The Russian Oligarch With the Most to Lose
By Angel Au-Yeung and Stu Woo, Apr. 20, 2022, WSJ
In late December, brothers Nikita and Kirill Mordashov did
as their father asked and transferred their shares in a
mining company to the Russian oligarch. Alexey Mordashov
had given his children stakes in the family business as part
of a succession plan but decided they weren’t quite ready,
according to a person close to him.
Two months later, after Russia invaded Ukraine, Mordashov
was racing to get those shares off his hands again. This
time, he transferred a roughly $1 billion stake to Marina
Mordashova, the mother of four of his other children,
according to public documents and the person close to the
oligarch. Later that day, the European Union froze his
European assets.
Western governments have levied a barrage of sanctions
targeting Russian tycoons with penalties meant to strip
away their wealth and financially isolate them. Governments
hope they might pressure Russian leader Vladimir Putin into
ending the war.
Mordashov, 56, has more at stake than most of his peers.
One of Russia’s richest men, his net worth is higher than
that of any individual on the EU’s sanctions list, according
to the Bloomberg Billionaires Index. His fortune centers on
his 77% stake in Severstal PAO, among the world’s biggest
steelmakers, which sells its products all over the world,
particularly in Europe, where it has a large staff and
operations. It has long depended on global financing to keep
operating, a channel now under threat from sanctions.
Unlike other oligarchs, who have either embraced sanctions
as a badge of honor or tried to pivot away from pariah status,
Mordashov has decided to try to manage through the mess.
He has moved to protect his large Western shareholdings
while taking steps to focus his steelmaking business on new
markets in Asia and Africa. He is pursuing legal waivers in
the U.S. and U.K. that would allow Severstal to make debt
payments to bondholders, according to an announcement the
company filed with the London Stock Exchange—a move the
company hasn’t been able to do since sanctions were levied.
In announcing its sanctions, the EU said Mordashov “is
benefiting from his links with Russian decision makers.”
The U.K. followed the EU and sanctioned him and several other
oligarchs on March 15, resulting in a combination of penalties
that froze their assets and made it difficult for their
businesses to operate across Europe. The U.S. Office of
Foreign Assets Control hasn’t sanctioned him; the office
declined to comment.
Mordashov had fashioned himself an apolitical businessman
who kept the Kremlin at arm’s length, said the person close
to him. He had dedicated much of his career pushing Russia
toward the West. The fluent English and German speaker had
lobbied for Russia’s entry into the World Trade Organization
and once led a Brussels-based global steel trade group. He
had paid tuition for 200 of his employees to go to business
school in England.
The sanctions lumped him together with oligarchs like Igor
Sechin, chief of Russian oil producer Rosneft. After the
U.S. targeted Mr. Sechin in 2014 over Mr. Putin’s annexation
of Crimea, Mr. Sechin had said Washington’s action was a sign
he was doing his job. Mr. Sechin is now under the new EU and
U.K. sanctions. Rosneft didn’t respond to requests for comment.
On the evening the EU sanctioned him, Mordashov issued a
statement saying he has never been close to politics and
didn’t see how sanctioning him would help solve the Ukraine
conflict. Without mentioning Mr. Putin, he called what was
happening in Ukraine “a tragedy for two fraternal nations”
and said he hoped the “bloodshed” would end soon.
Since Feb. 18, he has lost about a quarter of his wealth,
which Bloomberg now estimates at $22 billion.
Through a family spokeswoman, Mordashov, his sons Nikita
and Kirill, and Ms. Mordashova declined to be interviewed
for this article.
Leaning West
--------------
Mordashov’s career has been characterized by his success
navigating Russia’s postcommunist chaos while embracing
Western markets and business management.
He was born north of Moscow, where his parents worked at a
steel mill. He secured a postcollege job at the mill as an
economist and, in 1992 at age 27, became its chief financial
officer. One of his priorities was fending off Moscow-based
tycoons targeting the mill during Russia’s upheaval toward
capitalism, he told The Wall Street Journal in 2004.
Mordashov and his peers set up a company that bought steel
from the mill and resold it, using the proceeds to buy shares
of Severstal, which means Northern Steel in Russian.
He became CEO in 1996 and by the early 2000s was among
industrialists who regularly met with Putin. Yet Mordashov
has said he was different from other oligarchs because he
had few political connections. “We never had any high-placed
patrons in the govt,” he said in the 2004 Journal profile.
He also leaned West, hiring McKinsey & Co. to find bottlenecks
in Severstal and encouraging employees to go to business school
at England’s Northumbria University, his alma mater. Anders
Aslund, an adviser to Russian and Ukrainian governments in the
1990s, recalled Mr. Mordashov speaking at a Moscow university
in the early 2000s about hiring McKinsey and getting mobbed by
students afterward. “He was treated like a rock star,” Aslund said.
In 2006, Mordashov saw a chance to bridge his Russian and Western
business worlds after Indian-owned Mittal Steel made a hostile bid
for Luxembourg-based rival Arcelor. He met Mr. Putin and won his
blessing for a counterbid, the Journal reported that year. Arcelor’s chairman, making a case to shareholders to accept Severstal’s offer,
called Mr. Mordashov a “true European,” noting his English and
German proficiency.
Mittal eventually outbid Mordashov, who then pursued smaller deals,
including buying an ArcelorMittal facility in Maryland for
$810 million in 2008.
He was “really a Western-style manager,” said Michael Harms,
head of the German-Russian Chamber of Commerce from 2007 to 2016.
“That’s why the sanctions on him are not wise and also not fair,
because he was one of the best representatives of the modern face
of Russian business.”
Mordashov retreated from the U.S. after Moscow annexed Crimea in
2014. That year, he sold two major U.S. steel mills for a combined
$2.3 billion. Four years later, the U.S. sanctioned one of his
companies for assisting in delivering turbines to Crimea. In Europe,
he gradually built a stake in German travel giant TUI AG, becoming
its biggest shareholder. During the pandemic-triggered global travel
collapse, he put up more capital to bolster TUI financing.
Succession issues
----------------
The oligarch recently began setting up a second generation of
Mordashovs to play a leading role in his empire. He is father of
seven children from three mothers, said the person close to him.
In 2019, he transferred significant stakes in TUI and Nord Gold,
which had been spun off from Severstal, to sons Nikita and Kirill.
On Dec. 28, 2021, both brothers transferred their Nold Gold stakes
back to their father, according to U.K. records. That day, the pair
also sold their TUI shares back to their father, public records show.
Mordashov had asked them to make the move, feeling Nikita, now 21,
and Kirill, now 22, weren’t mature enough to hold such stakes, the
person close to him said.
In late February, Mordashov’s business lieutenants told him news
reports suggested the EU was about to sanction him, the person
said. He transferred stakes in Nord Gold to Ms. Mordashova,
according to U.K. records. He transferred the TUI shares from
subsidiaries he controlled to an entity named Ondero Ltd., TUI
said in a press release. A TUI spokesman declined to comment.
Nord Gold didn’t respond to requests for comment.
On Feb. 28, the EU announced sanctions against Mordashov and
other oligarchs. It cited his role as head of Severgroup, an
entity owning 5.4% of Bank Rossiya, alleged by Western officials
to be the personal bank of senior Russian officials. The EU said
Bank Rossiya also opened branches in the Ukrainian region of
Crimea, helping Russia consolidate the area it illegally annexed.
Brussels said Severgroup had significant stakes in a media group
controlling television stations that support Moscow’s attempts
to destabilize Ukraine.
Mordashov’s spokeswoman said that his stakes in Bank Rossiya
and the media group are minor, and that he isn’t involved in
day-to-day decision-making at either organization. Bank Rossiya
didn’t respond to requests for comment.
On March 3, Mordashov held a virtual town-hall meeting from
Moscow for Severstal employees, according to a summary of the
meeting that Severstal posted on social media. He said the
company didn’t plan to lay off any employees and was in a
stable financial position.
Severstal lawyers started work applying for a special license
from the U.K. and the U.S. Office of Foreign Assets Control to
let its bank, Citigroup Inc., transfer funds to pay interest
to bondholders, said the person close to Mr. Mordashov.
Severstal also announced its applications in a statement to
the London Stock Exchange on April 1. While the U.S. hasn’t
sanctioned Mr. Mordashov, Severstal said that Citigroup froze
the payments due to regulatory investigations.
Citigroup declined to comment.
The share price of Severstal, which previously did significant
business in EU countries such as the Czech Republic, Italy and
Poland, has fallen by about a third since Russia invaded Ukraine.
On March 18, TUI said it was informed that Ondero, the entity
to which Mordashov transferred his shares, was controlled by
Ms. Mordashova, the mother of four of Mordashov’s children.
It said that the German Federal Ministry for Economic Affairs
and Climate Action was investigating the transaction, which
would be invalid until at least the end of the probe.
A spokeswoman for the German agency said it was conducting an investment-screening procedure relating to TUI. Without
disclosing the individuals involved, she said the probe was
unrelated to sanctions but rather an investigation into whether
the transaction threatens Germany’s public order or security.
Italian authorities said they seized one of Mordashov’s yachts,
the 213-foot Lady M, as well as property on the Mediterranean
island of Sardinia. Late last month, the 465-foot megayacht
Nord, equipped with two helicopter pads, a cinema and swimming
pool—the person close to Mr. Mordashov said it belongs to the oligarch—completed its three-week journey from the Seychelles
in the Indian Ocean to Vladivostok, a far-eastern Russian city
near the Chinese and North Korean borders.
Locals have been visiting the harbor and posting selfies
with the vessel on social media.
https://www.wsj.com/articles/russia-oligarch-mordashov-sanctions-ukraine-11650309587
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