

The Russian state is likely to keep targeting entrepreneurs with similar profiles and seizing “any assets they can get their hands on”, Shumanov said. “They’re bleeding them dry. It doesn’t matter when the assets were acquired, whether it was during someone’s time in government office, before or after that. It doesn’t even matter if the asset has any connection to what the Prosecutor General’s Office is seizing.”