Gabriela Baczynska and David Gauthier–Villars

ISTANBUL/BRUSSELS – Russian businessman Andrey Melnichenko gave control to two of the largest fertilizers and coal companies in the world to his wife, three sources familiar with the situation say.

Melnichenko was a Russian energy industry entrepreneur who built his fortune after the fall of 1991. He sold his shares in SUEK AO, a coal producer, and EuroChem Group AG, a fertilizer group, on March 8th, his 50th. His wife Aleksandra Melnichenko took control of both companies.

Melnichenko controlled both companies from Moscow, Switzerland until March 8th through a network of corporations and trusts that spread out to Cyprus and Bermuda. According to legal filings examined by Reuters.

Melnichenko’s spouse was the second beneficiary owner on the trust documents’ list. This is according to three individuals who spoke anonymously because they don’t have permission to discuss the assets of the couple. According to the sources, this meant she could inherit the ownership of the businesses in case her husband passed away.

According to people who were familiar with the situation, Melnichenko became concerned when the conflict in Ukraine started in February. According to people, Melnichenko informed trustees on March 8 that he was retiring as beneficiary. This triggered the same chain changes to trust records as if the businessman died, making his wife the beneficiary.

Reuters couldn’t reach Melnichenko, his wife, for comment.

SUEK’s spokesperson in Russia didn’t return messages seeking comment. EuroChem, a Swiss company, confirmed Aleksandra Melnichenko’s replacement as her beneficial owner.

According to Reuters, on Wednesday the company stated that the trust held a 90% share of the fertilizer company’s global fertilizer business was now in primary beneficial ownership.

Tages-Anzeiger in Switzerland first reported the role of Melnichenko’s wife at EuroChem. This report focuses on Melnichenko’s role in SUEK, as well as details such as ownership timing and other details.

Forbes named Melnichenko Russia’s 8th richest man with an estimated $18 billion fortune. He founded SUEK two decades earlier and EuroChem twenty years ago.

Melnichenko was sanctioned by the European Union on March 9, citing his proximity to Russia. This is part of an attempt by the West to penalize Vladimir Putin, Russian President, for invading Ukraine. The sanctions – which include freezing his assets, banning him from entering the European Union and prohibiting EU entities from providing funds to him – do not apply to his wife nor the couple’s daughter and son.

Britain added Melnichenko to its sanctions list, who was Russian, but was born and raised in Belarus, on March 15. The next day, sanctions were imposed by Switzerland against Melnichenko.

In March after EU sanctions had been imposed on Ukraine, the businessman stated that the conflict was “truly tragic”. He appealed to peace. Melnichenko spokesmen said that at the time, he didn’t have political affiliations.

In an attempt to pressure Moscow into withdrawing, the West has imposed severe sanctions on Russian individuals and companies.

Some sanctioned Russian businessmen such as Vladimir Yevtushenkov and Roman Abramovich have transferred their assets to family and friends, raising doubts about the efficacy of these efforts to pressurize Moscow.

Melnichenko was a Swiss citizen whose home was in St. Moritz, Switzerland, until his sanctioned arrest. He gave instructions for the transfer of ownership from Mount Kilimanjaro, where he was enjoying his birthday. A Boeing (NYSE:) 737 emblazoned with the billionaire’s signature “A” on the fuselage had landed in Tanzania on March 5, arriving from Dubai, according to flight-tracking service Flightradar24.

Melnichenko’s lawyer did not respond to queries about Kilimanjaro.

The implications of Melnichenko’s ownership transfer at SUEK/EuroChem were far reaching.

The Swiss financial authorities decided that both companies can continue to operate normally after a lengthy review that lasted several weeks. This was on the basis that Melnichenko had resigned. SUEK/EuroChem reported that British and German financial regulators reached similar conclusions.

German and British regulators did not respond to our requests for comment.

SUEK, EuroChem, which reported revenues of $9.7 and $10.2 billion, were able in April to complete their reviews and resume the distribution of millions in interest payments to bondholders.

SUEK/EuroChem has also been in contact with Western clients over the past weeks. They showed them documentation with the new ownership structure to ensure that they are able to do business with former Mr. Melnichenko companies.

PAYMENTS NO MORE

The Secretariat for Economic Affairs in Switzerland (SECO), stated that neither EuroChem nor SUEK were subject to sanctions.

SECO stated that Melnichenko wasn’t a beneficiary of EuroChem trust at the time of its sanction by the EU or Switzerland.

SECO stated that Eurochem had confirmed to it it wouldn’t provide any funds for Melnichenko.

SECO replied to a query by saying that company management and the Swiss Sanctions Enforcement Committee had written to SECO to assure that sanctions would be fully enforced and that financial resources and funds will not be available for sanctioned individuals.

Swiss authorities, however, have supported their decision not to issue sanctions to Melnichenko or Melnichenkos former companies. They cited the fact that EU authorities hadn’t sanctioned them.

“In this case, we have done exactly what the EU has done,” Switzerland’s Economy Minister Guy Parmelin told Swiss television on Wednesday.

Parmelin said that Switzerland is also concerned that EuroChem sanctioning at a time where fertilizer prices are soaring in many parts of the globe could have serious consequences for agriculture markets. According to U.N. data, EuroChem produced over 19 million tonnes of fertilizer in 2013. This is roughly 10% of global output.

European Commission is the EU’s executive branch. It said that it did not have any information regarding Melnichenko’s transfer of assets to his spouse. It has stated that it would close loopholes which allow companies and individuals to escape its sanctions. It presented proposals earlier this week that would criminalize moves to avoid sanctions.

Melnichenko, a mathematician with a dream to become a physicist once, dropped out of school to plunge into post-Soviet life.

MDM Bank, which he founded, was not too big to be involved in the 1990s privatizations by President Boris Yeltsin. These transfers of assets from a former superpower were made to businessmen. They would go on to become the “oligarchs” because of their political and financial power.

Melnichenko started buying often-distressed coal and fertilizer assets. He became one of Europe’s wealthiest men.

When it announced its sanctions on Melnichenko, the EU stated that Melnichenko belonged to “the most influential circle Russian businesspeople with close connections to Russian government”.

Melnichenko was just one of many business executives who spoke with Putin about the effects of sanctions on Ukraine’s invasion. It is a sign of Putin’s close relationship to Russia, as the EU stated in its March 9 sanction directive.

Melnichenko spokesmen denied that Melnichenko belonged to Putin’s inner circle. They also stated they would contest the court sanctions. On May 17, Melnichenko challenged the sanctions by lodging an appeal with the EU’s General Court, which handles complaints against European institutions, court records show.

Russia describes its actions in Ukraine as a “special operations” that aims to dearm Ukraine and defend it against fascists. The West and Ukraine both claim that the claims of fascists are unfounded and that war was an unprovoked aggression.

Italy seizes Melnichenko’s superyacht, the Sailing Yacht A 470ft A. The price tag for Melnichenko was 530m euros. This happened three days following his EU sanctions listing.

SUEK/EuroChem reported that on March 10, just days after EU sanctions were announced against Melnichenko, and 159 other people tied to Russia in a joint statement, their founder had resigned as he held the positions of director at both companies.