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Where there is no law, but every man does what is right in his own eyes, there is the least of real liberty
Henry M. Robert

To seize and... destroy

Why does Russia want to gain control of the Crimean shipyards?
18 June, 2014 - 17:58
Photo by Andrii KRYMSKY

Russian authorities aim to seize the shipbuilding assets located in the Crimea. The peninsula hosts, among others, shipyard More in Feodosia, shipyard Zaliv in Kerch, and Sevastopol Naval Plant (Sevmorzavod). Russia’s minister for Crimea Oleg Savelyev told reporters in April that Russian business representatives were in talks “to buy several Crimean enterprises.” Because seizures of private companies will be likely illegal, Russian officials decided to look for loopholes. “We focus on opinions of employees of these companies. They know better all the relationships, internal links, business connections. We look forward to a balanced, reasoned position we will need to evaluate and consider, and when a general decision will be made, we will act without looking back,” Russian newspaper Vzglyad cited a source working in the military-industrial complex.

Still, the seizure rhetoric is heard again. For example, the self-proclaimed interim governor of Sevastopol Sergey Menyaylo said that after checking legality of its property evaluation and privatization, Sevmorzavod “will become a Russian enterprise working for the city.” “We are now checking legality of the plant’s privatization. I told the director of Sevmorzavod at a city leadership meeting that the waterworks were not private property, they were state property, at the moment operated by Sevastopol, as a constituent member of the Russian Federation,” he stated recently.

Meanwhile, Volodymyr Konstantynov (leading participant of the Russian-ordered annexation of Crimea, now serving as head of the self-proclaimed Crimean parliament) suggested in an interview with the Interfax agency the need to adopt a federal law on countering terrorism which would allow confiscation of Crimean assets belonging to Ukrainian businesspeople who were involved in preparation and financing of combat operations in south-eastern regions. “The United States uses in such cases the anti-terrorism laws which are very severe. They deal, in particular, with terrorist accomplices’ property. So, we need to pass laws allowing us to confiscate legally, using bailiffs properties of those involved in genocide against civilians,” he said.

Whatever the preparations, the intended outcome of all this “flirting” is clear – it is Russian control of the shipbuilding enterprises in the Crimea.

Director of international tax planning at the ICF law firm Natalia Ulianova believes that despite all, Russia will not seize assets of major Ukrainian businesspeople by force. International law does not allow for seizure of private property without a good reason. The Russians will probably endeavor to resolve the issue through the courts, arguing that this or that company was once privatized illegally, for any examination, including one of the legality of the transaction, requires a court order.

“If we analyze the actions and statements of the Russian authorities, we see that they seek to convince world public opinion and their own compatriots of the legitimacy of their actions. After Ukrainian warships had been seized in the Crimea in spring, Russian experts, politicians, and journalists were actively discussing how to use the fleet: which units were more modern and in good condition, and which would be better to have scrapped. This continued until the proposition appeared in the media saying that if there had been no war, the ships could not be considered trophies, so they would get arrested in any foreign port and required to return to Ukraine. Then Russia started to return ships to Ukraine,” Ulianova shared her observations.

The use of the said practice of confiscating “terrorist accomplices’ property” is quite likely in Russia in the near future. In May, President of the Russian Federation Vladimir Putin signed into law a bill that has made more severe the criminal and administrative responsibility for the crimes of terrorism and extremism. Organizing and financing of terrorism shall now be punishable with imprisonment for a term of 15 to 20 years. The country is also adopting stricter legislation on combating corruption and offshore finance. Emphasis is on criminalization. For example, it is planned to criminalize international tax planning and the use of non-resident companies, and it will be very difficult to prove that a firm in question is a real contractor and not a company established to minimize taxes.

But then again, everything rests on the need to prove it. Putin himself denies all accusations that Russia favors separatists in eastern Ukraine. He told foreign reporters that if the US was talking about the evidence of this, it had to present it. Russia may find itself faced with a similar requirement.

Russia’s interest in shipbuilding assets is due to a lack of own industrial capacity. Putin noted that the Crimea had a very good potential in terms of shipbuilding and ship repair. The Kremlin also decided long ago to significantly increase its navy, and the State Armaments Program till 2020 calls for construction of 24 submarines, 54 surface ships of different classes, and 96 special auxiliary ships. Construction of new ships will cost more than 2.5 trillion rubles. Meanwhile, the Russian government has repeatedly stated that there is a problem with implementation of the program (the reasons for which merit a more thorough study!). Last year, Russian president criticized for “problems with the timing and quality of execution of orders” the United Shipbuilding Corporation, which had “serious financial, industrial, intellectual resources” allocated to it. Putin said that the construction and transfer to the navy of a number of submarines and surface ships was unnecessarily delayed. Well, it looks like the Russians are in no hurry to use for the intended purpose their existing capacity!