Ukraine’s Security Service (SBU) recently seized the “corporate rights” of Kyivstar, the country’s largest telecommunications company.

VEON, the Dutch-based owner of Kyivstar, has raised concerns over the decision and has vowed to fight it.

According to VEON CEO Kaan Terzioglu, international investors have been “confused” by the move. He said that supporters have reached out to congressmen and parliament members for assistance.

There was a lack of transparency in the process, Terzioglu said.

Investors and shareholders learned of the seizure through the news, and it has cost the company $150 million, he said.

In a Kyiv Post interview, Kyivstar President Oleksandr Komarov said he learned of the news through social media.

Terzioglu said Ukraine is fighting for the rule of law in its fight against Russia’s invasion, and that he wants to see the rule of law observed in Ukraine.

On Oct. 6, the SBU announced the seizure of all corporate rights of Russian oligarchs Mikhail Fridman, Peter Aven and Andrei Kosogov over their involvement in financing Russia in the current invasion.

This included Kyivstar and Lifecell corporate rights, two of Ukraine’s biggest telecommunications companies.

According to the initial court decision, 99.9 percent of Kyivstar’s authorized capital was to be taken by Ukraine.

The court later amended the decision on Oct. 23 and changed it to 47.8 percent, corresponding to the oligarchs’ shares in the business structure, indirectly owned through a UK fund called LetterOne.

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Previously, Ukraine had nationalized corporate rights owned by Russian oligarchs, including the Ocean Plaza shopping mall in Kyiv.

However, since the circumstances and the legal basis of the Kyivstar seizure remain unclear, the seizure is seen as a controversial move.

Who are the oligarchs?

Mikhail Fridman, Peter Aven, and Andrei Kosogov are all Russian oligarchs wanted and sanctioned by Ukraine’s security service, the SBU, due to their complicity in the full-scale invasion of Ukraine.

All three used to reside on the board of directors of LetterOne, a UK fund, which owns 47.8 percent of VEON’s common and voting shares, which in turn owns Kyivstar in Ukraine.

Mikhail Fridman, who was born in western Ukraine, has been known for financing Russian forces, including the provision of insurance services for Russian military equipment and personnel. He also ensured his telecommunications company in Russia, cooperated with authorities there, and enabled the Russian government’s surveillance of the local population.

Peter Aven is believed to be a close ally of Putin. He is a major shareholder of Alfa Group, which owns Alfa Bank, one of Russia’s largest banks that continues to contribute to the Russian economy in the ongoing invasion. The bank is currently under US sanctions.

Andrei Kosogov is the largest shareholder of Alfa Bank. He is also on the supervisory board of Alfa Group.

What’s the connection between VEON and Russia?

Even though the company has its roots in Russia in the 1990s, it has since expanded globally beyond the Russian border.

Terzioglu said that the company distanced itself from Russia on the first of the invasion and has since exited the Russian market and sold off its corporate rights and operations to a group of senior members of the PJSC VimpelCom management team.

“[On] day one of the war, we made a choice — we chose Ukraine,” said Terzioglu at a press conference in Kyiv. “[...] and we have no more business in Russia as VEON.”

“We have an independent board of directors, who unanimously decided to be in Ukraine, not in Russia,” he said.

Terzioglu denied influence from the oligarchs in question, saying that VEON is a publicly owned company, and the oligarchs have “zero ability” to influence any economic interests and operations of its corporation.

Terzioglu said the company has pledged $600 million over the next three years for Ukraine’s reconstruction, and that they are “committed to rebuilding Ukraine when victory comes.”

Why is Ukraine seizing the corporate rights of Kyivstar?

The Ukrainian government wants to avoid the transfer of business corporate rights by arresting the corporate rights of Russian oligarchs complicit in the invasion. According to SBU’s statement, the “seizure of corporate rights” is meant to preserve material evidence to avoid corporate rights' transfer to fictitious entities, and it should not affect business operations and interests.

Since LetterOne, owned by the oligarchs in question, has a partial share in Kyivstar’s owner VEON, a decision was made to arrest the corporate rights of Kyivstar.

However, Kyivstar and VEON did not receive documents that detail the basis of the initial seizure on Oct. 6, leading to speculations in some quarters that it was a calculated move by the authorities to take over Kyivstar’s corporate rights.

Kyivstar also works with Helsi, a Ukrainian medical application that contains medical data of Ukrainians, which became a point of concern regarding potential data leaks to Russian-influenced parties.

What does it mean for Ukraine?

The seizure of foreign-owned corporate rights has shaken investor’s trust in Ukraine’s respect towards the rule of law, Terzioglu said.

“I fully respect the authorities' concerns [...] and I am happy to read [...] that there is full protection of international foreign investors’ rights in Ukraine,” said Terzioglu.

Terzioglu said that VEON is open for dialogue with officials, and meetings are due to take place between the major shareholders of VEON and government officials, including representatives from embassies whose investors are affected by the recent ruling.

“We are also here to talk with the government to understand their concerns and explain to them how we will be their biggest partner,” said Terzioglu “proving that Ukraine is [a] land of law, and it is a big opportunity for foreign investors to invest.”

While the meetings are continuing, investors in the US, UK and other countries are worried about what the move entails — both for Kyivstar’s future and Ukraine’s investment prospects, Kyivstar’s leaders said.

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