Ukraine wants to confiscate the assets of Oleg Deripaska

The government of Ukraine plans to confiscate all the property of businessmen Oleg Deripaska and Sergey Kurchenko, former Ukrainian Defense Minister Pavel Lebedev and former President Viktor Yanukovych located in the country. This was announced on September 12 by Ukrainian Prime Minister Denys Shmyhal.

“The government is reimposing sanctions on Sergei Kurchenko, Pavel Lebedev, Viktor Yanukovych and Oleg Deripaska in terms of blocking their assets and assets in which they may be involved. This decision is necessary in order to finally confiscate all their property on the territory of Ukraine, according to the new legislation,” the politician wrote in his Telegram channel. He added that the freezing and confiscation of all assets of the Russian Federation and its citizens takes place “in accordance with clearly defined procedures and in accordance with new legislation.”

In May 2022, President of Ukraine Volodymyr Zelensky signed a law on the confiscation of property and assets of persons supporting Russia’s Special Military Operation (SVO) in Ukraine. We are talking about individuals and companies that “in one way or another” support the NWO.

Deripaska owns 44.95% of the authorized capital in the En + holding, which owns 56.88% in the businessman founded in the 2000s. Russia’s largest aluminum company UC Rusal.

Major asset UC Rusal in Ukraine, the Nikolaev Alumina Refinery (NGZ), which has stopped production since March of this year after the start of the RF SVO in Ukraine. Previously, NGZ provided a fifth of UC Rusal’s needs for alumina, a semi-finished product needed for aluminum production.

Representative UC Rusal told Vedomosti that Deripaska in 2018 “left the aluminum company and has nothing to do with it,” and the Nikolaev plant has not been working for several months. Deripaska’s spokesman did not respond to a request.

Other assets in Ukraine UC Rusal and En+, according to their records, no. Previously, UC Rusal owned the Zaporozhye Aluminum Plant (ZALK). But in 2015, the Prosecutor General’s Office and the Supreme Court of Ukraine returned a controlling stake in the enterprise (68.01%) to the state. 29.54% of ZALK remained in the ownership of UC Rusal (controlled through Velbay Holding Limited). According to a representative of UC Rusal, now the company owns only the Nikolaev Alumina Refinery in Ukraine (he does not specify the fate of 29.54% of ZALK).

In early March, UC Rusal announced a halt in production at the Nikolaev plant “due to inevitable logistical and transport problems in the Black Sea and adjacent areas.” In 2020, UC Rusal completed a project to increase the plant’s capacity to 1.76 million tons of alumina. According to UC Rusal, the refinery is the company’s second largest alumina refinery after the Aughinish refinery in Ireland with a capacity of 1.99 million tons per year.

In total, the company has nine plants for the production of alumina. In 2021, the Nikolaev facility increased alumina production by 2.6% to 1.77 million tonnes, slightly above design capacity. The plant produces 21.3% of UC Rusal’s alumina. In total, alumina production in 2021 reached 8.3 million tons, which is 78.6% of the design capacity of UC Rusal plants (Vedomosti wrote about this on March 1).

In Ukraine, legal proceedings are already underway around the asset. At the end of May 2022, the Perechinsky District Court of the Transcarpathian Region arrested the corporate rights of the Nikolaev Alumina Plant, owned by Guardon Ukraine and Aluminum of Ukraine, which own the shares of the plant, and the funds on the accounts of the enterprise, the Ukrainian edition of Ligabusinessinform reported on July 1 with reference to the judgment. The text of the court ruling, to which the publication referred, said that the arrest was imposed as part of a criminal case against top managers of the plant “on charges of tax evasion and embezzlement of property on an especially large scale.” Representative UC Rusal does not comment on these litigations.

As Vedomosti wrote, due to the SVO in Ukraine, UC Rusal experienced difficulties with the supply of alumina against the background of the Australian government’s ban on the export of raw materials to the Russian Federation and the suspension of production at the NGZ. This negatively affected the availability of raw materials for the company and led to an increase in the cost of aluminum production. “The cost of aluminum production in the first half of 2022 increased by 33.2% to $2028 / t compared to $1523 / t by 2021 due to increased costs for alumina, other raw materials and materials, as well as logistics,” it was said. in the financial report of the aluminum company under IFRS for 6 months.

Dmitry Gorbunov, a partner at Rustam Kurmaev & Partners, explains that when it comes to the transfer of property in favor of the state, it is assumed that “this process involves the reimbursement of the value of the seized property to the owner.” “Such decisions are made by authorized bodies of state power, including the government,” the lawyer told Vedomosti.

He added that in this case we can talk about the confiscation of property. “The purpose of confiscation, as a rule, is the need to compensate for the damage caused by its owner. But for this, firstly, the fault of the owner of such property in causing damage must be proven, and secondly, its amount must be confirmed, which must be commensurate with the value of the property confiscated,” explains Gorbunov. Property owners, according to the lawyer, will be able to try to defend their interests in court, return confiscated property, or try to recover its value.

Confiscation of property “carries potential risks of loss UC Rusal actual control” over the Nikolaevsky Alumina Refinery, believes Yevgenia Meshkova, a member of the Russian Bar Association. But from the point of view of compliance with international law, it will be difficult to deprive the shares of the UC Rusal plant, in her opinion. “To lose legal control over the NGZ, confiscation of property and seizure of corporate rights is not enough. It is necessary to properly formalize the redistribution of securities, shares, which cannot be carried out by the Ukrainian side. The Nikolaev Plant is a city-forming enterprise, the share placement plan was approved by the government of Ukraine (the shares of the Nikolaev Plant were acquired by the predecessor of UC Rusal, Siberian Aluminum, in 1997 – Vedomosti). This document is not a normative legal act, and it cannot be canceled or invalidated,” Meshkova explained.

Independent industrial expert Leonid Khazanov adds that the development of the situation with the Nikolaev Alumina Refinery “will directly depend on who will control its territory.” “If the NGZ is under the control of the Armed Forces of Ukraine, then UC Rusal there is little that can be done to keep it safe. If the territory of the Nikolaev region comes under the control of the Russian military, then in the future it is possible to restart the NGZ,” he says. “But the Ukrainian authorities, even in the event of confiscation, will definitely not be able to restart the plant themselves, not to mention providing it with raw materials.”