Government Seizure of Ukraine: The Security Service (SBU) of Ukraine has taken control of the largest telecom company in the nation, Kyivstar, and changed its “corporate ownership.” The owner of Kyivstar, VEON, is contesting the decision and intends to file an appeal.
Kaan Terzioglu, CEO of VEON, stated that foreign investors are confused by the latest action. He added that advocates have reached out to lawmakers and other members of the legislature in an attempt to get assistance.
There was a lack of transparency in the process, Terzioglu said.
He claimed that because investors and shareholders found out about the seizure through the media, the company had to spend $150 million.
In an interview with the Kyiv Post, Oleksandr Komarov, the president of Kyivstar, stated that he found out about the news on social media.
Terzioglu stressed his wish for the rule of law to be upheld in Government Seizure of Ukraine and stated that his country is working to ensure that legal principles are enforced in its fight against Russia’s invasion.
The SBU said on October 6 that it had acquired the corporate ownership rights of Russian oligarchs Andrei Kosogov, Peter Aven, and Mikhail Fridman because of their financial backing of Russia during the current invasion. This included two of the biggest telecom businesses in overnment Seizure of Ukraine, Kyivstar and Lifecell, as well as their corporate rights.
In the initial court decision, Ukraine was to acquire 99.9% of Kyivstar’s approved capital. On October 23, the court did, however, modify its ruling, lowering Ukraine’s ownership to 47.8%. This puts them in line with the oligarchs’ indirect ownership of the corporate structure, which is held through the UK fund LetterOne.
In the past, Ukraine had seized ownership of Russian oligarchs’ corporate interests, including the Ocean Plaza mall in Kyiv. As a result of the ambiguity surrounding the motivations and legal grounds for the Kyivstar seizure, the action is seen as problematic.
Who are the oligarchs?
Due to their role in the entire invasion of Ukraine, Russian oligarchs Mikhail Fridman, Peter Aven, and Andrei Kosogov are being sought for and facing penalties by the SBU, the security service of Ukraine.
Prior to this, all three were members of the board of directors at LetterOne, a fund based in the UK that owns 47.8 percent of VEON, the company that owns Kyivstar in Ukraine.
Mikhail Fridman, a Western Ukrainian by birth, is well-known for his assistance to Russian forces, which includes his provision of insurance for Russian military hardware and people. Additionally, he made sure that his Russian telecom company and the authorities worked together, which made it easier for the Russian government to monitor the local populace.
Peter Aven is a major shareholder in Alfa Group, which owns Alfa Bank, one of the biggest banks in Russia that keeps up its support for the Russian economy despite the continuous invasion. It is thought that Aven has deep relations to Putin. US sanctions are now in place for the bank.
Andrei Kosogov is the main shareholder of Alfa Bank and a member of the Alfa Group supervisory board.
What’s the connection between VEON and Russia?
Even though the company was founded in Russia in the 1990s, it has steadily expanded outside of that country. According to Terzioglu, the company left the Russian market after withdrawing from it at the beginning of the invasion. It then gave its corporate rights and operations to a group of senior PJSC VimpelCom management members.
[On] day one of the war, we made a choice — we chose Ukraine,” said Terzioglu at a press conference in Kyiv. “[…] and we have no more business in Russia as VEON.”
“We have an independent board of directors, who unanimously decided to be in Ukraine, not in Russia,” he said.
Since VEON is a publicly traded firm, Terzioglu denied that oligarchs are attempting to influence the company’s operations or economic goals.
Terzioglu also emphasized the company’s commitment to supporting Ukraine’s recovery after victory is gained by announcing that $600 million will be provided for the country’s restoration during the next three years.
Why is Ukraine seizing the corporate rights of Kyivstar?
The goal of the Ukrainian government is to seize the business rights of the Russian billionaires who are engaged in the invasion and prevent them from being transferred. As per the SBU’s statement, the “seizure of corporate rights” is meant to protect concrete evidence and prevent the transfer of these rights to imaginary companies; it is not meant to cause any hindrance to company operations or interests.
Retaining Kyivstar’s corporate rights was decided upon since the oligarchs in question own a portion of LetterOne. Nevertheless, no documentation outlining the reasoning for the initial seizure on October 6 was provided to Kyivstar or VEON, which raised fears in certain quarters that the authorities were planning to use this action to seize control of Kyivstar’s corporate rights.
Concerns have been raised over the possible disclosure of this data to parties influenced by Russia due to Kyivstar’s collaboration with Helsi, a Ukrainian medical application that stores medical information about Ukrainians.
What does it mean for Ukraine?
Investors’ faith in Ukraine’s commitment to enforcing the rule of law has been damaged by the revocation of corporate rights held by foreign organizations, according to Terzioglu.
“I fully respect the authorities’ concerns […] and I am happy to read […] that there is full protection of international foreign investors’ rights in Ukraine,” said Terzioglu.
Meetings between government officials and VEON’s principal stakeholders are planned, according to Terzioglu, who also expressed VEON’s willingness to have conversations with them. Delegates from embassies representing investors affected by the latest judgment will be present at these meetings.
“We are also here to talk with the government to understand their concerns and explain to them how we will be their biggest partner,” said Terzioglu “proving that Ukraine is [a] land of law, and it is a big opportunity for foreign investors to invest.”
The founders of Kyivstar have stated that while the talks are still in progress, investors from the US, UK, and other countries are worried about how this decision will affect their company’s prospects as well as investment chances in Ukraine.
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