Russia’s central bank has said the government broke the rules when it took over some assets related to the conflict in Ukraine. This is the first time the Russian elite has shown any disagreement with the government’s actions.
Since the conflict began, Russia has taken control of many assets from foreign investors and wealthy Russians. Some people within the government are worried about this. They fear the country is moving towards a Soviet-style system where everything is controlled by the state.
The Moscow Stock Exchange and some central bank officials complained about the government’s seizure of a gold mining company, UGC. While they didn’t object to the seizure itself, they said the government did not follow the rules about buying out other shareholders. The central bank agreed and told the state to make the required offer.
Some people believe the government’s actions are hurting private property rights in Russia. They say it devalues the investments of those who bought shares legally. One investor said the law doesn’t seem to apply during nationalizations. UGC had a big public offering in 2023, with many Russian investors holding shares. Some people are concerned that these actions will discourage others from buying shares in the future.
A lawyer confirmed that Russian law requires a company that gains a large stake in another company to offer to buy out other shareholders. The government has seized assets worth about $50 billion. These seizures include assets from Western companies and Russian businesses. This is the largest redistribution of property since the 1990s.
President Putin asked officials to make more companies sell shares. But the UGC case has raised concerns about the future of these offerings. A top official from the Moscow Stock Exchange criticized the government for not following its own rules, which is hurting the stock market.
One challenge is that there is no money set aside to buy out the shareholders. A solution could be to sell the seized assets quickly, with the new owners making the offer. A new rule from Putin is expected to speed up these sales. A copper producer is likely to buy the stake in UGC. The finance ministry plans to sell it by the end of October. The central bank’s first deputy chairman warned that the current actions could discourage foreign investors even after peace is reached in Ukraine.
With information from Reuters