As Sanctions Rise, Russian Billionaires Are Reshaping Fortunes While They Can
In the dark of the night of March 4, Italian police in the Ligurian port of Imperia surrounded a 215ft superyacht belonging to Russia’s fourth richest person, Alexey Mordashov.
The European Union had sanctioned the billionaire on February 28, a few days after the Russian invasion of Ukraine. Her vast holdings in Europe – including ‘Lady M’, with her swimming pool and beauty salon – have apparently been frozen by authorities.
Mordashov, however, had already made his own moves.
On the same day the steel magnate was sanctioned, he transferred control of a roughly $1.1 billion stake in London mining company Nordgold to his wife, Marina Mordashova. It also transferred part of its $1.7 billion stake in holiday tourism business TUI AG from a Cypriot holding company to a company incorporated in the British Virgin Islands.
As lawmakers around the world increase pressure on parts of Russia’s elite to pressure President Vladimir Putin, they have often pointed to stalled superyachts, luxury real estate and sports clubs as signs that their efforts are working.
But the truth is darker – revealed in obscure corporate documents that can take days to become public. They show Russian billionaires switching stakes, giving up board roles and relinquishing control, all part of a race to get ahead of officials in the US, UK and EU and restructure their assets while they still can.
One example is Mikhail Fridman, who was sanctioned by the EU alongside Mordashov and his business partner Petr Aven. Filings show he ceded control two days later of at least three companies in the UK, where he is not sanctioned. He transferred those shares to a former employee of LetterOne, the investment company he co-founded.
Mikhail Fridman handed over control of at least three companies in the UK two days after being sanctioned by the EU
The list is long and includes those facing a new round of EU sanctions this week.
Vadim Moshkovich cut his stake in agricultural conglomerate Ros Agro to less than 50% before sanctions hit. Andrey Melnichenko withdrew as a beneficiary of his roughly $17 billion stake in fertilizer producer EuroChem and thermal coal supplier Suek effective March 9 – the day he and others were sanctioned. That didn’t stop Italian authorities from seizing Melnichenko’s €580 million superyacht in Trieste, Italy. There is no reason to put Melnichenko on an EU sanctions list, and he will challenge the measures, a spokesman for Melnichenko said in an email Saturday after the seizure was announced. Sanctions require industry compliance, and companies must quickly dig into layers of corporate ownership to find, freeze, and report relevant accounts. In the United States, they share their findings with the Office of Foreign Assets Control, or OFAC.
It can take time for financial institutions to identify associated accounts of a sanctioned person that are not yet widely known, said Howard Mendelsohn, chief client officer at Kharon.
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Someone who is sanctioned can use this as a window to hire attorneys, consider ownership changes and otherwise move assets, he said. “They might think, ‘I might have some time here before anybody finds out what all my businesses are, especially the majority-owned ones,'” Mendelsohn said. my wife, my employee(s), and I’m going to put this stuff under other names and it’s going to come out and it’s going to be documented that I’m not the majority owner.