12:38 13.03.2024


Billions in sanctioned assets: how does the SPFU work with these assets?

6 min read
Billions in sanctioned assets: how does the SPFU work with these assets?

Vitaliy Koval, Chairman of the State Property Fund of Ukraine 


The number of sanctioned assets transferred to the State Property Fund of Ukraine as the sole body currently working with them exceeds seven hundred. As of mid-March 2024, there are 731 units, but this list is not static; it is periodically updated. This property belonged to 35 sanctioned groups or individuals.

There are several categories of sanctioned assets. These include corporate rights, residential and non-residential real estate, land plots, vehicles, and funds in accounts. It can also be more specific assets, such as aviation engines, wings, or aircraft chassis (the latter belonging to the PJSC "Ilyushin Aviation Complex").

What are the stages of processing sanctioned assets at the SPFU?

After receiving a sanctioned asset, the SPFU begins processing. Initially, the registration of ownership rights takes place, then the preparation of the property for auction for lease or sale, and finally, the auctions themselves via the Prozorro.Sale system.

However, this is a general working scheme, which can vary depending on the ownership of the asset, physical location, conditions, and so on.

For example, the first sanctioned property to be received by the SPFU was that of the russian billionaire Vladimir Yevtushenkov. In 2022, the High Anti-Corruption Court of Ukraine confiscated his shares in 5 enterprises and 17 real estate objects. Most of these assets are currently being prepared for sale. At the same time, among them are those where a share of ownership belongs to the russian federation, and there is currently no mechanism to take any action with them.

Also, among the first sanctioned assets received under the management of the Fund were those of the russian billionaire Mikhail Shelkov. These are corporate rights in 4 enterprises, nearly a dozen real estate objects, and 18 vehicles. More than half of them are currently in the penultimate stage of processing – preparation for sale, lease, or other methods of managing this property.

At the same time, there was already an attempt to sell the corporate rights of Shelkov to LLC "Investagro", a company located in Kyiv. The auction on the Prozorro.Sale system was planned for August 2023 but did not take place because there were no willing participants to purchase this lot. The lot’s initial value reached UAH 27.5 million.

Currently, another significant package of sanctioned assets is being prepared for sale, including the assets of LLC "Investment Union "LYBID"" (better known as SEC "Ocean Plaza"), LLC "Aerok", LLC "Demurinsky GZK", LLC "Motordetal-Konotop", and others.

The Fund has also received under the management a portion of sub-sanctioned assets, which are currently located in temporarily occupied territories. Such property is included in the general list and recorded as state-owned, however, no additional actions regarding it can be taken for obvious reasons. The return to this issue can only occur after the full restoration of the constitutional order of Ukraine in these territories.

Features of the work of the SPFU with sanctioned assets

Sanctioned assets that come under the management of the State Property Fund are in different conditions and have specific characteristics. They may be under arrest, with a prohibition on registration actions regarding them. To lift the arrest, representatives of the Fund appeal to the court, which initiates a legal process that can last for months. If the asset is shares, they need to be treated as securities through depository institutions to be transferred to the state account.

A separate direction of work with sanctioned property is studying conditions, gathering reliable information about the assets, and conducting mandatory inventory. This provides an understanding of asset’s value and the subsequent steps that need to be taken for effective management.

At the initiative of the Fund, in enterprises may occur changes in management. Also, the restoration of accounting is underway, as such documentation is usually absent (the data is mostly stored in cloud storage, access to which is lost).

Based on the collected information, the State Property Fund makes management decisions on the fate of each object. The main thing is to find an option that will bring the most benefit to the state: either funds to the budget from the sale, or "dividends" from another way of use.

Decisions to sell assets, lease them, or otherwise dispose of them depend on many factors. On their type, relevance, and market demand, the availability of material and human resources (if it is an enterprise), legislative restrictions, and so on.

For example, corporate rights may only be sold via auction, and their lease is impossible. As for sanctioned residential real estate objects, work with them is currently limited due to legislative collisions regarding their management. Assets in the form of funds of sanctioned persons in bank accounts may be transferred to the state budget immediately after all bureaucratic processes. And property with cultural value goes to the state museum, library, and archival fund.

Thus, behind each asset stands detailed analysis and a separate decision on management method. In general, the management norms of assets seized in favor of the state are established in the relevant resolution of the Cabinet of Ministers of Ukraine from November 2023.

How to measure the benefit from sanctioned assets transferred to the SPFU?

The overall assessment of sanctioned assets transferred to the State Property Fund reaches UAH 3.2 billion. This is not the exact amount that Ukraine will receive through sale, lease, or other methods of managing this property.

As a result of an auction, a certain lot may find a new owner who will buy it several times more expensive than the established initial value. Some objects may currently not be of interest to the market, and their starting price may need to be lowered instead. Some assets cannot be operated separately due to their location or legislative restrictions.

However, the State Property Fund of Ukraine is working to maximize the efficiency of each sanctioned asset under management. This is important because the funds obtained from this source go to the Fund for the Elimination of the Consequences of Russian Aggression.