Alexey Mordashov was a model of economic success in the post-Soviet era, rising from humble beginnings to become Russia’s wealthiest oligarch with a net worth believed to be more than $28 billion. Then the sanctions began...

The road to riches 

Born in Cherepovets, Russia, Mordashov graduated from the Leningrad Institute of Economics before earning an MBA from the University of Northumbria in the UK. He started his working life in a steel mill in Cherepovets and after just 4 years was appointed Finance Director. After the fall of the Soviet Union and subsequent privatisation of state assets, Mordashov formed an investment fund and amassed a large stake in the steel mill. Shortly after, he founded Severstal which has grown to become Russia’s biggest steel and mining company.  

$28 billion and counting 

According to Forbes magazine’s list of billionaires, in 2021 Mordashov only narrowly missed out on a place in the top 50 richest people in the world, with a ranking of 51.  

His wealth was comprised of a 79.2% share of Russian steelmaker Severstal, a major shareholding in the German tourism giant TUI, the industrial machine maker Siloviye Mashiny and gold producer Nordgold, and held further interests in online supermarket Uktonos, plywood manufacturer Sveza. In addition, Mordashov boasted a 26% holding in the National Media Group, 7.3% in CTC Media, 5.5% in Bank Rossiya, and 2.8% in Tele2 Russia. 

Things start to fall apart 

On February 24th Russia invaded Ukraine and four days later, the EU included Mordashov on its list of sanctioned individuals citing his close ties with Vladimir Putin and was immediately hit by asset freezes and a travel ban.  

Two weeks later the UK followed suit, adding Mordashov to a long list of sanctioned individuals, also freezing assets, banning travel to and from the UK, and preventing UK citizens and companies from conducting business with him. 

The scramble to evade sanctions

As a billionaire Russian oligarch, privy to the innermost workings and plans of the Putin regime, it’s highly unlikely that the invasion came as a surprise. And with his hand in many a European political pocket, nor were the sanctions that followed. 

At the time, he vehemently argued that he was being unfairly targeted and told Tass news agency “I have absolutely nothing to do with the emergence of the current geopolitical tension and I do not understand why the EU has imposed sanctions on me.” 

Yet when just days before the invasion Putin summoned Russia’s most prominent business leaders to a meeting at the Kremlin, the billionaire’s private jet flew from Seychelles to Moscow. Immediately after the meeting, the jet flew straight back to the Seychelles. 

With the threat of sanctions looming, his subsequent meetings with his many advisors and facilitators must have resembled a war cabinet of his own, intently studying the global battlefield and invoking strategies to defend and preserve his wealth. 

When you are in the know, you act fast. And Mordashov has been a very busy billionaire. 

The transfer of major holdings to an offshore haven 

On February 28th, the very same day that the EU imposed sanctions on him, Mordashov made his first big move.  

He immediately transferred his 29.9% stake in German travel giant TUI from a Cyprus-registered holding company Unifirm to a shell company in the British Virgin Isles.  

And after some investigating into the heavily protected system of ownership on the island tax haven, it transpired the shell company is in the name of Marina Mordashova, the mother of his children. 

Struggling to get gold out of Africa

Around the same time, he was forced to step down as director of Norgold, his UK-listed mining company and transferred his £1.1 billion controlling stake, once again to Marina Mordashova.

While this took place some 2 weeks before the UK belatedly imposed its own set of sanctions on the fast-acting oligarch, they subsequently had a direct effect on the London-based company. By the third week of March, the company was struggling to find a refiner willing to handle the gold produced in Burkina Faso and Guinea.  

To add to his woes, just a few weeks later Norgold announced that it was closing its Taprako mine in Burkina Faso. Calling upon force majeur, the company cited the deteriorating security situation in the battle against armed militants linked to the Islamic State and Al Queda. 

Entering choppy waters

Tracking down and identifying entities hidden by an intricate and complex web of shell companies and tax havens is without doubt a difficult and daunting task.  

Not so in the case of the more visible and tangible displays of oligarch’s opulence, so western powers turned their attention to their yachts. According to Bloomberg, in the month of March, no less than 13 super yachts valued at $2 billion have been seized or impounded across Europe. 

One of these was Mordashov’s £54 million 215 ft yacht, the ‘Lady M’, which was impounded by Italian authorities on March 4, together with a $114 million compound located on the Mediterranean island of Sardinia. 

But the £384 million, 142-metre Nord, that cost an estimated £384 million and sails under a Cayman Islands flag had already left for safer waters. By mid-March, the Nord which was previously anchored in the Seychelles for the winter, was tracked far from the long arm of western law and anchored in the Russian port of Vladivostok. 

The art of being untraceable 

Switzerland has a long and well documented history for welcoming money with no questions asked. Today, some $150bn of Russian money is held there, accounting for 5% of all the wealth deposited in Swiss banks. 

One of the mainstays is the Geneva Freeport. Described as a “black box” of the art world by the EU’s special committee on financial crimes and tax evasion, it provides a scrutiny-resistant haven for a staggering $100bn worth of art and valuables. 

So, while many oligarchs opt for gold bars, crypto, and other types of less traceable wealth, many wealthy Russians, including Mordashov, turned to fine art. Not so much art lovers, but lovers of the fact that the Geneva Freeport doesn’t ask for the identity of the ultimate beneficiary. 

In early March, the Swiss government sanctioned Mordashov along with several high-profile oligarchs and as a result, the news should be awash with stories of priceless works of art being seized.  

But when Swiss businesses are faced with having to reveal details about hidden wealth, they don’t tend to be very forthcoming. As the Financial Times recently revealedCredit Suisse instructed hedge funds and investors to destroy any documentation relating to their Russian oligarch clients.

This doesn’t bode well for any claims about enforcing sanctions and transparency when it comes to the riches of art that are secreted in the Alladin’s caves of Geneva. 

Don’t bank on it

“I have absolutely nothing to do with the emergence of the current geopolitical tension and I do not understand why the EU has imposed sanctions on me.”

Despite Mordashov’s claims not to be involved with the Kremlin, he has long embraced people close to Putin. 20 years ago, Mordashov bought a stake in Rossiya Bank, which counts as shareholders Putin proxies Yury Kovalchuk and Nikolay Shamalov, whose son Kirill was once married to one of the Russian president’s daughters. 

Already sanctioned for its role in Crimea, Rossiya bank was placed under additional measures, thereby limiting its ability to operate globally, amidst claims by the EU that Rossiya Bank is the “personal bank” of senior Russian figures who ultimately benefited from the annexation of Crimea. 

It’s also worth noting that Mordashov used his stakes in Rossiya Bank and the oil company Surgutneftegaz to set up Russia’s largest private media holding National Media Group. This in turn has a large stake in Channel One, the country’s main state television channel which has fiercely defended Putin’s “special operation” in Ukraine and further questioning his non-involvement in Russian politics and the war in Ukraine. 

The immediate aftermath 

At the beginning of April, it was reported that over the last calendar year Russian oligarchs lost on average 27% of their wealth.  

Of all the oligarchs, on paper Mordashov took the biggest hit, with Forbes claiming that he has lost $15.9 billion or 50% of his net worth, relegating him to Number 128 on their list of the richest people on earth at the time of writing. 

Bearing in mind that it is now in every Russian oligarch’s interest to hide their wealth from the world at large, the accuracy of these figures must surely be heavily disputed.

The use of crypto assets and currencies, art and antiquities, networks of family members and friends, combined with complex and often impenetrable shell companies, will no doubt serve to shield much of this ‘lost’ wealth from prying eyes. 

There may be more trouble ahead

The German government has been probing Mordashov’s transfer of his stake in TUI and has ruled it invalid until an official investigation has been concluded. Even if it is found to be in breach of EU sanctions, how the authorities would go about retrieving the money from its new home in the British Virgin Islands is another matter. 

In addition, the Russian tycoon’s Severstal group could become the first Russian business to default on its debts. This comes after Citigroup blocked an interest payment pending regulatory probes and requested that the company obtain a licence from the US Office of Foreign Assets Control before it would allow the payment to proceed.

It has also been disclosed that Severstal is attempting to sell its last two US steel mills for $2.3 billion. Yet it remains uncertain as to whether this is due to its precarious financial situation, or is a retaliatory move driven by pressure from the Kremlin. 

The fact is that like many oligarchs, Mordashov has been left exposed by his own international web of business interests, further complicated by the need to transfer assets to trusted family members and associates. With shareholdings heading west to the island tax havens of the Caribbean, and yachts heading east to safer waters, keeping track of his assets must amount to a billionaire-sized headache. 

Perhaps the biggest challenge Mordashov will face in the future, is not how to evade sanctions, but how to unravel the labyrinth of business transactions that have ultimately been of his own creation.


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