Opportunities and threats for Russian capital in Ukraine
Recently, the situation around Russian business in Ukraine has been artificially inflated by information in the media about the threat of confiscation of Russian assets in response to the nationalization of Ukraine’s state property in the Crimea. Therefore, the issue of assessing real threats and business opportunities and investing Russian capital in Ukraine is quite relevant.
As it may sound incredible now, in the medium term, for Russian private investors, Ukraine can become an attractive territory for investment. And those who can retain their positions now and benefit from new opportunities that are associated primarily with the upcoming reforms and the influx of Western capital into the economy of Ukraine will benefit.
The confiscation of capital of Russian companies will not
In Ukraine, the confiscation of property of a Russian investment is equivalent, as there will be no foreign investment.
First, it is prohibited by the law “On the Protection of Foreign Investments in Ukraine”. At the same time, foreign investors have the right to compensation for losses, including lost profits and moral damage caused by them as a result of actions, inactions or improper performance of their duties by state agencies. Investments of foreign investors are legally better protected than domestic investments, but one should not forget that they are subject to registration in accordance with the decree of the Cabinet of Ministers of Ukraine “On Approval of the Regulations on the Procedure for State Registration of Foreign Investments”.
Secondly, the settlement of claims for damages caused by the military invasion and annexation of the Crimea, the Ukrainian government sees exclusively at the expense of the state property of the Russian Federation and will act in the legal field. According to the statement of the Minister of Justice of Ukraine Pavel Petrenko, “We began calculating the value of the state property of the Russian Federation, which is located on the territory of Ukraine. According to international law and Ukrainian legislation, this property can be the subject of compensation for damages to those possible decisions that will be made by Ukrainian or international courts. “. The minister assured that Ukraine would not encroach on the property of Russian citizens, this is only the property of the Russian state.
Thirdly, all the reforms that are being discussed and will be carried out in Ukraine are aimed at protecting private property and attracting private investment, especially in real sectors of the economy. Therefore, in the near future we can expect positive changes in the legal field, which will affect the issues of improving the tax regime, amnesty of capital, preventing corporate raids, and corruption in government.
Therefore, Russian business may not be afraid of confiscations; moreover, it can count on the assistance of law enforcement agencies to protect private property in Ukraine, which is proved by the situation around the return of KAMAZ property to Ukrainian law enforcement agencies.
Russian exporters may lose Ukrainian markets
For Russian exporters, the devaluation of the hryvnia and the conduct of trade wars will lead to the loss of the Ukrainian market or the need to transfer production to Ukraine. Especially the transfer of production will be relevant to exporters who have views of the European Union in connection with the abolition of EU duties for Ukraine.
Of course, a number of Russian companies will have to leave the market not being able to withstand the competition in this situation with Ukrainian and European manufacturers. Thus, according to LIGABusinessInform, the largest Russian truck manufacturer KamAZ has stopped deliveries to Ukraine since the beginning of 2014, and also suspended certification of a number of vehicles for the Ukrainian market. The automakers explain the termination of deliveries by the difficult situation in Ukraine and the devaluation of the hryvnia, which led to a rise in the cost of the car for end customers.
In addition, the loss of the market for exporters is also related to the fact that Ukrainian buyers, in protest against the actions of the Kremlin, increasingly began to refuse to buy Russian-made goods. Therefore, a number of manufacturers who do not want to lose the Ukrainian market should think about creating a business in Ukraine.
New opportunities for Russian business in Ukraine
Any changes, along with negative consequences, carry new opportunities that are worth paying attention to Russian business. The main opportunities for Russian private capital are primarily related to the following factors:
Capital injection in the economy of Ukraine. A number of countries announced their intention to provide assistance to Ukraine in the total amount of 32-37 billion dollars. The EU is preparing an aid package of 11 billion euros, 15-20 billion can send to the IMF, Japan intends to provide up to 1.5 billion dollars, the United States – 1 billion dollars. This will help avoid default and stabilize the economic situation. Additionally, Ukraine plans to receive funds as compensation from the Russian Federation for actions in the Crimea through international and domestic courts.