Ukraine opens new front against oligarchs, seizing their businesses

8 November 2022, 07:47 PM
Ihor Kolomoisky may be losing Ukrnafta. This is more than 60% of oil production in the country and more than 500 gas stations. However, so far the state has not been able to take away anything from the oligarch except debts (Photo:NV)

Ihor Kolomoisky may be losing Ukrnafta. This is more than 60% of oil production in the country and more than 500 gas stations. However, so far the state has not been able to take away anything from the oligarch except debts (Photo:NV)

Ukrainian businessmen Ihor Kolomoisky, Kostiantyn Zhevaho, Oleksandr Yaroslavskyi, and Kostiantyn Hryhoryshyn have been forced to yield their assets to the Ministry of Defense. What are these assets, is compensation possible, and why would some oligarchs not mind giving up their troubled enterprises to the state?

The Ukrainian government has suddenly became the owner of five large private businesses. The Ministry of Defense has received shares and control in Motor Sich, Ukrnafta, Ukrtatnafta, Zaporizhtransformator, and AvtoKrAZ, following a decision by the country’s General Staff.

"Such steps, necessary for our state in times of war, are carried out in accordance with current laws and will help meet the urgent needs of our defense sector," President Volodymyr Zelenskyy explained on Telegram.

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This cannot be called nationalization, insists Defense Minister Oleksii Reznikov.

“This is the seizure of property during martial law," he said during a briefing on the decision.

According to National Security and Defense Council Secretary Oleksiy Danilov, after the end of martial law, these assets "may be returned to the owners”, or they will receive appropriate compensation for their value. The officials did not detail how the state came up with the list of nationalized assets.

According to NV's source in Zelenskyy’s team, Deputy Head of the President’s Office Rostyslav Shurma championed this expropriation the most. He’s the one who takes care of economic policy and industry on Bankova Street. According to the source, Shurma also proposed the creation of temporary administrations at the so-called regional gas companies belonging to oligarch Dmytro Firtash, and the ruling party is now discussing the relevant bill.

Supervisory boards have already been formed at the enterprises, Reznikov announced. The next step is the appointment of management. The "affected" owners of the plants have so far held back their reactions and have not commented on the decision made by the Ukrainian military leadership.

NV looks into this wartime transfer of assets, the challenges this move will face, and what will happen after Ukraine’s victory.

Motor Sich

The transfer of shares in the Zaporizhzhya-based manufacturer of aircraft engines and gas compressor units to the state raises fewer questions than other enterprises.

Over the past few years, Motor Sich has constantly been embroiled in high-profile scandals. The secret sale of shares to a mysterious Chinese investor, trade with Russia through third countries, and eventually the arrest of long-time Motor Sich president Vyacheslav Boguslayev on suspicion of aiding the aggressor state are good arguments for expropriating the company, which only thanks to Boguslayev's lobbying went through non-competitive privatization in the 1990s.

Apart from Boguslayev, only Chinese investors can oppose this development of events. But this is not news – long before the war they filed a lawsuit against Ukraine in international arbitration at The Hague. The motivation of the claim is an alleged violation of the right to fair and equitable treatment and expropriation of investments contrary to an agreement between the governments of Ukraine and China.


Ukrnafta is the largest Ukrainian crude oil company, which has 85 special permits for hydrocarbon production. The major difficulty in its work is the relationship between the two largest groups of shareholders. The state, represented by the state oil company Naftogaz of Ukraine, owns slightly more than 50% of the company's shares. Bridgemont Ventures Limited, Bordo Management Limited, and Littop Enterprises Limited (all Cyprus-registered companies associated with Ihor Kolomoisky, Hennadiy Boholyubov, and Ihor Palytsia) together control 40.1% of the share capital.

Over the past two years, Ukrnafta has produced approximately 1.5 million tons of oil and condensate. This is almost 63% of Ukraine’s total production. Ukrnafta also produces about 6% of all Ukrainian gas. In addition, the company owns a huge network of gas stations, which before the full-scale invasion of Russia had 537 branches.

The only thing that Ukrnafta lacks is its own oil refinery. Before the war, refining was carried out at the facilities of the Kremenchuk Refinery of Ukrtatnafta, another company seized in yesterday's decision.


The Kremenchuk Refinery is the second joint business of the state, represented by Naftogaz of Ukraine and private shareholders, including Ihor Kolomoisky, Oleksandr Yaroslavskyi and Pavlo Ovcharenko. Unlike Ukrnafta, it is actually controlled by private investors, who together own about 60% of the shares.

Until recently, it was the largest operating refinery in Ukraine, which processed both Ukrainian and imported oil. But this spring it was destroyed as a result of several missile attacks on Kremenchuk. Petro Danyliak, co-owner of the OKKO filling station network, estimated the cost of restoring the enterprise at $1 billion. Moreover, he believes that during the war in Ukraine there is no need to create new refining capacities because of the threat of their destruction.

The situation is aggravated by the fact that in early October the Supreme Court of the United States ordered Ukraine to pay $173 million to Russian company Tatneft, which in the 1990s was one of the shareholders of the refinery, but lost all shares due to a conflict with the Ukrainian shareholders of the plant. That is, the state inherited a debt fixed by a court decision in the United States. Moreover, a Russian court arrested businessmen Ihor Kolomoisky and Hennadiy Boholyubov in absentia.

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Kolomoisky did not respond to a request for comment from NV Business via messenger. Nor did the press service of Yaroslavskyi's DCH company respond to a request to comment on the seizure of Ukrtatnafta in favor of the state.


The products of the Zaporizhzhya-based machine plant are now extremely important for Ukraine after the Russian attacks on domestic energy infrastructure. Damage to transformer equipment has become almost the main cause of massive power outages in Ukrainian cities. It is impossible to replace transformers quickly.

"It's not like in a supermarket: you come, you buy,” DTEK Executive Director Dmytro Sakharuk told Radio NV.

“This is a single-piece product that is made only on order.”

Restoration of energy infrastructure will cost state-owned Ukrenergo and private energy companies tens, if not hundreds of millions of dollars. But the state's decision to de facto confiscate Zaporizhtransformator (ZTR) means that this money will bypass the current owner of 97.3% of ZTR shares – AMC Svarog Asset Management. In the state register, Swiss citizen Leonid Pivovarov is recorded as its ultimate beneficiary. He is a classmate of prominent businessman Kostiantyn Hryhoryshyn, who for many years has been considered to be the real owner of the Zaporizhzhya enterprise. It was not possible to find out his reaction the loss of Zaporizhtransformator. Hryhoryshyn did not reply to NV Business’ questions by publication.

According to official information, ZTR has been non-operational since the beginning of the war. The company has recently been struggling with a number of debt issues. Back in 2019, courts opened a bankruptcy case against ZTR. According to preliminary information, just the confirmed bank claims amount to UAH 3.6 billion ($97.5 million).

According to the court-appointed arbitration manager of ZTR, Ivan Husar, the formation of the register of creditors' claims may take place on Nov. 29. The change of ownership should not affect the course of the bankruptcy procedure, Husar told NV Business.


This Kremenchuk-based plant, which is usually associated with Kostiantyn Zhevaho, is a world-famous manufacturer of trucks for civil and military purposes. The range of KrAZ trucks is represented by vehicles of 4×2, 4×4, 6×4, 6×6, 8×4, and 8×6 wheel configurations, including truck tractors, flatbed trucks, dump trucks, and various special and military equipment, including platforms for multiple launch rocket systems. It is difficult to overestimate the need for this equipment both during the war and during the post-war reconstruction of the country.

AutoKrAZ, like ZTR, is in bankruptcy proceedings. And, judging by the latest news, the long-term owner of the plant is trying to influence the course of events.

It is unknown how Zhevaho reacted to the news about the alienation of the plant. At the time of publication, his press service had not answered questions sent to him by NV Business.

What are the risks of seizing enterprises and why can it be beneficial to their owners?

One of NV Business’ source, who previously held the position of a top manager in a state-owned company, noted that one of the main discussions around the process of withdrawal or nationalization is the payment of compensation to private owners in the future.

But he believes that the risks of large payments can be significantly reduced by taking advantage of past experience.

"In early 2021, the state won an international arbitration against minority shareholders of Ukrnafta,” the source tells NV Business.

“They demanded more than $6 billion, but the Ministry of Justice was able to prove that they did not have such a right.”

According to him, the court decided that minority shareholders cannot be considered investors at all and claim compensation, because they acquired their shares in a dubious way, and not as a result of transparent privatization or purchase on the market.

In 2015, Kolomoisky himself admitted during a meeting of the Special Commission of the Verkhovna Rada on Privatization that he had been transferring $5 million to the second president of Ukraine, Leonid Kuchma, every month – for the right to change the management and gain operational control over Ukrnafta.

Almost all the private owners of the nationalized businesses have similar issues. It is also worth mentioning the citizenship of some of these businessmen.

Vyacheslav Boguslayev was discovered to have a Russian passport. Zaporizhtransformator’s former owner, Kostiantyn Hryhoryshyn, used to be a citizen of Russia and Cyprus – only obtaining Ukrainian citizenship in 2016. He also brought the company to a bankrupt state. Kostiantyn Zhevaho’s AvtoKrAZ is in the same situation.

Therefore, the state may have arguments to reject these shareholder’s potential claims ,and not pay compensation if they demand it. If, of course, Ukrainian courts will accept these arguments.

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