ECONOMY
‘Nationalization Has Begun to Hit People Who Seemed to Have “Protection.”’
February 17, 2025
- Andrei YakovlevAssociate at Harvard University’s Davis Center and a fellow at Hanse-Wissenschaftskolleg (HWK)
-
Tatiana Rybakova
Journalist and writer
In an interview with Republic, economist Andrei Yakovlev explains why the latest nationalizations in Russia are different than earlier ones, pointing out that even elites close to Putin might no longer be safe.
Domodedovo airport. Source: Wiki Commons
Tatiana Rybakova: The process of “deprivatization” or, frankly speaking, expropriation, continues, and there are two things that have surprised me. First, the reason for why assets are being taken by the state has changed: whereas earlier it was violations allegedly committed during privatization or, as, for example, in the case of the car dealership Rolf, alleged corruption, now a nationalization target is labeled “strategic” – they say, there should be no foreign ownership in this company. And foreign ownership is considered the presence of [someone holding] residency or foreign citizenship among the owners, or offshore companies in the ownership structure. It started with the airports Domodedovo and Sheremetyevo; almost immediately the Prosecutor General brought similar charges against the oilfield services company Borets, the agribusiness conglomerate Rodnye Polya and others.
And the second thing is that this process has hit people who were considered close to Putin’s inner circle or even in Putin’s inner circle, as well as people who were seen as being under the patronage of someone from Putin’s inner circle.
For example, it was believed that Nikolai Patrushev provided “protection” for Domodedovo, while Arkady Rotenberg owned a third of Sheremetyevo. Finally, they have gone after Sergei Bogdanchikov, the former head of Rosneft, who, by the way, took YUKOS’ assets.
Why have the authorities decided to use such a dubious approach [to nationalization] as the presence of foreign ownership in a business? And second: are they really coming after the businesses of people who are so close to Putin?
Andrei Yakovlev: Regarding the first point, you are not entirely right. This process started in a noticeable form with the nationalization cases of 2023, in particular with the transfer – through nationalization – of chemical industry assets to the Rotenburg brothers’ company Roskhim.
Already at that point, the main arguments put forward by the Prosecutor General were not about privatization violations, but about strategic enterprises being in the hands of private owners who do not reside in Russia, which was said to threaten the country’s economic sovereignty and national security. Most of the nationalization cases as early as 2023 were based on these arguments.
The choice of this approach by the Prosecutor General (and the FSB, which is behind this process), in my view, is attributable to the fact that alleged violations during privatization, which took place some 30 years ago, could legally be challenged, with the circumstances of specific cases and the clear expiration of the statute of limitations, among other things, being cited [as a defense]. In this regard, the FESCO case is telling: the transport company was taken away from the Magomedov brothers only after the war started, even though they had already been in prison for several years; before that, their lawyers had challenged prosecutors’ allegations of privatization violations, and the courts had been forced to consider these challenges.
And the second thing is that this process has hit people who were considered close to Putin’s inner circle or even in Putin’s inner circle, as well as people who were seen as being under the patronage of someone from Putin’s inner circle.
For example, it was believed that Nikolai Patrushev provided “protection” for Domodedovo, while Arkady Rotenberg owned a third of Sheremetyevo. Finally, they have gone after Sergei Bogdanchikov, the former head of Rosneft, who, by the way, took YUKOS’ assets.
Why have the authorities decided to use such a dubious approach [to nationalization] as the presence of foreign ownership in a business? And second: are they really coming after the businesses of people who are so close to Putin?
Andrei Yakovlev: Regarding the first point, you are not entirely right. This process started in a noticeable form with the nationalization cases of 2023, in particular with the transfer – through nationalization – of chemical industry assets to the Rotenburg brothers’ company Roskhim.
Already at that point, the main arguments put forward by the Prosecutor General were not about privatization violations, but about strategic enterprises being in the hands of private owners who do not reside in Russia, which was said to threaten the country’s economic sovereignty and national security. Most of the nationalization cases as early as 2023 were based on these arguments.
The choice of this approach by the Prosecutor General (and the FSB, which is behind this process), in my view, is attributable to the fact that alleged violations during privatization, which took place some 30 years ago, could legally be challenged, with the circumstances of specific cases and the clear expiration of the statute of limitations, among other things, being cited [as a defense]. In this regard, the FESCO case is telling: the transport company was taken away from the Magomedov brothers only after the war started, even though they had already been in prison for several years; before that, their lawyers had challenged prosecutors’ allegations of privatization violations, and the courts had been forced to consider these challenges.
“The advantage of citing national security and ‘threats to sovereignty’ as arguments when seizing property is that there is no corpus delicti that lawyers could challenge in court.”
Such charges are based on FSB reports, which in a legal sense contain nothing more than “value judgments” – and attempts by lawyers and judges to dispute these value judgments carry personal risks of being accused of creating threats to national security.
Against this backdrop, it is no coincidence that all court decisions on charges of this kind brought by the Prosecutor General are made with such speed, whereas previously claims of privatization violations usually took months to settle.
Everything has its limits, however. The threats-to-national security argument simply could not be applied to car dealerships (in the case of Rolf and Sergei Petrov) or pasta (Makfa). That is why the argument about corruption was used there: they say the owners either received these assets when they held government posts, or they managed them when they were officials or MPs.
Against this backdrop, it is no coincidence that all court decisions on charges of this kind brought by the Prosecutor General are made with such speed, whereas previously claims of privatization violations usually took months to settle.
Everything has its limits, however. The threats-to-national security argument simply could not be applied to car dealerships (in the case of Rolf and Sergei Petrov) or pasta (Makfa). That is why the argument about corruption was used there: they say the owners either received these assets when they held government posts, or they managed them when they were officials or MPs.
“One way or another, when the Prosecutor General makes these claims, the courts now just stand at attention and approve the decisions handed to them.”
Arkady Rotenberg next to Vladimir Putin at the opening of the Crimean Bridge. May 2018. Source; Wiki Commons
That is, the environment has objectively changed. Previously, at least in commercial disputes, people from business tried to challenge such charges, and there was a chance that, thanks to competent lawyers, the courts, in particular arbitration courts, would look at the case differently and reverse something.
Now, however, claims to seize property are made not through arbitration courts but through courts of general jurisdiction, which have always been much more loyal to prosecutors. There is nothing new in these charges – this story has been going on for years; it is just that the context has changed.
TR: And prosecutors have found an effective tool.
AY: Yes. What is relatively new here, in my view, is the gathering of a new wave of nationalization. There was a wave in 2023/early 2024. After that, last year, Putin spoke at the Russian Union of Industrialists and Entrepreneurs congress, where he again stated that this did not represent an overturn of privatization but “individual, specific cases.”
The emphasis is not on overturning some deals that were supposedly illegally done, but on protecting national interests, national security and so on. The general message was that if you are in Russia, pay taxes and are loyal to the government (including giving money to support the special military operation – though this was not said explicitly), then you can relax; no one will touch you. That is, all asset seizures target only people who left the country, are insufficiently patriotic and own certain strategically important assets.
After this speech, judging by my conversations, business did not exactly calm down, but there was a feeling that these were all one-off cases. Sure, property is clearly being redistributed; sure, assets have been taken away from owners; but still, this concerns those who lived abroad – not us – they said. A certain calm set in. Though there were new cases, there was no tangible wave.
But what is happening now feels like a new wave.
Still, you are right about the second question: now, it appears, [nationalization] has begun to hit people who seemed to have “protection.”
For example, Makfa and the chemical plants that I mentioned apparently did not have sufficient protection.
Now, however, claims to seize property are made not through arbitration courts but through courts of general jurisdiction, which have always been much more loyal to prosecutors. There is nothing new in these charges – this story has been going on for years; it is just that the context has changed.
TR: And prosecutors have found an effective tool.
AY: Yes. What is relatively new here, in my view, is the gathering of a new wave of nationalization. There was a wave in 2023/early 2024. After that, last year, Putin spoke at the Russian Union of Industrialists and Entrepreneurs congress, where he again stated that this did not represent an overturn of privatization but “individual, specific cases.”
The emphasis is not on overturning some deals that were supposedly illegally done, but on protecting national interests, national security and so on. The general message was that if you are in Russia, pay taxes and are loyal to the government (including giving money to support the special military operation – though this was not said explicitly), then you can relax; no one will touch you. That is, all asset seizures target only people who left the country, are insufficiently patriotic and own certain strategically important assets.
After this speech, judging by my conversations, business did not exactly calm down, but there was a feeling that these were all one-off cases. Sure, property is clearly being redistributed; sure, assets have been taken away from owners; but still, this concerns those who lived abroad – not us – they said. A certain calm set in. Though there were new cases, there was no tangible wave.
But what is happening now feels like a new wave.
Still, you are right about the second question: now, it appears, [nationalization] has begun to hit people who seemed to have “protection.”
For example, Makfa and the chemical plants that I mentioned apparently did not have sufficient protection.
“In the last wave, it was precisely these ‘weak players’ that got hit, with their assets going to others that had strong patrons.”
Vladimir Putin at a Russian Union of Industrialists and Entrepreneurs congress. April 2024. Source: Kremlin.ru
In addition, there was the pool of assets of foreigners exiting Russia. These were also divided among players who had connections in various government structures. Again, it was crucial that the signals being sent out were not about nationalization – this was even directly stated by Putin.
A market remained, and in fact, in most cases, the assets that were seized from their owners or put under state management were later sold. For example, Danone was taken over by the Federal Property Management Agency (Rosimuschestvo), which appointed Ramzan Kadyrov’s nephew to manage it; in the end, Danone was actually sold to the Kadyrov family. A similar story played out with Rolf: it was given to Umar Kremlev, who is close to the current head of the presidential guard service. That is, there were rather clear signals as to whom the assets were being transferred to. But now, the property of people who had rather strong patrons has begun to be redistributed.
I would say this started with the conflict around Wildberries, a large online retailer that had backing, while not 100% from the siloviki, but at least from bureaucrats and politicians. Nevertheless, over its assets an open, bruising conflict began between Suleiman Kerimov and Kadyrov.
It is unclear how it will end, as for now, at least on the surface, Kadyrov looks more like the losing side. Because no assets were given back to [Vladislav] Bakalchuk.
In any case, this was a clear redistribution of property that was in no way connected to any foreign owners. Already back then, my interlocutors, primarily in Russia, told me: they got the feeling that people who have siloviki connections have now decided to cash in on them. Because God knows how long they will last, so while they are there, better to try to use them for something that can definitely make some money. This was exactly the situation with Wildberries.
I get the sense that the latest cases really represent property redistribution among groups close to Putin. Apparently, these players’ ability to play hardball has begun to change, as well. The abovementioned Patrushev Sr. is in a weaker position than before. This could serve as the backdrop for other groups with strong positions to try to take something away – hence, perhaps, the story with Domodedovo.
Regarding Bogdanchikov, perhaps this story is a test of how Igor Sechin will react. He was big and powerful during Alexei Ulyukaev’s arrest and the seizure of Bashneft from AFK Sistema, but in the last three years he has generally been neither seen nor heard.
Perhaps one of his friends/rivals decided to check: grab something rather small and see what happens. That is, this really could mark the beginning of a struggle for pieces of the pie within certain high-ranking circles amid a deteriorating economic situation, primarily from the standpoint of fiscal resources.
Previously, there was enough money from the budget to go around: for the war, for social programs and for projects that provided rent to elites.
A market remained, and in fact, in most cases, the assets that were seized from their owners or put under state management were later sold. For example, Danone was taken over by the Federal Property Management Agency (Rosimuschestvo), which appointed Ramzan Kadyrov’s nephew to manage it; in the end, Danone was actually sold to the Kadyrov family. A similar story played out with Rolf: it was given to Umar Kremlev, who is close to the current head of the presidential guard service. That is, there were rather clear signals as to whom the assets were being transferred to. But now, the property of people who had rather strong patrons has begun to be redistributed.
I would say this started with the conflict around Wildberries, a large online retailer that had backing, while not 100% from the siloviki, but at least from bureaucrats and politicians. Nevertheless, over its assets an open, bruising conflict began between Suleiman Kerimov and Kadyrov.
It is unclear how it will end, as for now, at least on the surface, Kadyrov looks more like the losing side. Because no assets were given back to [Vladislav] Bakalchuk.
In any case, this was a clear redistribution of property that was in no way connected to any foreign owners. Already back then, my interlocutors, primarily in Russia, told me: they got the feeling that people who have siloviki connections have now decided to cash in on them. Because God knows how long they will last, so while they are there, better to try to use them for something that can definitely make some money. This was exactly the situation with Wildberries.
I get the sense that the latest cases really represent property redistribution among groups close to Putin. Apparently, these players’ ability to play hardball has begun to change, as well. The abovementioned Patrushev Sr. is in a weaker position than before. This could serve as the backdrop for other groups with strong positions to try to take something away – hence, perhaps, the story with Domodedovo.
Regarding Bogdanchikov, perhaps this story is a test of how Igor Sechin will react. He was big and powerful during Alexei Ulyukaev’s arrest and the seizure of Bashneft from AFK Sistema, but in the last three years he has generally been neither seen nor heard.
Perhaps one of his friends/rivals decided to check: grab something rather small and see what happens. That is, this really could mark the beginning of a struggle for pieces of the pie within certain high-ranking circles amid a deteriorating economic situation, primarily from the standpoint of fiscal resources.
Previously, there was enough money from the budget to go around: for the war, for social programs and for projects that provided rent to elites.
“Now, money is tighter; everyone knows that money will be found for the war, but there is no such certainty about everything else.”
DNR leader Denis Pushilin and Presidential Administration co-head Sergei Kiriyenko meet with residents of Vuhledar after the Ukrainian army was driven out of the city. November 2024. Source: VK
And this might be pushing players that have siloviki connections to take what they can right now.
TR: I have a different idea. Over the past three years, Sechin and Arkady Rotenberg, like many of Putin’s old friends, have not been very visible. We have not heard bellicose statements out of them. Is this wave of nationalization not a signal from Putin to his “old friends” that they can no longer remain silent?
AY: There is probably this signal, too. And I would say it is part of a broader story that concerns different groups within the elite. In particular, many cultural elites in 2022 (unlike 2014) actually spoke out against the war and left the country.
In fact, for the first two years, the Kremlin’s attitude was that if you just keep quiet and stay in the country, you may perform, go on tour, put on plays and lead your normal life. It all ended with Nastya Ivleeva’s “almost-naked” party. Though there was nothing there that these people had not been doing for the previous 20-25 years, they were told: “no, you are not allowed to behave like that anymore.”
Until then, everything was following the script that everything was normal: nothing had happened; this is not a war but rather a special operation; sure, it is Ukraine, not Syria, but it does not concern ordinary people; it is our business, and you go and live your normal life – relax, work, make money, go to the movies, plays, amusement parks; unwind as best you can – even at “almost-naked” parties.
But then we found out that we are in a “war with the West” and things need to change. In my understanding, this is now set to affect business as well.
It is thought that Dmitri Medvedev has morphed into an awful militarist. But there is another militarist out there: Presidential Administration First Deputy Chief of Staff Sergei Kiriyenko. He is known as the “deputy king of the Donbas.” Though he has become a little less visible, as far as I understand, he is the one who oversees the “Time for Heroes” program (which is supposed to train Ukraine war veterans to be future leaders in government). Broadly, he is engaged in renewing the bureaucratic elite. Kiriyenko has long been associated with the Kovalchuks, and they, especially Kurchatov Institute DirectorMikhail Kovalchuk, have long been known for their anti-Americanism. It has been written that Mikhail Kovalchuk was among those who set Putin against Ukraine, the US and the West in general.
Distancing oneself from supporting the war, as was possible for two and a half years, is getting risky.
TR: I have a different idea. Over the past three years, Sechin and Arkady Rotenberg, like many of Putin’s old friends, have not been very visible. We have not heard bellicose statements out of them. Is this wave of nationalization not a signal from Putin to his “old friends” that they can no longer remain silent?
AY: There is probably this signal, too. And I would say it is part of a broader story that concerns different groups within the elite. In particular, many cultural elites in 2022 (unlike 2014) actually spoke out against the war and left the country.
In fact, for the first two years, the Kremlin’s attitude was that if you just keep quiet and stay in the country, you may perform, go on tour, put on plays and lead your normal life. It all ended with Nastya Ivleeva’s “almost-naked” party. Though there was nothing there that these people had not been doing for the previous 20-25 years, they were told: “no, you are not allowed to behave like that anymore.”
Until then, everything was following the script that everything was normal: nothing had happened; this is not a war but rather a special operation; sure, it is Ukraine, not Syria, but it does not concern ordinary people; it is our business, and you go and live your normal life – relax, work, make money, go to the movies, plays, amusement parks; unwind as best you can – even at “almost-naked” parties.
But then we found out that we are in a “war with the West” and things need to change. In my understanding, this is now set to affect business as well.
It is thought that Dmitri Medvedev has morphed into an awful militarist. But there is another militarist out there: Presidential Administration First Deputy Chief of Staff Sergei Kiriyenko. He is known as the “deputy king of the Donbas.” Though he has become a little less visible, as far as I understand, he is the one who oversees the “Time for Heroes” program (which is supposed to train Ukraine war veterans to be future leaders in government). Broadly, he is engaged in renewing the bureaucratic elite. Kiriyenko has long been associated with the Kovalchuks, and they, especially Kurchatov Institute DirectorMikhail Kovalchuk, have long been known for their anti-Americanism. It has been written that Mikhail Kovalchuk was among those who set Putin against Ukraine, the US and the West in general.
Distancing oneself from supporting the war, as was possible for two and a half years, is getting risky.
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