This is the 12^th time that the European Union has imposed restrictions on Russian businesses. According to Castellum.ai, a global sanctions monitoring database, Russia has faced 11,327 restrictions since February 22, 2022. The total number of sanctions imposed on the country and its citizens has exceeded 14,000 — writes Gary Cartwright in EU Today

However, despite this, big Russian capital just keeps finding new ways to circumvent them. And, as a result, it gets richer. Thus, the owner of the EuroChem and SUEK corporations, Andrey Melnichenko, doubled his fortune in 2022 — from USD 11 billion to USD 25 billion, which is a record for him.

The main problem with the lack of effectiveness of sanctions is that the EU, simply put, does not have a synchronized list of those to be hit by these restrictions. Even though, since 2014, sanctions have been imposed against almost 10,000 Russians, just 500 of them face restrictions from all the countries allied to Ukraine simultaneously. This lack of synchronisation is also facilitated by Russia’s satellite states in Europe — Hungary led by Prime Minister Viktor Orban, Slovakia with its new head of government Robert Fico, and many other politicians.

So long as there is no unity in the EU regarding restrictions for Russian business, oligarchs use various methods to circumvent sanctions: they change the structure of ownership and management, resign from top posts, and transfer ownership to close relatives: wives (by filing fictitious divorces), children, parents. But one of the most convenient methods for circumventing sanctions is to transfer a part of one’s sanctioned assets to trusted persons. These persons are usually mid-level businessmen.

Some asset custodians can even "get a full house" – by simultaneously acting as nominal custodians for several leaders of the Russian Forbes list, who fiercely compete with each other for access to resources within Russia. Thus, for the richest businessman in Russia, Andrey Melnichenko, ex-Minister of Fuel and Energy Sergey Generalov and a person from Vladimir Putin’s inner circle, Gennady Timchenko, who owns the Volga Group, a private investment vehicle, such a confidant is a businessman by the name of Nikolay Levitskiy.

Who is Nikolay Levitskiy

Nikolay Levitskiy crossed paths with all these oligarchs at different points in his business career. Mr Levitskiy was born in St Petersburg. In 1994, after graduating from the University of Economics and Finance, he immediately became chairman of the board of the largest regional branch of KomiBank, which held the assets of oil companies (and which was declared bankrupt two years later). Then he moved to the Komi TEK oil company, and then to the Imperial Bank. After that, he moved to the post of Vice President for Economics and Finance at Slavneft. Then he headed oligarch Andrey Melnichenko’s holding Eurochem, and in 2003 he was appointed the Vice Governor of the Komi Republic.

After leaving the civil service, Mr Levitskiy used loan funds to found Geotech Holding CJSC, one of the largest Russian companies in the geological exploration and oilfield service market. It is worth noting that Gennady Timchenko owned a 25% stake in the company for a while.

Geotech Holding is still remembered by oil workers, not for its achievements but for ever-present fraud, claims for missed tax payments amounting to hundreds of millions of rubles and unpaid wages. Mr Levitskiy personally withdrew more than USD 30 million from Geotech in total. As a result, creditors, including Sberbank and the Otkritie financial group, recovered the Geotech Holding oilfield service from him when the company’s debts approached USD 700 million.

After this "success" in oilfield services, Mr Levitskiy went into the kvass business, and in 2013 acquired control over the Russian industry leader — JSC Deka from Veliky Novgorod with a turnover of USD 100 million. As a result, the enterprise suffered the fate of Geotech: a few years later the company was declared bankrupt, with debts reaching tens of millions USD. While all this went down, just as happened with Geotech, a large sum was stolen from the company through companies personally associated with Mr Levitskiy. This time it was more than USD 7 million.

How oligarchs escape sanctions with Mr Levitskiy ‘s help

According to media reports, December 2022 was the first time Mr Levitskiy acted as a proxy to not just register, but acquire a new asset for sanctioned Russian oligarchs. That time, his offshore company Axiomi Consolidation acquired a controlling stake in the Russian Far Eastern IRC iron ore company from Gazprombank for USD 96 million.

The real beneficiary of the IRC company, Mr Melnichenko, could not have participated in this transaction, since he would have caused the IRC company, which is listed on the Hong Kong Stock Exchange, to be hit by sanctions, and Mr Levitskiy was quite suitable for the role of "asset custodian". After all, Mr Levitskiy has not had any significant capital for a while. All of Nikolay Levitskiy ‘s companies are bankrupt. Thanks to this property rights registration scheme, the IRC not only avoided sanctions but even retained its listing on the Hong Kong Stock Exchange.

In April 2022, the Donalink company, which owns the Primorskaya State District Power Plant, was simply re-registered under Mr Levitskiy’s name. Previously, before the introduction of Western sanctions, this company belonged to the Cypriot AIM Capital plc., which is owned by billionaire Melnichenko. The participants in this transaction did not even particularly hide the fact that this was just another scheme to conceal assets.

According to official sources, as of April 7, 2022, Nikolay Levitskiy was one of the three participants in MK Donalink LLC. But on the very same day, all of the company’s shares were pledged to AIM Capital plc. Thus, Mr Melnichenko, despite the sanctions, retained full control over the asset. However, he ceased to be formally associated with it.

In addition, from June to September 2022, Mr Levitskiy, through the IK Axioma LLC, took temporary ownership of the Far Eastern Vanino port, which is also part of Mr Melnichenko’s assets. Back then, this company acted as a dummy corporation in the scheme for restructuring the billionaire’s assets.

An almost identical scheme was used with Sergey Generalov’s assets. He owned NPF Mikran JSC. This leading Russian manufacturer of radio electronics has been under sanctions from the US Department of Commerce since 2016.

In December 2021, to circumvent the sanctions, Mr Generalov, through Promyshlennyye Investory LLC, sold a blocking stake (25% + 1 share) in NPF Mikran JSC for USD 5 million to his own company, MIKPI LLC, which is nominally owned by Mr Levitskiy. However, Mr Generalov, just like Mr Melnichenko, retained the pledged shares.

Among other things, Mr Levitskiy also owns the Tuloma port terminal for fertilizer transhipment. Previously, the port was owned by Gennady Timchenko’s family. This scheme is similar to the previous two — Timchenko nominally ceased to own the sanctioned asset but continues to maintain actual control over its operations.

It is possible that this list of assets nominally owned by Mr Levitskiy is not complete. Thanks to such formal asset transfer schemes, Russian oligarchs will, despite Western sanctions, continue to earn billions on international markets, all while keeping up public complaints about colossal losses.

List of links:

https://www.bloomberg.com/news/articles/2023-10-31/eu-is-weighing-fresh-sanctions-on-5-3-billion-in-russian-trade?srnd=premium-europe

https://ru.krymr.com/a/vengriya-slovakiya-yevrosoyuz-splochennost-ukraina-zayavleniya/32656515.html

https://www.interfax.ru/business/820928

https://www.znak.com/2015-03-18/gruppu_geotek_s_dolgami_na_15_mlrd_rubley_pytayutsya_prodat_gosudarstvu_za_400_mln_dollarov

https://www.dp.ru/a/2015/07/06/Deka_ponesla_ubitki

https://www.rbc.ru/spb_sz/24/05/2019/5ce7bfe99a79477dfa83a6d4

https://apostrophe.ua/article/society/2023-09-22/who-is-mr-levitskiy-kak-putinskie-oligarhi-obhodyat-zapadnyie-sanktsii/54180

https://lenta.ru/articles/2022/04/19/udelny/

https://wek.ru/zolotoj-chelovek

https://www.interfax.ru/business/833947

https://www.interfax.ru/business/840451

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