The Uninvestable Climate: What Scares Investors in Ukraine

Investors fear blackouts, inflation risks, currency swings, broken logistics, labour shortages, unpredictable regulatory decisions and restrictions imposed by the National Bank of Ukraine.

And then there are Russian missiles, which can change plans, budgets, routes, contracts and even the geography of a business in an instant.

When Russia launches missiles at Ukraine, it does not hide its intent. It targets people, energy infrastructure, factories, warehouses, ports and logistics. Its goal is perfectly clear: to destroy Ukraine both as a state and as an economy.

And yet, these are not the only fears that investors face.

Ukraine has other risks too. They do not come with air raid sirens. They are often justified by the need to protect the state’s economic interests or safeguard national security. And they, too, can leave a crater where a business once stood. You have probably guessed by now: I mean the risk of the country’s law-enforcement system putting pressure on business.

Of course, this does not mean businesses should not be scrutinized. They should be. Especially in wartime. Especially when strategic assets, public funds, defense, or possible links to the aggressor state are involved.

The point is that such “checks” should protect the state, and not destroy the asset. When a search brings production to a halt, when an asset freeze derails a major contract, when seized documents make it impossible for a company to operate, and when “temporary” measures cause a business to lose people, markets and value for years, this becomes an issue for the state.

From my legal practice, I can say this is not an isolated story. There are cases where the law- enforcement system confuses the interests of the state with the interests of individual actors within the system, and the protection of the economy with control over someone else’s business.

So, while Ukraine presents its vast investment potential to the world on international platforms – the drone deal, the minerals deal, recovery, energy, industry, new markets – I want to tell two less polished, but highly revealing stories, about investing in Ukraine.

They differ in context and in substance. But they lead to the same conclusion.

The first is about a foreign investor that believed in Ukraine, built a business here, paid taxes, exported its products around the world, kept people employed – and then spent years watching its asset become mired in criminal proceedings over alleged tax evasion, an asset freeze, transfer to ARMA and state-appointed management, all while its value became slowly eroded.

The second is about a Ukrainian investor. Not one that moved money abroad, bought crypto or waited out the war in a safer jurisdiction, but a business that decided to invest in a troubled state-owned industrial asset in a frontline region: paid the state, assumed the debts of a half-ruined plant, its wage obligations, responsibility for employees, and the prospect of restoring production.

And what it received was not a so-called “investment nanny”, nor even basic coordination, but a search, an asset freeze, the seizure of critical technical documentation and the risk of losing a major international contract.

The Ukrainian Climate

Story One. A Foreign Investor

This is the story of an investor that was not merely “looking at” Ukraine, waiting for guarantees, or asking for incentives.

The Lviv Insulator Company, part of the Estonian GIG Holdings group, manufactured glass suspension insulators for high-voltage power lines, exported its products, and kept hundreds of people employed. Its annual turnover exceeded half a billion hryvnyas. What makes the story all the more bitterly ironic is that, for a country effectively living through an energy crisis, this company was the only manufacturer of this type of product in Ukraine.

So what went wrong?

A tax dispute. Around UAH 4 million in allegedly unpaid taxes. An amount the investor was ready to pay so the company could keep operating, and only then defend its position against the state in court.

But the state chose a different path. A fairly familiar one, one might say: the company’s corporate rights were frozen, and the asset was transferred to ARMA. At the same time, a narrative about a “Russian connection” in the company’s ownership was pushed into public view.

That “Russian connection” deserves a separate explanation, because in Ukraine it is almost a sentence for a business, even when it has no legal basis. And we would not have taken on such a client had we not been convinced that there were no links to the aggressor state.

So yes, there was a fact in this story that required explanation: one of the beneficial owners of the European company that owns Lviv Insulator Company was born in the Russian Federation. But then come the important details – the details without which that fact becomes manipulation. She has not lived in Russia since 2012. In 2021, she became an Estonian citizen. She severed ties with her former Russian business partners even before the full-scale invasion. All of this is documented.

After 24 February 2022, the company’s owners publicly condemned Russia’s aggression and have continued to support Ukraine, even though their own asset in Ukraine has effectively been held hostage.

In the end, the “Russian connection” never became a legal story. Moreover, that version was later dropped from the criminal proceedings. Nor did it become grounds for a sanctions decision by Ukraine’s National Security and Defense Council.

The real case is about taxes and alleged official forgery.

And then came the next stage.

In theory, this is called asset management. In practice, it became a slow removal of the business from economic life.

While the state was deciding who should manage the company, and how and when that should happen, the business was losing markets, people, turnover, and value. The workshops were mothballed, employees left, and turnover fell to zero. Three years after the freeze, the asset was finally transferred to a state-appointed manager. But by then, it was no longer an operating business. It was an idle enterprise carrying all the consequences of prolonged inaction.

The most absurd part of this story is not even that a tax dispute worth a few million hryvnyas blocked an asset worth hundreds of millions. It is that when the investor tried to understand the exact amount of the tax claim in order to resolve the issue, the state effectively failed to provide a clear answer.

So here is the logic: the asset is frozen over alleged tax non-payment, the business is ready to pay, but the authority handling the proceedings says that determining the exact amount is not within its competence.

I will not go into a long debate here about lost budget revenues, lost jobs, and so on and so forth. I will simply state the result: a unique manufacturer for Ukraine’s energy infrastructure is degrading, and the investor receives a blunt lesson. In Ukraine, an asset can be lost not only to war, but also to «temporary» procedural decisions that last for years.

Story Two. A Ukrainian Investor

The second story is different. This time, it is not about a foreign investor, but about a Ukrainian business that had a choice: not to take the risk, to move its money out, to wait it out, to buy something safer, to stay away from a complicated asset.

It did the opposite.

Our client took part in the privatization of a state-owned enterprise located in a city relatively close to the front line. This was not a polished asset from an investor presentation. In reality, it was a troubled plant: debts, a neglected site, looted equipment, more than 100 employees, wage arrears, and proximity to the frontline.

In other words, this was exactly the kind of asset for which the state could only dream of finding an investor. Especially during wartime.

And then, almost miraculously, a buyer appeared. It was the sole bidder in a Dutch auction on Prozorro.Sale, paid the state for the shareholding, took on the plant’s difficult history, its debts, its wage obligations, and the attempt to bring the plant back to life.

And then the Security Service of Ukraine (SSU) came knocking.

Ownership of the shares has still not been transferred to the buyer. Searches were carried out at the plant. From the court order, the investor learned about criminal proceedings which, according to the account set out in that order, related to events dating back to 2023. In other words, long before the client had even heard of the asset.

In short, the proceedings relate to the plant’s pre-privatization history. According to the investigation, three years ago the then management may have effectively stripped the enterprise of its property, causing the plant to lose its value even before privatization. The new investor entered the picture in 2026, through an open auction, without tailor-made terms or any non-competitive mechanism.

So the investigation is looking into the period before privatization. But the consequences are effectively hitting the new buyer, which came in later through a procedure organized by the state itself.

And the most painful part of this story is not the search itself. A business entering a sensitive asset during wartime has to be ready for scrutiny. The problem is that, during the search, critical technical documentation and technical specifications for the production of certain products intended for export under international contracts were seized. Because of the freeze on the corporate rights, the investor is already at risk of losing an international contract.

And here, once again, we see the same crater – without an air raid siren and without a Russian missile strike.

The state sells a troubled asset to an investor. The investor pays the state, takes on multimillion-hryvnya obligations, assumes responsibility for employees and risks, tries to revive production, and moves toward international markets. Then another arm of the same state seizes the documents without which that production and contractual plan may grind to a halt.

And no, this story is not about saying that the SSU should not scrutinize risks. Of course it should. If there were contacts, decisions or intentions in the company’s previous history that posed a threat to the state, they must be legally assessed. But a review of the pre-privatization period should not automatically turn the new investor into a hostage of someone else’s history. And it certainly should not kill the asset itself.

For now, all of this looks like yet another signal to investors: do not assume that open and transparent privatization will protect you from law-enforcement agencies.

And this is not the problem of a single enterprise. It’s the problem of a country that wants investment, but still does not always know how to treat those who have already invested.

So what are the conclusions?

The simplest conclusion after stories like these is not to invest in Ukraine. But that would be the wrong conclusion.

The right conclusion is different: investing in the Ukrainian economy is still possible. I would like to say that investors can simply invest here. But for now, “possible” is the more honest word.

What is clear is that traditional investment analysis is not enough. Especially when it comes to privatization, government contracts, industry, energy, defense, exports, frontline regions, or assets with a complicated past.

Let me be honest: zero risk does not exist anywhere. Except, perhaps, for those who do nothing. But risk can be made manageable.

And the first thing an investor needs to understand is this: in Ukraine, failure is not the only dangerous scenario. Success can be dangerous too.

The bigger the contract, the more visible the asset, the more important the sector, the closer the business is to the state, defense, energy or critical infrastructure, the more attention it will attract. From regulators, law-enforcement agencies, competitors, media outlets and everyone who can smell big money very quickly.

A small supplier may go unnoticed. A company that grows fast, lands a major contract or acquires a strategic asset will be seen by everyone who needs to see it. That is why, in Ukraine, basic due diligence has to include a criminal law risk map.

Before entering into a deal or taking on a contract, an investor has to ask some uncomfortable questions. Are there old criminal proceedings surrounding this asset? Were there searches involving the previous management? Is there a history of conflict with the state authorities? What happened to the company’s property prior to privatization? Who are the real beneficial owners, directors, advisers, counter-parties and suppliers? Are there any sanctions risks, Russian link or other toxic trace? Can the source of funds be explained? Does the price make sense? Do the production, logistical and financial capacity to perform the contract exist?

And this is where it’s important not to mistake a formal risk register for serious analysis.

As I’ve already said, with a complicated asset the question is not whether risks exist. They almost always do. The real question is what happens if that risk actually materializes.

• If the corporate rights are frozen tomorrow, does the investor merely lose momentum, or effectively lose control over the asset?
• If technical documentation is seized during a search, can the company continue operating, or does production grind to a halt?
• If a public hint of a “Russian link” appears, does the business already have documents, chronology, a position and a crisis response strategy ready, or does it start defending itself only after it has already been cast as guilty?
• If proceedings revolve around the old management, can they still “catch” the new owner?

The point is to understand which risks can be accepted, which can be structured, which can be protected with documents, and which can turn the deal into a trap.

An investor entering a complicated Ukrainian asset should come not only with a business plan, but also with a possible defense scenario and proper legal counsel.

A Question for the State

Now, let’s turn to the state. Business should not be untouchable. And I certainly do not want this text to read as a call to “leave the investor alone simply because they are investors”. That’s not how it works.

War cannot be a free pass for schemes, sham services, inflated prices, hidden related parties, questionable sources of funds or Russian links. If a business works with the state, invests in a strategic asset, or operates in defense, energy or critical infrastructure, then there should be questions.

But the state should have not only the right to ask those questions. It should also be responsible for the consequences of its own actions.

A search, for example, can mean halted production for an enterprise. A freeze on corporate rights can derail a deal that is beneficial not only to the investor, but to the state as a whole.

That is the core of the problem.

In Ukraine, decisions that paralyze a business are made far too easily. And far too rarely does anyone in the future answer for what happened to the asset a year, two years or three years down the line.

If, after a freeze, an enterprise loses people, markets, turnover and value, whose problem is that? Formally, no-one’s. The investigation was ongoing. Procedural decisions were in place. The state was  “protecting the public interest”. The reality is that the country ended up with one fewer functioning enterprise.

So the question is not whether the state should scrutinize business. It should.

The question is whether it knows how to do so without killing what can still work.

Reputation is a separate story all together. In Ukraine, a business often loses in the court of public opinion before a court has even begun hearing the case. First of all there is a  “leak”. Then a Telegram channel assembles a convenient version. Then media outlets pick up a few powerful words:  “Russian link”, “scheme”, “strategic asset”, “national security”, and so on.

After that, one can spend years explaining the chronology, the documents, the beneficial owners, the taxes and the lack of any connection to the previous period. But the reputational sentencing has already been passed.

What these methods build is not an investment climate, but fear.

And here the state has to decide whether it wants an investor as a partner – someone who brings money, takes risks, restores production and pays taxes – or as a convenient target that can be put on pause at any moment by a procedural decision.

It cannot have it both ways.