ISTANBUL / BRUSSELS – Russian businessman Andrey Melnichenko handed over ownership of two of the world’s largest coal and fertilizer companies to his wife the day before he was sanctioned by the EU, according to three people familiar with the matter.
Melnichenko, who built his fortune in the years following the fall of the Soviet Union in 1991, gave up his shares in coal producer SUEK AO and fertilizer group EuroChem Group AG on March 8, the day of his 50th birthday, and left his wife. , Aleksandra Melnichenko, the real ownership of companies, the people said.
Until March 8, Mr. Melnichenko the two companies through a chain of trusts and companies stretching from Moscow and the Swiss city of Zug to Cyprus and Bermuda, according to legal records reviewed by Reuters.
Since 2006, Mr Melnichenko’s wife has been number two after her husband on the list of beneficial owners of the two companies in trust documents, according to the three people who spoke on condition of anonymity because they are not allowed to speak publicly about the couple’s assets. That meant she stood to inherit the ownership of the businesses in the event that her husband died, the people said.
However, when the war in Ukraine began in February, Mr Melnichenko was worried that he would be appointed under the EU sanctions regime for Russia, people with knowledge of the matter said. On March 8, Mr Melnichenko informed the trustees of his retirement as a beneficiary, the people said. It triggered the same chain of changes in the trust register that would have happened if the businessman had passed away, making his wife the beneficiary.
Reuters was unable to reach Mr Melnichenko and his wife for comment.
A spokesman for the Russian-based SUEK did not respond to messages seeking comment. Switzerland-based EuroChem confirmed that Aleksandra Melnichenko had replaced her husband as real owner.
“Following the departure of the founder, the primary beneficial ownership of a trust that owns 90% of the shares in the global fertilizer company has been automatically transferred to his wife,” the company said in a statement to Reuters on Wednesday.
The role of Mr Melnichenko’s wife at EuroChem was first reported by the Swiss newspaper Day indicator. Her role in SUEK as well as the time of change of ownership and other details are reported here for the first time.
Melnichenko, who founded SUEK and EuroChem two decades ago, was ranked last year as Russia’s eighth richest man by Forbeswith an estimated fortune of 18 billion.
The European Union sanctioned Mr. Melnichenko, citing his alleged proximity to the Kremlin, on March 9 as part of a Western attempt to punish Russian President Vladimir Putin for the February 24 invasion of Ukraine. The sanctions – which include freezing his assets, banning entry into the European Union and banning EU entities from providing him with funds – do not apply to his wife or the couple’s daughter and son.
Britain also put Mr. Melnichenko, who is Russian but was born in Belarus and has a Ukrainian mother, is on his sanctions list on March 15. Switzerland imposed sanctions on him the following day.
The businessman said in a statement to Reuters in March, after EU sanctions had been imposed, that the war in Ukraine was “really tragic” and he appealed for peace. A spokesman for Mr. Melnichenko said at the time that he had “no political affiliation.”
Western governments have imposed extensive sanctions on Russian companies and individuals in an attempt to force Moscow to withdraw.
But some sanctioned Russian businessmen, including Roman Abramovich and Vladimir Yevtushenkov, have transferred assets to friends and family members, raising doubts about the effectiveness of these attempts to pressure Moscow.
Mr. Melnichenko, whose residence was registered in the Swiss alpine resort of St. Melnichenko. Moritz, until he was hit by sanctions, gave his instructions to change the ownership of his businesses from a retreat near Mount Kilimanjaro, where he celebrated his birthday, according to a person familiar with the matter. A Boeing 737 adorned with the billionaire’s signature “A” on the fuselage had landed in Tanzania on March 5, when they arrived from Dubai, according to the flight tracking service Flightradar24.
A lawyer for Mr. Melnichenko did not answer questions about the Kilimanjaro trip.
Mr. Melnichenko’s transfer of ownership of SUEK and EuroChem had far-reaching consequences.
After several weeks of investigations, the Swiss financial authorities concluded that the two companies could continue to operate normally on the grounds that Mr Melnichenko was no longer involved in them. SUEK and EuroChem said British and German financial regulators have reached similar conclusions.
The British and German regulators did not respond to requests for comment.
Following the completion of the review at the end of April, SUEK and EuroChem – which last year had revenue of $ 9.7 billion and $ 10.2 billion respectively – were able to resume the distribution of millions of dollars in interest payments to bondholders.
In recent weeks, SUEK and EuroChem have also approached Western customers and shown them documents with the new ownership structure in an attempt to assure them that they can continue to trade with Mr. Melnichenko’s former companies, said two people familiar with the matter.
NO MORE PAYMENTS
In Switzerland, the Secretariat for Economic Affairs (SECO) said that neither SUEK nor EuroChem were under sanctions in the country.
The SECO said that Mr Melnichenko, as far as was known, was no longer in favor of the trust to which EuroChem belonged at the time of his EU and Swiss sanctions.
SECO also said it was seeking confirmation from Eurochem that it would no longer provide funds to Mr. Melnichenko.
“The company and its management have assured in writing to SECO that the Swiss sanctions measures will be fully complied with and in particular that no funds or financial resources will be made available to sanctioned persons,” SECO said in response to a query.
The Swiss authorities have defended their decision not to extend the sanctions to Mr Melnichenko’s wife or his former companies, pointing out that the EU authorities had not sanctioned them either.
“In this case, we have done exactly what the EU has done,” Swiss Economy Minister Guy Parmelin told Swiss television on Wednesday.
Sir. Parmelin added that Switzerland was also wary that sanctioning EuroChem at a time when fertilizer prices have risen in most parts of the world could have serious consequences for agricultural markets. EuroChem said it produced more than 19 million tonnes of fertilizer last year – roughly equivalent to 5% of world production, according to UN data.
The European Commission, the EU’s executive arm, said it had no information on the transfer of Mr Melnichenko’s assets to his wife. The Commission has said it is willing to close loopholes so individuals and companies can evade sanctions. Earlier this week, the proposal aimed at criminalizing measures to circumvent sanctions, including by transferring assets to family members, unveiled across the 27-nation bloc.
Under the trust structure, control over SUEK and EuroChem is exercised by independent administrators, while real ownership, which was in the hands of Mr. Melnichenko until March 8, has moved to his wife.
A mathematician who once dreamed of becoming a physicist, Mr. Melnichenko dropped out of university to dive into the chaotic – and sometimes deadly – world of post-Soviet business.
He founded MDM Bank, but in the 1990s was still too small to participate in the privatizations under President Boris Yeltsin, who handed over the former assets of a former superpower to a group of businessmen who would become known as the oligarchs because of their political and economic influence. . .
Mr. Melnichenko then began to buy up often distressed coal and fertilizer assets, making him one of Europe’s richest men.
The EU said when it announced its sanctions that Mr. Melnichenko “belongs to the most influential circle of Russian businessmen with close ties to the Russian government.”
Mr. Melnichenko was among dozens of business executives who met with Mr. Putin the day Russia invaded Ukraine to discuss the impact of sanctions, showing his close ties to the Kremlin, the EU said in its March 9 sanctions order.
At the time, a spokesman for Mr Melnichenko denied that the businessman belonged to Mr Putin’s inner circle and said he would contest the sanctions in court. On 17 May, Mr Melnichenko challenged the sanctions by lodging an appeal with the European Court of Justice, which deals with complaints against European institutions, court records show.
Russia calls its actions in Ukraine a “special operation” to disarm Ukraine and protect it from fascists. Ukraine and the West say the fascist claim is unfounded and that the war is an unprovoked act of aggression.
Italy seized Mr Melnichenko’s superyacht – the 470-foot sailing yacht A, which has a price tag of 530 million euros – on March 12, three days after he was put on an EU sanctions list.
SUEK and EuroChem said on March 10, a day after the EU announced sanctions against Mr. Melnichenko and 159 other people linked to Russia that their founder had resigned from his board positions in the companies. – David Gauthier Villars and Gabriela Baczynska / Reuters