- Melnichenko ceded control of the coal and fertilizer companies to his wife
- The transfer came the day before the EU imposed sanctions on him
- Asset transfers fuel doubts about the effectiveness of sanctions
ISTANBUL / BRUSSELS, May 27 (Reuters) – Russian businessman Andrey Melnichenko handed over control of two of the world’s largest coal and fertilizer companies to his wife the day before he was sanctioned by the European Union, according to three people knowledgeable about the matter.
Melnichenko, who made a fortune in Russia’s energy industry in the years following the fall of the Soviet Union in 1991, gave up his stakes in coal producer SUEK AO and the EuroChem Group AG fertilizer group on 8 March, the day of his 50th birthday, and he left. his wife, Aleksandra Melnichenko, in control of the companies, people said.
Until March 8, Melnichenko controlled the two companies through a chain of trusts and corporations that stretched from Moscow and the Swiss city of Zug to Cyprus and Bermuda, according to legal documents reviewed by Reuters.
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Since 2006, Melnichenko’s wife has been ranked second behind her husband in the list of effective beneficiaries of the two companies in fiduciary documents, according to the three people, who spoke on condition of anonymity because they did not they were allowed to speak publicly about the couple. assets. That meant she could inherit business ownership in case her husband died, people said.
When the war in Ukraine began in February, however, Melnichenko was concerned that he would be appointed under the EU’s sanctions regime on Russia, people familiar with the matter said. On March 8, Melnichenko notified the trustees of his retirement as a beneficiary, people said. This triggered the same chain of changes in trust records that would have happened if the employer had died and turned his wife into a beneficiary.
Reuters was unable to contact Melnichenko and his wife for comment.
A Russian-based SUEK spokesman did not respond to comments. EuroChem, based in Switzerland, confirmed that Aleksandra Melnichenko had replaced her husband as the effective owner.
“Following the departure of its founder, the main beneficiary ownership of a 90% stake in the global fertilizer company has 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. Your role in SUEK, as well as the timing of changes of ownership and other details, is 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 Forbes, with an estimated fortune of $ 18 billion.
The European Union sanctioned Melnichenko, citing his alleged proximity to the Kremlin on March 9 as part of a Western attempt to punish Russian President Vladimir Putin for invading Ukraine on February 24. Sanctions – which include the freezing of his assets, a ban on entering the European Union and a ban on EU institutions from providing him with funds – do not apply to his wife or daughter and son. of the couple.
Britain also put Melnichenko, who is Russian but born in Belarus and has a Ukrainian mother, on her March 15 sanctions list. Switzerland imposed sanctions on him the next day.
The businessman said in a statement to Reuters in March, following the imposition of EU sanctions, that the war in Ukraine was “truly tragic” and called for peace. A Melnichenko spokesman said at the time that he had “no political affiliation.”
Western governments have imposed drastic sanctions on Russian companies and individuals in an effort to force Moscow to withdraw.
But some sanctioned Russian businessmen, such as Roman Abramovich and Vladimir Yevtushenkov, have transferred assets to friends and family, fueling doubts about the effectiveness of these attempts to pressure Moscow.
Melnichenko, whose residence was registered in the Swiss alpine resort of St. Moritz until he was hit with sanctions, gave his instructions to change ownership of his businesses from a retreat near Mount Kilimanjaro where he was celebrating his birthday, according to one person. familiar with the subject. A Boeing 737 with the “A” signature of the billionaire on the fuselage had landed in Tanzania on March 5, arriving from Dubai, according to the flight tracking service Flightradar24.
A Melnichenko lawyer did not answer questions about the trip to Kilimanjaro.
Melnichenko’s transfer of ownership to SUEK and EuroChem had far-reaching implications.
After several weeks of reviews, the Swiss financial authorities concluded that the two companies could continue to operate normally because Melnichenko was no longer involved with them. SUEK and EuroChem said British and German financial regulators have reached similar conclusions.
British and German regulators did not respond to requests for comment.
Following the revisions at the end of April, SUEK and EuroChem – which had revenues of $ 9.7 billion and $ 10.2 billion last year – were able to resume the distribution of millions of dollars in interest payments. to bondholders.
In recent weeks, SUEK and EuroChem have also targeted Western customers, showing them documents with the new ownership structure in order to reassure them that they can continue to do business with Mr. Melnichenko 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.
SECO said Melnichenko was no longer a beneficiary of the trust to which EuroChem belonged at the time of its EU and Swiss sanctions.
SECO also said it asked for confirmation from Eurochem that it would stop providing funds to Melnichenko.
“The company and its management have assured SECO in writing that the Swiss sanctions measures will be fully complied with and, in particular, that funds and financial resources will not be made available to the sanctioned persons,” SECO said in response to a complaint. consultation.
The Swiss authorities have defended their decision not to extend the sanctions to Melnichenko’s wife or her 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.
Parmelin added that Switzerland was also suspicious that sanctioning EuroChem at a time when fertilizer prices had skyrocketed in most parts of the world could have disastrous consequences for agricultural markets. EuroChem said it produced more than 19 million metric tons of fertilizer last year, roughly equivalent to 10 percent of world production, according to UN data.
The European Commission, the EU’s executive arm, said it had no information on the transfer of Melnichenko’s assets to his wife. The commission has said it is ready to close the loopholes that allow people and businesses to evade sanctions. Earlier this week, it unveiled proposals aimed at criminalizing movements to avoid sanctions, including the transfer of assets to family members, to the 27-nation bloc.
A mathematician who once dreamed of becoming a physicist, Melnichenko dropped out of college 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 young to participate in privatizations under President Boris Yeltsin, who handed over the select assets of a former superpower to a group of businessmen known as the oligarchs for its political and economic influence. .
Melnichenko then began buying coal assets and often distressed fertilizers, making him one of the richest men in Europe.
The EU said in announcing its sanctions that 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 its close ties to the Kremlin, the EU said in its sanctions order. of March 9th.
A Melnichenko spokesman then denied that the businessman belonged to Putin’s inner circle and said he would contest the sanctions in court. On May 17, Melnichenko challenged the sanctions by filing an appeal with the EU General Court, which handles complaints against the European institutions, according to court records.
Russia describes its actions in Ukraine as a “special operation” to disarm Ukraine and protect it from fascists. Ukraine and the West say the fascist accusation is unfounded and that war is an act of unprovoked aggression.
Italy seized Melnichenko’s super-high – the 470-foot A-sailboat, priced at 530 million euros – on March 12, three days after being included in a list of EU sanctions.
SUEK and EuroChem said on March 10, a day after the EU announced sanctions against Melnichenko and 159 more people linked to Russia, that its founder had resigned from his positions on the companies’ board of directors.
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Report by David Gauthier-Villars and Gabriela Baczynska; Additional reports by Chris Kirkham in Los Angeles, Andrew MacAskill in London, Michael Shields and Brenna Hughes Neghaiwi in Zurich Daniel Flynn Edition
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