Billing Russia’s billionaires How Ukraine is going after Mikhail Fridman and Roman Abramovich’s sanctioned wealth
Mikhail Fridman and Roman Abramovich are among Russia’s most prominent oligarchs. But outside of Russia, their billions are tied up due to international sanctions imposed in response to Moscow’s full-scale invasion of Ukraine. The Ukrainian authorities are seeking to seize these assets, both at home and abroad, to help fund Ukraine’s post-war reconstruction, which is already slated to cost hundreds of billions of dollars. However, a lack of legal precedent has complicated international efforts to transfer Russian funds to Ukraine. Meduza special correspondents Elizaveta Antonova and Svetlana Reiter go behind the scenes of Ukraine’s attempts to seize Fridman and Abramovich’s frozen wealth.
Meduza first published this article in Russian on July 18. The following translation, which has been updated, as well as abridged for length and clarity, appeared in The Beet, a weekly email dispatch from Meduza in English covering Central and Eastern Europe, the Caucasus, and Central Asia. Sign up here to get the next issue delivered directly to your inbox.
Kyivstar is Ukraine’s biggest telecommunications operator — and soon it may belong to the state.
According to two sources close to the company’s shareholders, the Ukrainian authorities plan to nationalize the telecom giant, which has long been associated with Russian billionaire Mikhail Fridman. Another person who is well-informed about the market also confirmed this.
The London-based investment firm LetterOne, which Fridman founded together with his longtime business partner, Russian billionaire Petr Aven, owns a 47.9-percent stake in VEON, Kyivstar’s parent company. Fridman and Aven lost control of their stakes in LetterOne after the E.U. imposed sanctions on them in the wake of Russia’s 2022 invasion of Ukraine.
Kyivstar spokesperson Iryna Lelichenko told Meduza that the company “has no information regarding nationalization” and does not comment on “rumors and conjecture.”
Be that as it may, a high-ranking Ukrainian official affirmed that slowly but surely, “absolutely all” of Fridman’s Ukrainian assets are going to be nationalized.
Losing Sense Bank
Born in Lviv, Mikhail Fridman holds Russian and Israeli passports but not Ukrainian citizenship. While Fridman was among the first Russian oligarchs to publicly condemn the 2022 invasion of Ukraine, he and his partners in the Alfa Group conglomerate wound up under U.K. and E.U. sanctions nonetheless. Fridman then repeatedly complained that the sanctions imposed against him were unfair. He even tried to get them lifted with the help of some members of the Russian opposition. In the words of Fridman’s representatives, the sanctions “ruined his life.”
After coming under Western sanctions, Alfa Group’s shareholders also ran into problems in Ukraine. The country’s National Bank (the NBU) stripped them of their voting rights in Alfa-Bank Ukraine — a financial institution that Fridman co-founded. (The bank rebranded as Sense Bank in December 2022 to disassociate itself from the internationally sanctioned, Russia-based Alfa-Bank.)
At that point, Fridman offered to transfer $1 billion into Sense Bank for the purpose of financing projects connected to Ukraine’s infrastructure, healthcare, food security, and energy security. In exchange, he wanted the U.K. to lift the sanctions against him, as well as guarantees that Sense Bank would be preserved, reported Forbes Ukraine.
According to one of Meduza’s sources at Sense Bank, Kyiv didn’t respond to the offer. “Then Fridman wrote a letter to NBU head Andriy Pyshnyy and offered to sell Sense Bank for a symbolic amount of one dollar so long as it wouldn’t be nationalized,” the source explained. But Kyiv didn’t accept this offer either. “In May 2023, the bank’s shareholders submitted documents for this transaction with the National Bank of Ukraine. At the same time, Ukraine started adopting a bill on the nationalization of systemically significant banks,” the source said.
On May 29, 2023, the Ukrainian parliament adopted what the media dubbed the “law on nationalizing Mikhail Fridman’s Sense Bank.” The law empowers the NBU to withdraw any bank from the financial sector if its ultimate beneficiaries have come under Western or Ukrainian sanctions. The Ukrainian government can then, in turn, nationalize the bank in question.
The decision to nationalize Fridman’s assets can be attributed to the fact that this became an “overly important topic” in the press, the high-ranking Ukrainian official told Meduza.
Presumably, the official was referring to an investigation by RFE/RL’s Ukrainian service, which found that another Russian company linked to Fridman, AlfaStrakhovanie (Alfa Insurance), insures Russian National Guard vehicles being used in the war against Ukraine. The investigation also revealed that X5 Retail Group, in which Fridman owns shares, continues to work with Voentorg, a company belonging to Russia’s Defense Ministry which, in turn, supplies uniforms and food to Russian forces fighting in Ukraine.
In response to Meduza’s inquiries, Sense Bank’s press service said that they “do not give comments to the Russian press.” This was before the Ukrainian government nationalized Sense Bank on July 21, purchasing it for the price of one hryvnia — the equivalent of 2.7 U.S. cents.
Abramovich’s unfulfilled promises
Besides working to nationalize Russian oligarchs’ companies in Ukraine, Kyiv has also sought to gain access to their assets abroad. This includes funds belonging to Russian oligarch Roman Abramovich, who acted as a negotiator in the talks between Russia and Ukraine at the start of the full-scale invasion.
Abramovich, who sold Chelsea Football Club for roughly $3.2 billion in 2022, promised to donate the proceeds from the sale to a charitable foundation benefitting “all victims of the war in Ukraine.” However, the foundation’s representatives have been unable to reach an agreement with the U.K. government on the intended recipients of the funds. (The foundation’s head, Mike Penrose, claims that the government changed the original terms of the deal, thereby blocking the use of the funds outside of Ukraine. Neither Penrose nor Abramovich’s representatives responded to Meduza’s questions.)
“At the beginning of the war, [Abramovich] said that he was ready to give us [Ukraine] something, but then came the reservations,” the high-ranking Ukrainian official told Meduza indignantly. “It’s the same with all oligarchs. Publicly, they say that they’re not against giving money for [Ukraine’s] recovery, but then, using legal procedures, they block the possibility of using this money.”
According to this source, Abramovich expected that his involvement in the negotiation process and voluntary transfer of his funds would “allow him to hop off the sanctions list or receive certain concessions.” But the Russian billionaire remains under U.K., E.U., and Ukrainian sanctions.
“They won’t lift sanctions imposed on him, and he [now] understands this clearly. Buying his way out of sanctions, as he initially expected, won’t work. Now the war looks a lot worse [than it did in the beginning] — with this amount of war crimes, with the arrest warrant for Vladimir Putin… He understands that he’s still seen as involved in the creation of this system, which brought about such a quantity of crimes against humanity,” the Ukrainian official said.
At the same time, the official explained, the U.K. government cannot, by law, seize the proceeds from the Chelsea FC sale since Abramovich did not voluntarily consent to transferring the money directly to Ukraine. A source close to Abramovich corroborated this claim, alleging that although the oligarch no longer has access to the money, he is still able to block the transfer if he believes that the funds won’t be spent as he intended.
According to a lawyer specializing in international litigation, it’s unlikely that London would take the legal risk associated with seizing the funds, since they’re not intended for British taxpayers but rather for citizens of another country.
The fact that this could set a legal precedent in the U.K. complicates matters further, pointed out Vladyslav Vlasiuk, an adviser in the Ukrainian president’s office. “[The British authorities] don’t want to set a precedent so that the courts won’t have to do the same with the frozen assets of other countries later on,” he told the Ukrainian business outlet Ekonomichna Pravda.
Meduza’s source close to Abramovich insisted that the money has yet to be released due to the “games of British bureaucrats,” who don’t want to transfer the money directly to Ukraine. The high-ranking Ukrainian official, meanwhile, is confident that if Abramovich actually wanted to give money to victims of the war, then he would have done so already. “This is a flimsy excuse for someone like Abramovich; he knows how to protect his assets,” the official said.
‘Russian money is needed now’
At present, there’s only one mechanism for reparations: it requires calculating the damages the aggressor inflicted, legally fixing them with the help of the World Bank, and then signing a memorandum on the corresponding payments. But the aggressor country (in this case, Russia) would have to participate in this process.
When it comes to private assets, the situation is more complicated. “A mechanism to seize them for third country use doesn’t exist. That’s why it’ll always be possible to challenge it and say, ‘We were against the war, why did you take our money?’ And there will be legal proceedings with the government that seized those assets,” explained a source in Kyiv. “Accordingly, if the court cases are lost, this country will be obliged to pay compensation out of its own pocket.”
Ukraine, along with the representatives of other countries that have seized the assets of Russian oligarchs (such as Switzerland, Belgium, and the U.K.), are currently seeking a “legal formula” that will allow for transferring this money to Kyiv without breaching national laws.
The international litigation expert told Meduza that the best solution proposed so far would be to impose fines for evading sanctions (the E.U. is in the process of developing such a mechanism) and then having the money go to Ukraine. But for this to work, there would have to be concrete evidence of sanctions evasion, which can take several years to obtain.
Officials in Kyiv underscore that Ukraine doesn’t have that kind of time; rebuilding its war-torn cities must begin right away. “Critical infrastructure can’t wait until the end of the war,” Deputy Justice Minister Iryna Mudra said to Ekonomichna Pravda. “Russian money is needed now. In situations like the Kakhovka dam explosion, reconstruction projects should start immediately.”
According to the high-ranking Ukrainian official, offering “concessions” to the owners of these assets (such as easing sanctions) is theoretically an option that could be considered. But he also argued that this shouldn’t be on the table when it comes to Abramovich, no matter the circumstances.
“You give away three to five billion, keep another five billion for yourself, and bear no responsibility for the 20 years you actively used this regime and strengthened it?” the official asked rhetorically. “I think it would be strange if you could buy your way out.”
“The responsibility of the business elite who were actually the beneficiaries of the current Russian Federation and profited from it — that’s a serious issue,” he added.
Blame and responsibility
Unsurprisingly, Russian oligarchs have a different view. “We need to distinguish between blame and responsibility,” a top-10 billionaire from the Russian Forbes list told Meduza, when commenting on the nationalization of Fridman’s assets.
“We’re to blame for living in this country [Russia] for a long time. That’s our moral fault, I understand… But what is our responsibility? The Ukrainians are trying to turn blame into responsibility, but this needs to be differentiated. There can only be legal responsibility — meaning, it will come for them too,” he continued.
Nationalization and asset seizures should be based solely on legal norms, the billionaire underscored. He also described Ukraine’s actions with regard to Fridman’s assets as “not conducive to peacemaking.”
“The more Ukraine and the West black-ball Russian business, the more they’ll push [Russian businessmen] towards those who started all this,” he warned. “Even those Russian businessmen who didn’t really work for the regime before have begun to do so actively because they’ve been blocked off from [opportunities outside Russia].”
As Bloomberg previously reported, sanctions have prompted some Russian billionaires to return to Russia after years of living abroad. Such as Fridman’s business partner German Khan, the co-founder of Alfa Group and LetterOne who had been living in London for almost a decade. (Meduza sent questions for Khan to Alfa Group’s press service, but received no response.)
For this reason, Meduza’s source from the Forbes billionaire list believes that Western sanctions “don’t weaken Vladimir Putin’s regime, but rather make it stronger.”
“I’m not a revolutionary, I’m a businessman,” said a source close to Alfa Group’s shareholders, who argued that Russian business is “mostly apolitical” and can’t influence “Putin’s regime” in any way.
This couldn’t be further from Kyiv’s stance. As a source close to the Ukrainian leadership told Meduza, Putin’s regime helped Russia’s oligarchs make their fortunes — and this means the onus on them is clear.
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