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How Russian billionaire Melnichenko shielded assets from European sanctions

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How Russian billionaire Melnichenko shielded assets from European sanctions


SUEK and EuroChem stated on March 10, a day after the EU introduced sanctions in opposition to Melnichenko that their founder had resigned from his board positions on the corporations

How Russian billionaire Melnichenko shielded assets from European sanctions
Russian businessman Andrey Melnichenko ceded management of two of the world’s largest coal and fertilizers corporations to his spouse the day earlier than he was sanctioned by the European Union, in accordance with three individuals aware of the matter.
Melnichenko, who made his fortune in Russia’s power trade within the years following the 1991 fall of the Soviet Union, gave up his stakes within the coal producer SUEK AO and fertilizer group EuroChem Group AG on March 8, the day of his fiftieth birthday, leaving his spouse, Aleksandra Melnichenko, accountable for the businesses, the individuals stated.
Till March 8, Melnichenko managed the 2 corporations by way of a series of trusts and firms stretching from Moscow and the Swiss city of Zug to Cyprus and Bermuda, in accordance with authorized filings reviewed by Reuters.
Since 2006, Melnichenko’s spouse was second in line behind her husband on the checklist of useful house owners of the 2 corporations in belief paperwork, in accordance with the three individuals, who spoke on situation of anonymity. That meant that she stood to inherit possession of the businesses within the occasion her husband died, the individuals stated.
When the warfare in Ukraine started in February, nonetheless, Melnichenko grew involved that he could be designated underneath the European Union’s Russia sanctions regime, the individuals aware of the matter stated. On March 8, Melnichenko notified trustees of his retirement because the beneficiary, the individuals stated. That triggered the identical chain of modifications in belief data that will have occurred if the businessman had handed away, and made his spouse the beneficiary.
Reuters was unable to succeed in Melnichenko and his spouse for remark.
A spokesman for Russia-based SUEK didn’t reply to messages in search of remark. Switzerland-based EuroChem confirmed that Aleksandra Melnichenko had changed her husband as useful proprietor.
“Following the departure of its founder, the first useful possession of a belief holding a 90% stake within the international fertilizer firm has routinely handed to his spouse,” the corporate stated in an announcement to Reuters on Wednesday.
The function of Melnichenko’s spouse at EuroChem was first reported by Swiss newspaper Tages-Anzeiger. Her function at SUEK in addition to the timing of possession modifications and different particulars are reported right here for the primary time.
Melnichenko, who based SUEK and EuroChem 20 years in the past, was ranked as Russia’s eighth richest man 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 9 as a part of a Western try and punish Russian President Vladimir Putin for the Feb. 24 invasion of Ukraine. The sanctions – which embrace freezing his property, banning him from coming into the European Union and prohibiting EU entities from offering funds to him – don’t apply to his spouse nor the couple’s daughter and son.
Britain additionally put Melnichenko, who’s Russian but was born in Belarus and has a Ukrainian mom, on its sanction checklist on March 15. Switzerland imposed sanctions in opposition to him the next day.
The businessman stated in an announcement to Reuters in March, after the EU sanctions have been imposed, that the warfare in Ukraine was “really tragic” and he appealed for peace. A spokesman for Melnichenko stated at the moment he had “no political affiliations.”
Western governments have imposed sweeping sanctions in opposition to Russian corporations and people in an effort to power Moscow to withdraw.
However some sanctioned Russian businessmen, together with Roman Abramovich and Vladimir Yevtushenkov, have transferred property to family and friends members, fueling doubts over the effectiveness of those makes an attempt to stress Moscow.
Melnichenko, whose residence was registered within the Swiss alpine resort city of St. Moritz till he was hit by sanctions, gave his directions to alter the possession of his corporations from a retreat close to Mount Kilimanjaro the place he was celebrating his birthday, in accordance with an individual aware of the matter. A Boeing 737 emblazoned with the billionaire’s signature “A” on the fuselage had landed in Tanzania on March 5, arriving from Dubai, in accordance with flight-tracking service Flightradar24.
A lawyer for Melnichenko didn’t reply to questions in regards to the Kilimanjaro journey.
Melnichenko’s switch of possession at SUEK and EuroChem had far-reaching implications.
After opinions lasting a number of weeks, Swiss monetary authorities concluded that the 2 corporations might proceed working usually on the grounds that Melnichenko was now not concerned with them. SUEK and EuroChem stated that British and German monetary regulators have reached related conclusions.
The British and German regulators didn’t reply to requests in search of remark.
Upon completion of the opinions in late April, SUEK and EuroChem – which had revenues last year of $9.7 billion and $10.2 billion, respectively – have been in a position to resume distribution of tens of millions of (dollars)  in curiosity funds to bondholders.
In latest weeks, SUEK and EuroChem have additionally approached Western shoppers, displaying them paperwork with the brand new possession construction in a bid to reassure them that they will proceed doing enterprise with  Melnichenko’s former corporations, two individuals aware of the matter stated.
In Switzerland, the Secretariat for Financial Affairs (SECO) stated neither SUEK nor EuroChem have been underneath sanctions within the nation.
SECO stated that, so far as it was conscious, Melnichenko was now not a beneficiary of the belief to which EuroChem belonged on the time of his sanction by the EU and Switzerland.
SECO additionally stated it sought affirmation from Eurochem that it will now not present funds to Melnichenko.
“The corporate and its administration have assured in writing to SECO that the Swiss sanction measures shall be totally complied with and specifically that no funds or financial sources shall be made obtainable to sanctioned individuals,” SECO stated in response to a question.
Swiss authorities have defended their choice to not prolong sanctions to Melnichenko’s spouse or to his former corporations, pointing to the truth that EU authorities had not sanctioned them both.
“On this case, we’ve performed precisely what the EU has performed,” Switzerland’s Financial system Minister Man Parmelin instructed Swiss TV on Wednesday.
Parmelin added that Switzerland was additionally cautious that sanctioning EuroChem at a time when fertilizer costs have soared in most elements of the world might have dire penalties on agriculture markets. EuroChem stated it produced greater than 19 million metric tons of fertilizer last year– roughly equal to 10% of the world’s output, in accordance with UN information.
The European Fee, the EU’s government’s arm, stated that it had no details about the switch of Melnichenko’s property to his spouse. The fee has stated it’s keen to shut loopholes permitting people and corporations to elude its sanctions. Earlier this week, it unveiled proposals geared toward criminalizing strikes to bypass sanctions, together with by transferring property to members of the family, throughout the 27-nation bloc.
A mathematician who as soon as dreamt of turning into a physicist, Melnichenko dropped out of college to dive into the chaotic – and generally lethal – world of post-Soviet enterprise.
He based MDM Financial institution, however, within the Nineteen Nineties was nonetheless too minor to participate within the privatisations underneath President Boris Yeltsin that handed the choicest property of a former superpower to a bunch of businessmen who would develop into referred to as the oligarchs attributable to their political and financial clout.
Melnichenko then started shopping for up usually distressed coal and fertilizer property, making him one among Europe’s richest males.
The EU stated, when it introduced its sanctions, that Melnichenko “belongs to probably the most influential circle of Russian enterprise individuals with shut connections to the Russian authorities.”
Melnichenko was amongst dozens of enterprise leaders who met  Putin on the day Russia invaded Ukraine to debate the impression of sanctions, displaying his close ties to the Kremlin, the EU stated in its March 9 sanction order.
On the time, a spokesman for Melnichenko denied that the businessman belonged to Putin’s internal circle and stated he would dispute the sanctions in court docket. On Might 17, Melnichenko challenged the sanctions by lodging an enchantment with the EU’s Normal Court docket, which handles complaints in opposition to European establishments, court docket data present.
Russia calls its actions in Ukraine a “particular operation” to disarm Ukraine and shield it from fascists. Ukraine and the West say the fascist allegation is baseless and that the warfare is an unprovoked act of aggression.
Italy seized Melnichenko’s superyacht – the 470-foot Crusing Yacht A, which has a price ticket of 530 million euros – on March 12, three days after he was positioned on an EU sanctions checklist.
SUEK and EuroChem stated on March 10, a day after the EU introduced sanctions in opposition to Melnichenko and 159 different people tied to Russia, that their founder had resigned from his board positions on the corporations.
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