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Ambramovich selling his Ukrainian assets?

September 8, 2014

Whilst the ceasefire in eastern Ukraine is anything but, European and US sanctions are still to begin to bite properly, and the future of The Donbas looks at best to be set in some form of frozen conflict providing The Kremlin with de facto control of the region – other interesting things are happening amongst the Russian and Ukrainian oligarchy elite.

Amongst them, it would appear that Russia’s arguably most famous oligarchy, Roman Abramovich, is putting his Ukrainian assets in Dnepropetrovsk up for sale – or at the very least having them valued in preparation for sale.  Specifically work on an independent valuation of PJSC “Evraz Dnepropetrovsk Metallurgical Plant (DMZ), Petrovsky” (Dnepropetrovsk), Mining and Processing Plant (GOK) PJSC “Evraz Sukha Balka” (Krivoy Rog, Dnepropetrovsk region) and PJSC “Evraz Bagleykoks” .

That would essentially leave Evas Plc with Lanebrook Ukrainian Mining “Sukha Balka”, Petrovskogo  coke plants “Bagleykoks”, “Dneprokoks” and Dneprodzerzhinsky koksohzavod which it bought from Ukrainian oligarch Igor Kolomoisky in 2007.

In short, out of Ukrainian metals but staying in Ukrainian mining – more or less.

It may well be that preparations to leave Ukrainian metals is to do with envisaged gas and electrical shortages in the near future that will naturally affect production.  Certainly mining will be less affected.

It may also have something to do with the direction sanctions have been heading, and their effects now and in the longer term.  For sure, by the turn of the year, if left in place, they will truly begin to bite and The Kremlin will start to burn through its reserves in order to maintain the status quo domestically.  Nobody has ever accused President Putin of being either an economics or technology genius after all.

The move does, however, raise some matters for thought.

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Firstly, if supply to the metal plants owned by Mr Abramovich cannot be guaranteed, it would seem to suggest for those that believe in “Novorussiya”, Dnepropetrovsk is a step too far – at least for now.

It also suggests that the chances of any resolution to the Russian-Ukrainian gas war is also unlikely – as expected.

It raises the prospect of who would buy these businesses too.  A valuation of assets is one thing – their real value sat within what may well become a “front line oblast” is another.  Buyers would be few – and far from risk aversive.

What of Ukrainian sanctions?  As yet, whilst the USA and the EU are now well into sanctions mode – no matter how small their direct immediate effect has been – Ukraine is yet to sanction any Russian or Russian business.  Relevant laws have been passed by the RADA, but appear to be awaiting presidential signature before they can come into effect.

Is the Russian oligarchy now expecting Ukrainian sanctions on their Ukrainian based assets?  After all, some Ukrainian oligarchs have over the past 10 days just witnessed their Crimean based assets get “nationalised”, whilst some assets in Russia are now being “arrested” and investigated.

Not as headline grabbing as the ceasefire that isn’t in eastern Ukraine, granted.  Interesting though nonetheless.

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