Russia’s Central Bank Criticizes State Asset Seizures

Post by : Monika

On October 8, 2025, Russia’s central bank publicly criticized the government for violating the rights of minority shareholders in recent state takeovers of companies. This move is unusual. It shows that some parts of Russia’s financial elite are uneasy about how the state is grabbing assets — a process that has affected many companies, including ones once owned by Russian billionaires and foreign investors.

What Happened?

The central bank said the state broke the law when it seized a majority stake in a gold mining company known as UGC. It claimed the government should have made a mandatory buyout offer to all shareholders, especially to minority ones, but failed to do so. According to the central bank, that omission violated shareholder protection laws.

In simple terms: when the state takes over control of a public company, it should pay fair value and follow legal steps that protect all shareholders. The central bank ruled that these steps were not followed in the UGC case.

Why This Matters

Property Rights at Risk
The central bank warns that state actions like this undermine even the faintest remaining safeguards for private property in Russia. People who bought shares in UGC on the stock market were not part of any legal case; they were ordinary investors. Yet the takeover de facto reduced the value of their shares without offering them fair compensation.

Investor Confidence Suffering
Such aggressive state moves scare away investors. If the government can seize assets without following the law, who would want to invest? This behavior contributes to what some people call a “Russian discount” — where Russian assets are valued lower by investors because of risk.

Legal Pushback from Within
Surprisingly, this criticism came from part of the establishment — market-friendly technocrats, central bank staff, and some finance ministry voices. These are people who see value in preserving market rules and sound financial systems. Their opposition signals internal tension over how nationalization is being handled.

The UGC Case: A Closer Look

• UGC, the gold company in question, had a majority stake seized by the state.
• The law requires a mandatory buyout offer to minority shareholders in such a case. That offer is supposed to give them an option to sell their stake at a fair price.
• The state did not make that offer. The central bank says this omission is unlawful.
• The Moscow Stock Exchange (MOEX) also reportedly complained that the state violated law.
• There was no money budgeted for such a buyout, and valuation and due-diligence processes might delay any follow-up.

One proposed workaround is to resell the seized shares quickly, shifting the responsibility to the new owner. A presidential decree aims to accelerate such sales. In UGC’s case, the UMMC group is seen as likely buyer. The Russian finance ministry wants to complete this sale by the end of October for 100 billion roubles (about $1.23 billion).

Voices Inside Russia Express Concern

Officials like Vladimir Chistyukhin, First Deputy Chairman of Russia’s central bank (overseeing financial markets), joined the criticism. He warned that the state’s approach endangers Russia’s ability to attract foreign investment after any conflict ends.

• Officials and insiders say the crisis of property rights is not just in UGC — it’s becoming a broader pattern:
• Some state takeovers have followed court rulings, but others seem politically driven.
• The common thread is weak protection for minority shareholders, especially in public companies.
• Many fear we are drifting toward a Soviet-style command economy, where the state controls key assets without legal or financial checks.

Broader Consequences

Delisting and Market Withdrawals
The uncertainty pushes companies to delist or stay private. Public listings become riskier in such an environment.

“Russian Discount” Intensifies
Investors will increasingly demand steep discounts to account for legal and political risk in Russia. This damages valuations and raises funding costs.

Foreign Investment Likely to Shrink
If foreign investors believe their assets may be seized without recourse, they will avoid Russia entirely.

Wider Asset Grab Strategy
This isn’t isolated. Over the past years, the state has seized stakes in banks, infrastructure, mining, and real estate under various legal or political pretenses. Critics see this as consolidation of control in strategic sectors.

A Balancing Act

The central bank is trying to walk a fine line:

• It isn’t opposing the state’s right to seize assets where legal justification exists (e.g., in court rulings).
• But it insists the state follow existing laws, especially those protecting minority shareholders.
• Its pushback may be limited — it rarely contradicts the government — yet this is a meaningful check from inside the system.
• Still, many insiders believe more reforms are needed:
• Clearer rules on when the state can take assets
• Stronger protections and enforcement for minority shareholders
• Transparent valuation and compensation procedures
• Limits on how quickly seized assets can be sold

The UGC Example in Context

• The state seized a majority stake in UGC without offering a fair buyout to other shareholders.
• It bypassed legal protections.
• The central bank told the state property agency to execute the required offer.
• Because no funds were budgeted, this will be hard to implement.
• A new decree aims to speed up the sale of these assets, shifting responsibility to whoever buys them.
• This case has become emblematic: it shows what many see as a breakdown of legal norms in Russia’s asset politics.

Why It’s Unusual

It’s rare for Russia’s central bank to publicly criticize the government this way. Usually, central bank leadership is cautious and avoids confrontation. But rising concern over how rampant asset seizures may harm financial trust has pushed some voices to object.

This is not just business criticism — it’s about the future of Russia’s economic system: whether it continues under rule of law or moves toward more centralized control.

What Comes Next?

• The state may try to comply by issuing the buyout offers in some cases, but it may resist in others.
• The accelerated sales decree may push many cases into quick resolution, perhaps at unfavorable terms for original shareholders.
• Investors will watch closely whether the UGC case becomes a precedent.
• Foreign investors will make decisions based on whether Moscow appears willing to respect legal protections or not.

Russia’s central bank has issued a rare and significant warning: in its view, the state has violated shareholder protection laws in its seizure of UGC. By criticizing such asset grabs, the bank is pushing back against authoritarian trends and defending what remains of property rights in Russia’s financial system.

Whether this becomes more than a symbolic gesture depends on how the government responds — by backing down, partially complying, or doubling down. In any case, for investors, minority shareholders, and the future of Russia’s markets, this moment carries weight.