In May 2018, the National Security and Defense Council of Ukraine placed Russian billionaire and “aluminum magnate” Oleg Deripaska, who is close to Russian President Vladimir Putin, as well as three companies related to him (United Company RUSAL and its Moscow- and Cyprus-based branches, Judson Trading Limited and Velbay Holdings Limited) on the Ukrainian sanction list. This list consists of enterprises that “confront Ukraine” and “provide military components and supplies to the Armed Forces of the Russian Federation.” However, new evidence recently emerged that the Russian oligarch still owns nearly a dozen other companies in Ukraine that remain operational and have not been included on the sanctions list (Radio Svoboda, October 17).
The first company is the Cyprus-based United Company RUSAL Silicon Limited, a subsidiary of RUSAL. This firm has an exclusive mining license at the LLC Glukhiv Quarzites (Banitsky) Quarry. The Banitsky deposit, in the Glukhiv district of the Sumy region, is exceptional: it contains unique quartzite consisting of high-quality (99 percent) silicon. According to Kostyantyn Tkachov, a Ukrainian honorary specialist in geological exploration, this deposit has no analogues in Europe and there are few similar deposits anywhere else in the world. The Banitsky deposit is expected to last for at least 100 years. Experts call silicon a strategically important “raw material of the future,” as it is one of the main elements used in metallurgy, electrical engineering, radio electronics and semiconductors, and is the basis for solar panels. It has no substitute in the automotive, medical, aviation, military and aerospace industries (Radio Svoboda, October 17).
However, Ukrainian companies are almost unable to buy quartzite from the Glukhiv Quarzites Quarry. The company owned by Oleg Deripaska sells over 90 percent of this strategically important commodity to the Russian Federation, while Ukraine is forced to import silicon from China (Espreso.tv, October 17). In 2018, only two Russian companies purchased Ukrainian quartzite. Almost half of the production was shipped to the Urals Silicon, a subsidiary of Deripaska’s joint venture (Rusal.ru, accessed in October 19). The second half of the extracted quartzite went to the Novolipetsk Steel company, one of the four largest steel producers in Russia. The owner is another Russian oligarch, billionaire Vladimir Lisin, who, according to the Bloomberg Billionaires Index, is the third-richest person in Russia (Gazeta.ru, October 1).
According to Ukrainian investigative journalists, quartzite from the Banytsky quarry is acquired by the Russian defense industry through Deripaska’s Ural Silicon. In 2019, Deripaska’s factory sold silicon to the JSC Novosibirsk Mechanical Plant “Iskra”—the plant that is usually mentioned in Russian media as an important player in the state defense procurement sector. It has contracts with different structures of the Russian concern Rostec (a giant of the military-industrial complex). For example, since 2014, Ural Silicon has had a contract with JSC KBP “named after Academician A. Shipunov,” one of the leading design companies in the Russian defense industry (Radio Svoboda, October 17). Rostec is among KPB’s major shareholders and has developed over 140 models of weapons and military equipment currently used by the Russian Army. KBP designs high-precision weaponry: air defense weapons systems, anti-tank guided weapons, armament for light and hard armor, artillery guided weapons systems, guns, and grenade launchers (Kbptula.ru, accessed October 20). In 2019, a KBP product, the 2K25 Krasnopol artillery weapons system, was observed in Donbas (Radio Svoboda, October 17). According to Serhiy Moskalyuk, a senior researcher with the Independent Anti-Corruption Committee on Defense, silicon is widely used in missile technologies—for example, in the tactical missile complex Point-U, where the element is used as an antioxidant (Radio Svoboda, October 18).
Another Deripaska company not included on the Ukrainian sanctions list is the Dutch Emergofin B.V. (the ultimate beneficiary of which is United Company Rusal Silicon). Interestingly, the Security Service of Ukraine (SSU) suspects this enterprise in the deliberate destruction of the Zaporizky Aluminum Plant (ZAlK) in the interests of Russian competitors. In 2006, Deripaska and his partners purchased a controlling stake at the Zaporizky Aluminum Plant, then the largest Ukrainian producer of this metal. In addition to aluminum, silicon from Glukhiv quartzite was also produced here. But according to the SSU investigation, within a few years, the new owners gradually drove the plant to bankruptcy. Valuable equipment was dismantled and transferred from the plant to a company controlled by Russian business structures. The quarry, which was part of the plant, was allocated to a separate firm (061.ua, October 13, 2017). According to experts, as a result of criminal activities by Deripaska’s company, Ukraine suffered damages in the amount of more than $39 million (UNIAN, August 29, 2017). In 2011, Ukraine returned more than 60 percent of the shares of the Zaporizhzhya plant to state ownership; but in 2016, RUSAL subsidiaries (Emergofin B.V. and Velbay Holdings Limited) filed a request for arbitration against Ukraine (Rusal.ru, October 26, 2016). With cases still under review, one of the oligarch’s Cypriot companies (Velbay Trading) still owns 29 percent of the plant (Radio Svoboda, October 17).
The aforementioned companies are not the only examples of Deripaska’s freely operating Ukrainian businesses. His aluminum empire has been growing in Ukraine during last 13 years, and he owns nearly a dozen companies in this industry. The largest of them, the Mykolaiv Alumina Plant, is one of the major non-ferrous metallurgy enterprises in Europe (Unian.net, April 17, 2018). In addition, the plant owns terminals in the Mykolaiv seaport, the ultimate beneficiary of which is also Deripaska. Similarly, out of the 12 stevedoring companies currently operating in the Mykolaiv port, 8 belong to the Russian oligarch (Biz.censor.net.ua, May 22).
In the end, it is worth noting that despite SSU investigation and sanctions, the oligarch still owns numerous companies in strategically important industries in Ukraine. Valuable Ukrainian raw materials continue to be exported to Russia. Crucially, these raw materials are widely used for the production of weaponry later employed against Ukrainian forces fighting on the frontlines in Donbas.