- Melnichenko ceded control of his wife’s coal and fertilizer companies
- The cession came a day before the EU imposed sanctions on him
- The transfer of assets raises doubts about the effectiveness of sanctions
ISTANBUL / BRUSSELS, May 27 (Reuters) – Russian businessman Andrei Melnichenko ceded control of two of his wife’s two largest coal and fertilizer companies in the world the day before he was sanctioned by the European Union, according to three sources.
Melnichenko, who made his fortune in Russia’s energy industry in the years since the fall of the Soviet Union in 1991, gave up his stakes in coal producer SUEK AO and fertilizer group EuroChem Group AG on March 8, the day of his 50th birthday. your birthday, leaving his wife Alexandra Melnichenko controls the companies, people said.
Until March 8, Melnichenko controlled the two companies through a chain of trusts and corporations stretching from Moscow and the Swiss city of Zug to Cyprus and Bermuda, according to legal documents reviewed by Reuters.
Register now for FREE unlimited access to Reuters.com
I’m registering
Since 2006, Melnichenko’s wife has been second only to her husband on the list of beneficial owners of the two companies in confidential documents, according to the three, who spoke on condition of anonymity because they were not allowed to speak publicly about the couple’s assets. That meant she would inherit company ownership in the event of her husband’s death, people said.
However, when the war in Ukraine began in February, Melnichenko was worried he would be placed under the European Union’s sanctions regime against Russia, insiders said. On March 8, Melnichenko notified trustees of his retirement as a beneficiary, people said. This caused the same chain of trust entries that would have occurred if the businessman had died and made his wife a beneficiary.
Reuters was unable to contact Melnichenko and his wife for comment.
A spokesman for the Russian-based SUEK did not respond to requests for comment. Switzerland-based EuroChem has confirmed that Alexandra Melnichenko has changed her husband as the real owner.
“After the departure of its founder, the main real property of a trust, which owns a 90% stake in the global fertilizer company, automatically passed to his wife,” the company said in a statement to Reuters on Wednesday.
The role of Melnichenko’s wife in EuroChem was first reported by the Swiss newspaper Tages-Anzeiger. Her role in SUEK, as well as the timing of the change of ownership and other details are announced here for the first time.
Melnichenko, who founded SUEK and EuroChem two decades ago, was ranked eighth richest man in Russia last year by Forbes, with an estimated fortune of $ 18 billion.
The European Union sanctioned Melnichenko, citing his alleged proximity to the Kremlin, on March 9th as part of a Western attempt to punish Russian President Vladimir Putin for the February 24 invasion of Ukraine. The sanctions – which include the freezing of his assets, a ban on joining the European Union and a ban on EU organizations providing him with funds – do not apply to his wife or the couple’s daughter and son.
Britain also put Melnichenko, who is Russian but born in Belarus and has a Ukrainian mother, on its March 15 sanctions list. Switzerland imposed sanctions on him the next day.
The businessman told Reuters in March, following EU sanctions, that the war in Ukraine was “truly tragic” and called for peace. A spokesman for Melnichenko said at the time that he was not “politically biased”.
Western governments have imposed broad sanctions on Russian companies and individuals in a bid to force Moscow to withdraw.
But some sanctioned Russian businessmen, including Roman Abramovich and Vladimir Yevtushenkov, have transferred assets to friends and family members, casting doubt on the effectiveness of these attempts to put pressure on Moscow.
Melnichenko, whose residence was registered in the Swiss alpine resort of St. Moritz until he was hit by sanctions, instructed to change the ownership of his companies from a refuge near Mount Kilimanjaro, where he was celebrating his birthday, according to a person familiar with the matter. Boeing 737, decorated with the signature of billionaire “A” on the fuselage, landed in Tanzania on March 5, arriving from Dubai, according to the flight tracking service Flightradar24.
Melnichenko’s lawyer did not answer questions about the trip to Kilimanjaro.
The transfer of Melnichenko’s ownership to SUEK and EuroChem had far-reaching consequences.
After several weeks of inspections, the Swiss financial authorities came to the conclusion that the two companies could continue to operate normally on the grounds that Melnichenko was no longer involved. SUEK and EuroChem said British and German financial regulators had reached similar conclusions.
British and German regulators have not responded to requests for comment.
Following the end of April, SUEK and EuroChem – which had revenues of $ 9.7 billion and $ 10.2 billion last year, 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 clients, showing them documents with the new ownership structure in an attempt to reassure them that they can continue to do business with Mr Melnichenko’s former companies, two acquaintances said.
NO MORE PAYMENTS
In Switzerland, the Secretariat for Economic Affairs (SECO) said that neither SUEK nor EuroChem were under sanctions in the country.
SECO said that, to its knowledge, Melnichenko was no longer the beneficiary of the trust to which EuroChem belonged at the time of its EU and Swiss sanctions.
SECO also said it was seeking confirmation from Eurochem that it would no longer provide funds to Melnichenko.
“The company and its management have assured SECO in writing that the Swiss sanctions will be fully complied with and, in particular, that no funds or economic resources will be provided to sanctioned persons,” SECO said in response to a request.
Swiss authorities have defended their decision not to extend sanctions on Melnichenko’s wife or his former companies, saying EU authorities had not sanctioned them either.
“In this case, we did exactly what the EU did,” Swiss Economy Minister Guy Parmelin told Swiss television on Wednesday.
Parmelin added that Switzerland is also cautious that sanctioning EuroChem at a time when fertilizer prices have risen in most parts of the world could have dire consequences for agricultural markets. EuroChem said it produced more than 19 million metric tonnes of fertilizer last year – roughly equivalent to 10% of world production, according to the United Nations.
The European Commission, the EU’s executive body, said there was no information on the transfer of Melnichenko’s assets to his wife. The commission said it was ready to close the doors, allowing individuals and companies to evade its sanctions. Earlier this week, he unveiled proposals aimed at criminalizing sanctions circumvention, including by transferring assets to family members, across the 27-nation bloc.
A mathematician who once dreamed of becoming a physicist, Melnichenko left university to immerse himself in the chaotic – and sometimes deadly – world of post-Soviet business.
He founded MDM Bank, but in the 1990s was still too insignificant to participate in the privatizations under President Boris Yeltsin, which gave the selected assets to a former superpower of a group of businessmen who will become known as oligarchs because of their political and economic impact.
Then Melnichenko began to buy often problematic assets for coal and fertilizers, making him one of the richest people in Europe.
When announcing its sanctions, the EU said Melnichenko “belongs to the most influential circle of Russian businessmen with close ties to the Russian government”.
Melnichenko was among dozens of business leaders who met with Putin on the day Russia invaded Ukraine to discuss the impact of sanctions, showing close ties to the Kremlin, according to the March 9 EU sanctions order.
A spokesman for Melnichenko then denied that the businessman belonged to Putin’s inner circle and said he would challenge the sanctions in court. On May 17, Melnichenko challenged the sanctions by filing an appeal with the EU’s General Court, which hears appeals against European institutions, court records show.
Russia calls its actions in Ukraine a “special operation” to disarm Ukraine and protect it from the Nazis. Ukraine and the West say the fascist accusation is baseless and that the war is an unprovoked act of aggression.
Italy confiscated Melnichenko’s superyacht, the 470-foot sailing yacht A, worth 530m euros, on March 12th, three days after he was placed on the EU sanctions list.
SUEK and EuroChem said on March 10th, a day after the EU announced sanctions against Melnichenko and 159 others linked to Russia, that their founder had resigned from his positions on the company’s board.
Register now for FREE unlimited access to Reuters.com
I’m registering
Report by David Gauthier-Wheelers and Gabriela Bachinska; Additional reports from Chris Kirkham in Los Angeles, Andrew Makaskil in London, Michael Shields and Brena Hughes Negaiwi in Zurich Edited by Daniel Flynn
Our standards: Thomson Reuters’ principles of trust.
Add Comment