The kleptocratic Russian state is using the motivation of a foreign threat to become even more kleptocratic. This, in short, is the description of the new wave of expropriations of corporate assets in Russia after its most recent invasion of Ukraine. These expropriations – which at the time of writing number over 500 – come in three flavours: regulation on temporary state management of foreign assets; court-ordered nationalisation of allegedly illegally obtained assets; and forced sales to state-owned entities of private companies deemed strategically important for the war effort (Figure 1).
Figure 1 Share of seizures, by expropriation method, 2022-2024
Expropriation is a feature of dictatorships, manifested in a variety of emerging economies around the world (Rodrik and Mukand 2015). The war in Ukraine has, however, given the Kremlin a rationale to expand expropriation. This wave of expropriations follows recurrent Russian history. The October Revolution of 1917 set a precedent for expropriation, with the Soviet government’s sweeping nationalisation of private property becoming a model for similar actions under the Putin regime (Tsyvinski et al. 2013). The erosion of private property rights through regulatory pressure and court involvement was demonstrated in the Yukos case in 2006: the company – Russia’s then most-profitable private enterprise – was bankrupted through tax reassessments, fines, arrests of key management, raids of its premises, asset freezes, and forced sales of subsidiaries that ultimately transferred Yukos’ assets to state-owned Rosneft for minimal compensation (Guriev and Durnev 2007).
Temporary state management
Following the invasion of Ukraine and subsequent Western sanctions, Russia has developed a systematic approach to seizing assets of foreign companies, often citing the need for retaliatory measures against unfriendly nations. The government formalised this approach by issuing a decree on temporary state management over the Russian assets of foreign companies. Two European energy companies – Germany’s Uniper (with an 88% stake in Russia’s Unipro) and Finland’s Fortum – fell under this regulation first, with another 250 companies to follow suit in the three years since the invasion.
Several examples show the scale of expropriations. ExxonMobil’s assets were expropriated several months into the war and its Sakhalin-1 oil project, valued at over $4 billion in 2021, terminated. French food manufacturer Danone’s Russian assets were placed under temporary state management and later sold to a Kremlin ally at a 60% discount from market value. Danish brewing corporation Carlsberg’s Russian subsidiary, Baltika, was placed under temporary state management too, despite the company having signed an agreement to sell its Russian business. Norwegian media holding Amedia’s shares in five Prime Print publication houses were transferred to state management. Glavprodukt, a food producer with over 500 lines of products, was taken from its American owner Universal Beverage Company.
Court-approved nationalisation
In the three years since the war began, Russian courts have issued verdicts on the nationalisation of nearly 200 companies. Prosecutors commonly use claims of 1990s privatisation violations to seize private companies from entrepreneurs deemed unfriendly to the Kremlin regime. Several examples illustrate the pattern of court-approved nationalisations. The Tambov District Court seized the distilleries of Luxembourg-based Amber Beverage Group Holdings, naming them extremist associations supporting Ukraine. The owner was added to Russia’s terrorists list, with prosecutors citing his alleged support of the “Kyiv regime”. A few months earlier, prosecutors filed a lawsuit to seize Makfa, Russia’s largest pasta manufacturer, from its owners, alleging they conducted business with Ukraine. By the end of 2024, the Chelyabinsk District Court ruled for the nationalisation of Makfa.
The real estate company KR Properties was nationalised after being named co-defendant in a tax fraud case. The case went back over 20 years and was resuscitated after the owner’s public comments against the war. The Solikamsk Magnesium Plant, which produces materials critical for the aviation industry, was nationalised after the Arbitration Court seized its shares in favour of state company Rosatom, declaring the 1992 privatisation void. The same prosecutors demanded seizure of the winery Kuban-Vino, as well as the Yuzhnaya and Ariant agricultural firms and the Center of Food Industry Ariant, claiming these were developed using proceeds from illegal privatisation.
Some nationalisations were motivated by the needs of the war industry. The regional arbitration court in Sverdlovsk ruled to nationalise three defence industry plants – the Chelyabinsk Electrometallurgical Plant, Serov Ferroalloy Plant, and Kuznetsk Ferroalloys. Prosecutors claimed these were illegally privatised in the 1990s and that their production was exported to the US, violating national security interests. The St. Petersburg Arbitration Court seized AO Commercial Center, Transport and Forest (KCTL), after the court ruled that KCTL was illegally created in 1994 using assets from Severnaya Verf (Northern Shipyard), a defence enterprise. The Ivanovo Region Arbitration Court transferred Ivanovo Heavy Machine Tool Plant (IZTS), a defence enterprise, to state-owned Rosimushchestvo, after the court ruled the 1996 privatisation illegal. The Kaliningrad Central District Court ordered the seizure of 51.75% of Kaliningrad Sea Trade Port shares from the owner. The court ruled that he had concealed ownership of shares acquired 25 years earlier.
Forced sales
The third approach to expropriation involves transferring assets to state-owned companies, and from there to Kremlin-backed oligarchs, through pressure to sell at discounted prices. The most well-known example of this method is Tinkoff Bank. After its founder spoke out against the war in Ukraine, he faced pressure to sell his 35% stake to Vladimir Potanin, who has close ties to the Kremlin. As another example, the Yuzhuralzoloto Group of Companies (YGC) was sold off after four gold mining licenses were suspended by the regulator; state corporation Rostec is the new owner. Russia’s largest car dealer, Rolf, was transferred to Federal Property Agency’s management, followed by a Prosecutor General’s Office claim for nationalisation; six months later, ownership was transferred to a Kremlin-backed oligarch.
Some forced sales do not hide their true beneficiaries. A court ordered the transfer of Bashkir Soda Company (BSK) shares to the state after the judge ruled on privatisation violations. Four months later, ownership was transferred to Roshim, a holding owned by the Rotenberg family who are close friends of President Putin. Two months later still, the Altai chemical plant Kuchuksulfat, Russia’s only producer of sodium sulfate, was also sold to Roshim. The plant had been seized by the state when prosecutors challenged the legality of its privatisation.
State capitalism
The Russian economy’s productive assets are increasingly state owned or state controlled. The war in Ukraine has served as an additional rationale to expropriate private assets, at a pace not seen since for more than a century. However, the downsides of state ownership are well-studied (Djankov and Murrell 2002). The Soviet Union’s stagnant economy is witness to the previous round of expropriations. In other research, state capitalism in Russia – ownership by the state or a few Kremlin-backed oligarchs – is equally associated with retarded economic growth (Djankov 2015).
References
Djankov S (2015), “Russia’s Economy under Putin: From Crony Capitalism to State Capitalism”, Peterson Institute for International Economics Policy Brief 15-18.
Djankov, S and A Golovchenko (2024), “Patterns in sanctions on Russian individuals”, VoxEU.org, 3 November.
Djankov, S and A Golovchenko (2025), “Who benefits from Russia’s war in Ukraine”, VoxEU.org, 6 January.
Djankov, S and P Murrell (2002), "Enterprise Restructuring in Transition: A Quantitative Survey", Journal of Economic Literature 40(3): 739–792.
Guriev, S and A Durnev (2007), “Resource abundance and corporate transparency”, VoxEU.org, 21 November.
Rodrik, D and S Mukand (2015), “The Political economy of liberal democracy,” VoxEU.org, 29 September.
Tsyvinski, A, M Golosov, S Guriev and A Cheremukhin (2013), “Stalin and Soviet industrialization”, VoxEU.org, 10 October.
