Nationalisation of foreign owned assets starts in Crimea

Evidence has emerged from Swedish E&P oil firm Shelton Petroleum that the new authorities in Crimea have started a nationalisation process to take over foreign owned assets.

The concern was raised in a statement from the company this week, in regards to a Joint Investment Agreement between Shelton Canada Corp, a wholly owned subsidiary of Shelton Petroleum, and Ukrainian company Chornomornaftogaz (CNG).

The agreement is intended to give Shelton access to offshore licences. However, the company says that CNG’s assets are now subject to a nationalisation process pushed by the new government in Crimea.

“Following a referendum on 16 March 2014, Crimea has declared independence from Ukraine and requested to be part of the Russian Federation, which has been granted by the Russian president and the Russian Parliament. The new Crimean prime-minister has declared that the CNG interests on Crimea will be nationalized by the Crimean Republic. It has been reported that private interests and agreements will be respected. Neither the referendum nor the nationalization of CNG, which is in violation of the Ukrainian constitution, has been recognized by the government in Kiev or the Western community,” Shelton said in its statement.

It is not know how many other companies listed on Nasdaq OMX could be affected in a similar way to Shelton, but according to local business publication Affärsvärlden, the value of the licences is some SEK12m (€1.3m) on Shelton’s books.

Fund exposure

Data from FE points to some 777 funds with exposure to Ukraine. For many of these the exposure can be measured in fractions of a percentage point.

However, for a number of them there is significant exposure to geopolitical events affecting Ukraine.

 Ukraine exposure  
 Fund %
  Citadele – Ukrainian Equity – Nov 07 (FNL5) FNL5 73.60
  Evli – New Republics – Nov 06 (ACC3) ACC3 21.36
  Elbrus Capital – Elbrus – May 06 (BFV2) BFV2 20.40
  Trigon – Emerging Agri Sector – May 08 (M1X7) M1X7 18.50
  Gottex Fund Management Sarl IT – Global Fixed Income Realisation Limited – Jul 08 (CNT7) CNT7 14.50
  Franklin – Templeton Emerging Markets Bond – Apr 13 (JJBR) JJBR 10.08

Reviewing these portfolios shows that they have exposure to many sectors, including basic materials, industrials, consumer products, financials, and telecoms. They may also be exposed through different instruments, such as equities and corporate bonds.

Elbrus has close to 30% of its portfolio exposed to oil and gas, with top holdings data pointing to significant Russian exposure.

Citadele, the fund with the biggest exposure to the Ukraine market is exposed to consumer products, money market, basic materials, industrials, utilities and tech, media and telecoms as its biggest sector bets.


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