Russia turns drone-defense failures into grounds for broader state control

Russian President Vladimir Putin has proposed a new decree that could lead to private assets being placed under state control if their drone defenses are deemed inadequate or fail to meet necessary security standards. This decree, signed on August 24, 2024, expands the government's ability to take control of Russia's economy by targeting a range of sectors essential to the nation's security and economic stability.

These sectors include energy, industry, communications, utilities, transport, logistics, and life-support infrastructure.

The decree, known as Decree No. 604, allows for temporary management of a company's Russian property, securities, stakes in Russian companies, and other property rights. This temporary control has no specified deadline, requiring the President to issue instructions for its commencement and termination. Currently, the Federal Property Management Agency handles such cases, retaining ownership rights while covering the expenses from the company's income.

While the decree does not define what constitutes "ineffective" drone protection or the time frame for facility repairs, it covers violations of safety protocols, endangerment of normal operations, and ineffective counter-drone measures. Additionally, foreign controllers, including foreign organizations and citizens overseeing Russian companies, fall under the decree's purview.

According to research by Nektorov, Saveliev and Partners, a Russian law firm specializing in state takeovers, around 100 cases of nationalization have occurred since 2022, with total seized assets amounting to approximately $78 billion. The decree follows a series of Ukrainian attacks on Russian refineries, ports, and warehouses, leading to significant disruptions in various sectors.

For instance, Ozon, a retail company, experienced six such disruptions, resulting in a 29.09% drop in its shares following five weeks of strikes on privately held Wildberries.