Ukrainian Companies with Ties to Russia Pose Risks to Western Investors 



Executive Summary

  • The World Bank estimates that the effort to rebuild Ukraine will cost around $400 billion. 
  • Ukrainian businesses with links to the Russian defense industry present legal and reputational risks for investors and for organizations seeking to help Ukraine rebuild.  
  • Immediately following Russia’s full-scale invasion in February 2022, Russian and Belorussian individuals owned more than 20,000 companies in Ukraine. 
  • In 2022, the Ukrainian government passed legislation allowing seizure of Russian property in Ukraine and has since confiscated some businesses connected to notorious Russian oligarchs.  
  • However, the seizures have been hampered by bureaucratic hurdles and staff shortages at the Ministry of Justice, which is responsible for proving commercial links to the Russian state and its citizens. 
  • As of August 2023, only about 5% of those entities had changed ownership. 
  • Many Ukrainian businesses remain linked to Russia and its defense industry, and some have been awarded government contracts. 

Understanding the Complex Landscape of Ukrainian Businesses with Ties to Russia 

In the shadow of the ongoing conflict, Ukrainian businesses with ties to the Russian defense industry present a thorny challenge for investors and organizations committed to aiding Ukraine's reconstruction.  

The Depth of Russian Influence 

The scale of Russian influence in the Ukrainian corporate sector is alarming. Following the invasion, it was reported that Russian and Belarusian individuals owned over 20,000 companies in Ukraine.  

In response, the Ukrainian government has taken legislative steps aimed at severing these ties, including laws enabling the seizure of Russian properties in Ukraine. Some businesses linked to notorious Russian oligarchs have already been confiscated. However, the process has been anything but smooth. Bureaucratic hurdles and a shortage of staff at the Ministry of Justice, the body responsible for proving commercial links to the Russian state and its citizens, have significantly hampered these efforts. 

As of August 2023, a startlingly low figure of approximately 5% of these entities had seen a change in ownership. This slow pace of divestment points to a persistent economic influence that Russia holds in Ukraine, complicating efforts to disentangle the two economies. 

The Rebuilding Effort and Associated Risks 

The World Bank's estimation that rebuilding Ukraine will cost around $400 billion underscores the magnitude of the task ahead. Yet, as Ukraine looks to take on this monumental effort, the lingering connections of many Ukrainian businesses to Russia and, specifically, its defense industry, represent a minefield of risks.  

Notably, some of these businesses with Russian defense ties continue to be awarded government contracts, raising questions about the efficacy of the measures taken to free the Ukrainian economy of Russian influence. 

The Implications for Investors and Aid Organizations 

The intricate web of Ukrainian businesses tied to Russian interests poses significant hurdles for the international efforts aimed at rebuilding Ukraine. Investors and organizations eager to participate in this monumental task must navigate a landscape riddled with both legal complexities and reputational perils. The revelation that a significant number of these entities remain entwined with Russia, including its defense sector, underscores the urgency of addressing these challenges head-on. 

To safeguard the integrity and effectiveness of the rebuilding efforts, it is imperative for stakeholders to implement rigorous due diligence processes. Understanding the ownership structures and financial flows of potential Ukrainian business partners is crucial to avoid inadvertently supporting those with links to Russian aggression. 

As Ukraine strives towards recovery and sovereignty, the path forward demands not only physical reconstruction but also a steadfast commitment to economic independence and transparency. By tackling the complexities of Russian-linked ownership, the global community can contribute to a foundation for Ukraine that is not only rebuilt but also resilient against future threats.