A number of EuroChem Group’s dossiers, which became available to us, indicate that over the last year, the Russian chemical and fertilizer giant made consistent efforts to consolidate the ownership chain of its key Russian assets in Russia with a visible intention to reduce the impact of potential future sanctions on its Russian business and reduce financial connections between the Group’s Russian and international (Swiss) companies.
The assets consolidated under the EuroChem Group’s Russian business perimeter and subject to the recent corporate restructuring and are EuroChem Usolskiy Potash Plant LLC and EuroChem North West JSC.
EuroChem Usolskiy Potash Plant is one of the largest potash manufacturing facilities in Russia with the total potash production capacity above 2,4 million tons per years.
EuroChem North West is the largest ammonia producer in EuroChem Group, located in the Leningrad region of Russia, with the production capacity of 2,890 tons per day. EuroChem North West supplies ammonia to other enterprises of EuroChem Group.
According to available information, in December 2022 EuroChem JSC, the core Russian entity of EuroChem Group, filed an application to the Russian government authorities requesting to authorize the transfer of the ownership chain of these assets to Russia.
In the application, EuroChem Group states that the transfer of ownership was necessary to reduce the negative impact of European sanctions and to prevent the “unfriendly actions” of foreign states against EuroChem’s Russian assets.
As a part of this transaction, 80% of shares of EuroChem North West were transferred from the Group’s parent company – Swiss-registered EuroChem AG – to the Russian registered EuroChem JSC, while 53,5% of statutory capital of EuroChem – Usolskiy Potash Plant was transferred from EuroChem AG to its subsidiary – Cypriote Harvester Shipmanagement Limited – already being in the process of re-domiciliation to Russia.
It is not clear whether similar plans to consolidate the ownership in Russia exist in relation to other Russian assets of EuroChem Group. It is also not clear whether the Group had some plans to separate its Russian business from the rest of the group, because EuroChem AG still remains the main shareholder of the Russian business of EuroChem.
Other available documents indicate that in September 2023, EuroChem JSC filed an application to approve the acquisition of 53,5% of EuroChem Usolskiy Potash Plant from Nord Harvest Holding – a Russian-registered company established as a result of re-domiciliation of Harvester Shipmanagement Limited. In October 2023, the responsible Government Sub-Commission approved this acquisition, thus completing the process of transferring EuroChem Usolskiy Potash Plant to the Russian perimeter of the group.
The later dossiers indicate that EuroChem JSC also worked to arrange the set-off of existing financial obligations between EuroChem JSC and EuroChem AG to reduce the existing debt of the Swiss company to its Russian subsidiary and avoid the situation that the Swiss company could not repay its debts due to sanctions, or these payments, as well as EuroChem exported goods, could be arrested by foreign states. The total amount of set-offs exceeded 74 billion rubles (more than 750 million USD).
The intentions of Russian EuroChem JSC to set-off financial obligations with the Swiss company may also indicate that the group tries to separate the Russian and foreign perimeters of its business as G7 nations expand sanctions on Russia while EuroChem’s founder Andrey Melnichenko is already subject to the US, European and UK sanctions from as early as 2022.
