How is nationalization different from ordinary racketeering?

Nationalization is the process of expropriation of private property in favor of the state, with the mandatory provision of fair compensation.

International practice outlines universal characteristics of nationalization, which distinguish it from other types of compulsory expropriation—such as political racketeering or confiscation. Therefore, to be considered true nationalization, the process must be initiated by state authority, have a legislative foundation that ensures legal clarity, be coercive in nature, but with the purpose of serving public and governmental interests—not as a punitive measure.

This distinction is essential for separating nationalization from other forms of property seizure. What is currently happening around the Electric Networks of Armenia (ENA) contradicts the principles of genuine nationalization.

At the same time, for the process to truly count as nationalization, there must be fair and proportional compensation.

The process must be justified and substantiated by both social needs and economic grounds; it must be transparent and ensure effective governance. By the way, a successful practice can be drawn from France’s case after the Second World War, where there was an institution of “managers of managers”—a narrowly specialized group that provided additional oversight, including invited experts from abroad. This mechanism is highly effective from a governance standpoint.

Continuing on the topic of key prerequisites for successful nationalization, let’s highlight social support and caution. In terms of social support, the process should be perceived as understandable and acceptable across all layers of society. As for caution, it must be emphasized that the process should not be carried out hastily and should be implemented after thorough analysis. Once again, the draft law adopted in our case over a matter of days doesn’t reflect that caution.

At the same time, even in cases of successful implementation, studies show that nationalization as such is an extreme measure and is used when there are no other options left for state policy.