Seizure of SIBEKO from Andrey Melnichenko – redistribution of oligarchs’ assets or “hello” to Anatoly Chubais?
The nationalization of energy assets is gaining momentum. The Prosecutor General’s Office filed a lawsuit against Andrey Melnichenko, who is now in first place on the Russian Forbes list.
The department demands the return of the Siberian Energy Company (SIBEKO) to the state. The billionaire bought her shares in 2018 from oligarch Mikhail Abyzov, who is now in jail.
The main intrigue in this story is whether the Prosecutor General’s Office will confine itself to a civil lawsuit or decide to start a criminal prosecution at the same time. It will not be easy to prove violations on the part of the legal entities involved in the purchase – in 2017, the transaction for the purchase of SIBECO shares was approved by the Federal Antimonopoly Service. And after that, the Siberian energy holdings controlled by Andrei Melnichenko closely cooperated with government agencies – agreed on tariffs, received benefits. Does it all have to be rolled back? However, the process of “zeroing out” the property right, although it looks difficult, is quite feasible in practice. And it is facilitated by the fact that Andrey Melnichenko, like many big businessmen, does not own Russian assets directly, but hides behind offshore trusts.
The lawsuit against Andrey Melnichenko and legal entities controlled by him falls into emerging canvas for the nationalization of large and valuable assets (SIBEKO is the largest energy company in Siberia, it manages several hydroelectric power plants, state district power plants and thermal power plants). So, in July, the Leninsky District Court of Yaroslavl, at the suit of the same Prosecutor General’s Office, seized more than 80% of the shares of TGC-2 (includes 15 thermal power plants) from the former senator Leonid Lebedev. Moreover, the issue was resolved as quickly as possible – in just one meeting. The essence of the claims against Lebedev boils down to the fact that he derived income from the commercial activities of the company, being a senator from Chuvashia, which is contrary to anti-corruption legislation.
And last summer, energy assets were withdrawn from Mikhail Abyzov himself, who was then already in a pre-trial detention center on a criminal case that is still being considered. We are talking about the shares of RES JSC and Elektromagistral JSC (power grid companies in the Novosibirsk Region). At that time, the market value of these packages was estimated at 40 billion rubles, but the state “swallowed” them for only 10 billion rubles. Thus, Abyzov lost the opportunity to pay with shares for the damage caused to him in a criminal case. Recall: the former minister is accused of creating a fraudulent scheme that allowed him to withdraw money from controlled Russian companies to offshore.
The transfer of the Russian assets of the Finnish energy company Fortum into trust management of the Federal Property Management Agency also fits into the logic of increasing state control over the energy sector. At the same time, it is hard not to notice that in all the above episodes, the shadow of Anatoly Chubais is invisibly present, until recently he was practically inaccessible to the security forces, but now he is found somewhere abroad. It was he who at one time brought Fortum to the Russian energy industry and, even after leaving the energy industry for nanotechnology, he continued to do business with the Finns – for example, Rusnano and Fortum had a joint venture called Vetroenergetika Management Company. So Anatoly Chubais also played an important role in the fate of Mikhail Abyzov. At the beginning of the 2000s, yesterday’s student Mikhail Abyzov received the post of first deputy chairman of RAO UES, becoming the right hand of Anatoly Borisovich. Just at that time, Abyzov was able for the first time to defend his key asset, Novosibirskenergo, in a dispute with the prosecutor’s office. Then the Prosecutor General’s Office opened a criminal case against Novosibirsk officials, who, according to its version, allowed the sale of a package of Novosibirskenergo with a market value of about $40 million to Abyzov’s structures for about $570,000. Then Novosibirskenergo was renamed SIBECO and hidden offshore, which allowed Abyzov not to declare it when Dmitry Medvedev made him Minister for Open Government Affairs in 2012.
How the departure of Anatoly Chubais is connected with the criminal case against Mikhail Abyzov, one can only guess, but the fates of these characters are closely intertwined. And Andrey Melnichenko is also not a stranger in this company.
It is impressive that in the history of SIBECO, there are no questions for current and former officials. The Federal Antimonopoly Service approved the deal, the Prosecutor General’s Office was silent for years, the special services prepared certificates for the managers of strategic companies, the tax office registered the transfer of shares and received taxes, and other officials agreed on tariffs for the new owner. What comes out – only the entrepreneur is to blame? In an extreme case, only the authorities of the Novosibirsk region will deserve public censure, which, at the end of the last century, imprudently and cheaply sold Novosibirskenergo to Abyzov. It is noteworthy how Andrey Melnichenko suddenly turned from the shark of capitalism into a poor sheep that is about to be sheared. Like, he bought a business and conscientiously developed it with his own money, and now he is losing an asset. Although, if you look closely at the details, the picture may look different. After all, SIBECO is not just a business, but an object of natural monopoly, which allows its beneficiaries to enrich themselves within the limits set by the state. Apparently, dividends through chains of companies were withdrawn abroad, and where taxes were paid on Melnichenko’s personal income, one can only guess (either in Switzerland, where he had a residence permit, or in the UAE, where he is a citizen). He himself admits that he has not lived in Russia for a long time, and his family trust Ferstin, on which all assets are ultimately recorded, is registered in Bermuda. Well, the privatization initiated by Chubais, designed to create a class of owners in Russia, has achieved its goals.
At the same time, it’s hard not to notice that many Russian business empires are organized in this way, and deoffshorization is still going on more in words and exclusively on a voluntary basis. Does this mean that only those owners of assets who, for one reason or another, have fallen out of the cage and can no longer protect themselves, as before, fall under the distribution?
Perhaps, its history in this context should begin from the mid-1980s, when Andrey Melnichenko studied at the mathematical special school at Moscow State University together with Mikhail Abyzov. Later, when Abyzov began working in the Chubais team, Melnichenko was already a co-owner of MDM Bank. Soon the bank became a major shareholder of RAO UES and actively participated in the redistribution of energy assets as part of the energy reform initiated by the same Chubais. The next time the interests of Melnichenko and Abyzov crossed in the public sphere in 2018, when Melnichenko’s structures bought SIBECO shares from Abyzov, or rather, from his offshore companies, for 32.5 billion rubles.
It is the purchase of these shares that the Prosecutor’s Office is now blaming Melnichenko’s structures. According to the leaks, the agency could see a violation of anti-corruption laws by Melnichenko himself and legal entities controlled by him when making transactions to acquire shares
SIBECO. That is, Melnichenko, presumably, helped at that time the official Abyzov either hide or sell undeclared property.
Is it possible to believe that Melnichenko gave Abyzov a friendly shoulder? Quite. But at the same time, commercial structures controlled by Melnichenko in this story look like conscientious buyers. In addition, some lawyers argue that the statute of limitations for the 2018 deal has expired. That is why the question arises whether the proceedings will turn into a criminal plane, since the Prosecutor General’s Office decided to return the Siberian power plants to the state.
As for Andrei Melnichenko, he is one of those who, after the start of the SVO, clearly manages to sit on two chairs. Unlike many oligarchs at the top of the Forbes list, in recent months he has been spotted in Moscow, participating in the working processes of the RSPP. Having fallen under sanctions, he initially gave compassionate interviews to European newspapers. He emphasized that his mother is Ukrainian, that he created his capital himself and that his wife, to whom the business was hastily transferred, is an EU citizen. “How can someone have political influence in a country where he spends no more than five weeks in the last ten years?” – he spoke about his situation in Russia to Swiss journalists. However, these statements did not help Andrey Melnichenko get rid of European sanctions and unfreeze luxury villas, yachts and accounts, which we wrote about more than once. Also, he and his family had to move from Switzerland to the UAE. But at the same time, the EuroChem company he created, one of the world’s largest fertilizer producers, continued to operate freely. Only Switzerland imposed sanctions against it, and it lifted the restrictions already in May last year. Another key asset of Melnichenko – the Siberian Coal Energy Company (SUEK) – is also doing well. In the meantime, there have been rumors that Russian coal and fertilizers are now being sold around the world by traders registered in the UAE. Of course, no one will prove their direct connection with Andrey Melnichenko, but in principle the scheme looks working.
Both coal and chemical assets of Melnichenko in Russia remain a tasty morsel for the most influential oligarchic circles. Particularly attractive is the production of fertilizers, against which the West does not impose sanctions. At the same time, EuroChem and SUEK are in a rather vulnerable position in terms of the domestic political situation in Russia. The holdings belong to parent companies from unfriendly Switzerland and Cyprus. And those are ultimately controlled by the Bermuda trust, the beneficiary of which is a citizen of the unfriendly EU Alexandra Melnichenko (billionaire’s wife). And if you manage to take away SIBECO from this trust, then why not take a swing at EuroChem or at least part of its assets?
It is noteworthy that Andrey Melnichenko is in charge of carbon regulation at RSPP. One might get the impression that he inherited the role of Anatoly Chubais in terms of promoting the ESG agenda in Russia. This means the potential of an intermediary between the Russian and Western industrial lobbies in developing new rules of the game. After all, sooner or later Europe will have to negotiate with Russia on the purchase of energy and metals. Whether this can annoy someone who is able to influence the decisions of the Prosecutor General’s Office is an open question. It is hardly worth seriously considering Andrei Melnichenko’s competition on “carbon issues” with Ruslan Edelgeriev, adviser to the President of Russia on climate and ally of Ramzan Kadyrov. Or is there some kind of dog buried here too?
The nationalization of large, medium and small enterprises is going on throughout the country. Here are just a few examples.
The object of the trial was a land plot and a complex of buildings associated with the Prichal restaurant on Rublyovka. Since the 90s, Yushvaev, who served nine years for robbery, enjoyed authority in the capital and the Moscow region and no one dared to challenge him. However, last year there was news that Israeli citizen Gavril Yushvaev received a certificate of belonging to Sephardic Jews and is preparing to move to the Atlantic coast. Now the presidential administration claims to become the legal owner of “Prichal” and the adjacent territory. In Russia, Yushvaev still has one more landmark asset – the Oko tower in the Moscow City complex.
The Prosecutor General’s Office demands the return to the state of one of the largest producers of methanol and formalin in Russia, Metafrax Chemicals. It is indicated that the authorities of the Perm Territory in the mid-1990s did not have the right to corporatize a strategic enterprise without permission from Moscow. However, the enterprise was privatized, and the shares were transferred to trust management of the structures of the future billionaire Dmitry Rybolovlev, after which they completely came under his control. Recall that in those years Rybolovlev was actively buying up assets in the Urals, and in 2010 he resold the shares of Uralkali at a profit, receiving about $5 billion for them. Until recently, the American Sorcy Investments Trust was listed as the ultimate beneficiary of the Perm ethanol producer – the prosecutor’s office considers it connected with Rybolovlev. The billionaire himself, who has long settled in Monaco, has already rushed to disown the Russian asset, the possession of which threatens him with Western sanctions. It is possible that the plant will be handed over “without a fight.”
The Arbitration Court of St. Petersburg and the Leningrad Region is considering the claim of the Prosecutor General’s Office for the recovery in favor of the state of the shares of LLC HeidelbergCement Rus, JSC Raw Materials Company, JSC Tsesla Shale Cement Plant, JSC Gurovo-Beton. The supervisory authority believes that the cement production is controlled by a German company and its beneficiary, Ludwig Merkle. According to prosecutors, the Germans “may take actions aimed at withdrawing the property complex of controlled enterprises, their sale to third parties, which will lead to a stop in technological cycles, a reduction in production capacity, and the creation of an artificial shortage of products.” There is a second bottom to this story. Raw Materials Company JSC owns licenses for the development of limestone on Mount Shakhtau. The destruction of the mountains of Shakhtau and Kushtau in 2021 caused mass protests of the inhabitants of Bashkiria. Now everything is going to the fact that the authorities of the republic will completely take control of the situation with the extraction of limestone in this area.
In May, a court, following a lawsuit filed by the Prosecutor General’s Office, invalidated transactions for the acquisition of shares in Syassky Pulp and Paper Mill (a major manufacturer of toilet paper and paper napkins) by the Nerya company associated with businessman Dmitry Zaitsev and ruled to collect securities in the income of the Russian Federation. It was pointed out that the plant itself is of strategic importance. An attempt by Zaitsev to challenge this decision in the Court of Appeal ended in failure. The essence of the conflict is that the offshore structure of Zaitsev bought the shares of the pulp and paper mill from the offshore structure of the previous owner. The prosecutor’s office and the court considered this circumvention of the law.
On August 5, the Prosecutor General’s Office filed a lawsuit against the companies “SibMir” and “IsNov” (part of Eduard Taran’s RATM holding) to recover state property from someone else’s illegal possession. The companies own 48.19% of the shares of the Rostov Optical and Mechanical Plant (ROMZ), which is engaged in the production of opto-mechanical and opto-electronic day and night vision devices for fire control systems for armored military vehicles, including for Armata tanks.
On July 24, the Arbitration Court of the Perm Territory arrested the property of Port Perm LLC, which the Prosecutor General’s Office demands to be returned to the state. The privatization of the port took place in 2009-2013, and eventually the property came under the control of Charles Butler, a British citizen living in the Czech Republic.