War on Ukraine Switzerland, Putin's coal-fired power plant
Adrià Budry Carbó & Agathe Duparc, collaboration: Robin Moret, Robert Bachmann, 13. June 2022
Represented by a simple office in an anonymous building or a small plaque in an alley of letter boxes, these Zug companies are in fact among the largest mining companies in Russia. They compete with Glencore on the coal market: 75% of the 212 million tonnes of Russian coal exported are traded from Swiss territory, according to Public Eye estimates based on data from mining companies. Switzerland, which pledged at the Glasgow climate conference (COP26) last autumn to “send coal back to the history books”, is actually a global heavyweight in this trade.
In the coal triangle formed by Zug, Lugano and Geneva, there are three typical profiles of companies:
- Russian extractors who produce coal from mines in Siberia and the Far East and market it via their offices located mainly on Baarerstrasse in Zug, without it ever crossing Swiss borders.
- The pure traders which market the coal to the Atlantic and Pacific markets. The Russians are overrepresented there, but a great deal of secrecy is made around the beneficial owners of these companies that have appeared in Geneva, Lugano and Zug.
- The Swiss banks which, despite their promises, continue to finance the “Coal Valley”. The sums committed are increasingly hidden in their accounting records but have continued to increase since the Paris agreements in 2016.
The extractors, this soot from Russia
In the increasingly closed world of coal producers, Glencore is probably the most prominent. The multinational from Baar, in the canton of Zug, produced 103.3 million tonnes of coal in 2021, and it marketed another 67.7 million tonnes purchased from third parties, in particular Russian companies such as KTK (see galery below). One of its representatives did not wish to indicate the origin of the coal negotiated by the multinational or whether it has informed its Russian partners that it will cease to carry out its existing contracts at the end of August. Glencore is the largest coal exporter in the world, excluding state companies. But in reality, another company based in Switzerland is vying for its crown of King of Coal.
This rival is the the Siberian Energy and Coal Company, better known by its acronym SUEK. Founded in 2001 by Russian billionaire Andrey Melnichenko (who before the sanctions at least resided in Switzerland), the largest Russian coal producer extracted 102.5 million tonnes of coal out of the ground in 2021, plus another 17 million tonnes which it purchased from third-party companies. The man who refuses to be called an oligarch, claiming to have benefited from no political support to build his fortune, Melnichenko registered his company in December 2004 with a St. Gallen fiduciary, and then later moved the holding and commercial branch of SUEK to an office on Baarerstrasse, in Zug, which shares its entrance with a branch of the Cantonal Bank of Zug. On 8 March, his 50th birthday, Andrey Melnichenko designated his wife, Aleksandra Melnichenko, as beneficiary of the trust that owns SUEK in order to avoid sanctions. A manoeuvre considered "legal", as SECO confirmed to us, because it was carried out before the sanctions were imposed, quite literally the day before. "Neither the company nor the wife have been sanctioned to date (1 June 2022)," added a spokesperson, who also mentioned the need of "maintaining jobs in Switzerland". However, the authorities now have to ensure that neither SUEK nor Mr. Melnichenko’s wife transfer "assets" to Andrey Melnichenko himself (the couple were tax residents in Switzerland at least before sanctions were imposed). "The SECO is monitoring this," said its representative, without giving further details. Three days after our exchange with SECO, the EU sanctioned Alexandra Melnichenko. And on 10 June, the Swiss federal council has adopted the latest measures.
Zug, the carbon city
In the shadow of the juggernaut that is SUEK, other major Russian producers set up shop during the same period. Their point in common? They are all led by so-called self-made-businessmen who cultivate discretion and maintain close ties with the Kremlin. Among them: Kolmar LLC did not even bother to put a brass plaque on the office building its trading company KSL AG (registered in 2016) shares with many shell companies in Zug. This company however is the rising star of Russian coal. As revealed by the Russian investigative media Agents, its majority shareholder was, at least until 2018, the daughter of a cousin of Vladimir Putin, who is married to the governor of the coal region of Kemerovo.
The data we have compiled reveals that the the annual coal production of these Russian mining companies (see their portraits below) linked to Zug (and Appenzell for SDS) reached 226.2 million tonnes in 2021. In fact, among the nine largest producers of coal from Russia, only one no longer has a physical presence in Switzerland. It moved away after having enjoyed Switzerland’s hospitality for a long time: This is Siberian coal producer Kubassrazrezugol (whose parent company is UGMK, another mining and metals giant from Russia), the first to bet on Switzerland with its Appenzell subsidiary Krutrade AG, open from 1998 to 2005.
When we tried to contact them, none of these Russian extractors answered a detailed list of questions concerning their Swiss subsidiary, their coal exports or their strategy for after the embargo entered into force. In Zug, authorities say they are not aware of any bankruptcy proceedings.
In a country that closed its last coal mine in 1947, the new Swiss “Coal Valley” alone symbolises the power and resilience of the most harmful of fossil fuels. Coal currently accounts for 40% of the increase in CO2 emissions globally.
From a logistical point of view, however, the majority of the coal produced in Russia never enters Swiss territory. In Europe, Russian coal’s main market, two entry points exist. By sea (37 million tonnes per year), coal is transported in large bulk carriers and unloaded in the ports of northern Europe (Amsterdam, Rotterdam and Antwerp) and then transported to Germany on the Rhine. By land transported (about 8 million tonnes per year), the coal is directly moved by train from Russia to Poland.
The most recent is the death of Dmitry Bosov, majority shareholder of Sibanthracite Group, based in Zug, who was found in his Moscow villa in May 2020 with a bullet in the head and a pistol lying next to him. The official version speaks of suicide “without known cause”. “Those who knew Dmitry Bosov do not believe that anything could have broken the entrepreneur who survived the aluminium wars”, states an article on the company's website. A few weeks earlier, Bosov had publicly split with one of his partners, Alexander Isaev, who accused him of embezzlement, as reported by the Russian daily Kommersant. In October 2021, Sibanthracite Group was acquired by Albert Avdolyan, the new strongman in Russian coal, and Bosov's former partner was reinstated on the board.
Vladimir Putin’s early investment in coal
After the fall of the USSR in the early 1990s, Russian coal – like the rest of the mining industry – experienced a descent into hell: accidents, unpaid wages, disastrous working conditions and strikes were the order of the day. The sector needed a complete facelift, as it suffered from higher production costs due to the large distances between mines, processing centres and end consumers. With the support of local governors and supporters in the Kremlin, mine and deposit managers joined forces with young entrepreneurs from diverse backgrounds to privatise the most lucrative parts.
In the early 2000s, empires were formed against a backdrop of widespread corruption and mafia-type settling of scores. The least profitable sites were closed, the country turned to export, and production was gradually concentrated around ten companies. It was at this time that the future billionaire Andrey Melnichenko, through the MDM Bank of which he was a co-founder, bought substantial stakes in the country’s main coal companies and joined them together in the SUEK group. This included the giant “Krasugol” (the coal mining company of Krasnoyarsk), who fell into his hands after various adventures, and with the help of the governor at the time: the very public figure of General Alexandre Lebed, who was at the time rumoured to replace President Boris Yeltsin.
Vladimir Putin quickly became aware of the sector’s potential when coal prices exploded between 2007 and 2010. In January 2012, then Prime Minister, he signed a vast industry development programme worth 119 billion US dollars – 8.5 billion of which was public funds – intended to improve infrastructure (especially rail and maritime transport) and boost coal production by 2030. Without reservations, the Kremlin has since 2019 actively supported large-scale coal mining projects in the Arctic.
In parallel, coal is globally going through a dual process of commoditisation (the fact that it is increasingly traded on international markets) and financialization. “For decades, coal was extracted and consumed close to its production site”, recalls a trader who has more than twenty years of experience in the sector. But after the oil shocks of the 1970s, coal began to be traded as an alternative on international markets. Some 150 million tonnes of thermal coal were traded in 1980, today it is ten times higher. The first financial products appeared around 2003 and 2004, with the arrival of a multitude of financial intermediaries (traders).
This dual trend has made it possible to position Switzerland as a trading hub. While Russia placed its oil pawns in Geneva, its coal companies chose Zug, with its specific taxation for foreign companies (until 2020) and its financial intermediaries who offered easy registration with a firm. In the sector, they prefer to evoke the tranquillity of the locality and the “country’s tradition of stability and rule of law”.
As a result, there are at least 25 Russian-owned coal companies in Switzerland (half of them in Zug, 5 in Geneva), including 18 pure traders, which are in charge of selling the 212 million tonnes of annual exports to Europe and Asian markets. Due to the opacity of the sector, there is no source to systematically document how many shipments of Russian coal are resold to Swiss traders.
And it could get even worse. Difficulties on the gas market (for which coal is the most direct substitute for producing electricity) and the continued rise in the price of the black diamonds reinforce the upwards trend of coal prices. For Alex Thackrah of the independent provider of price information Argus Media, it is unthinkable to combine energy transition and the implementation of effective sanctions on Russian fossil fuels, while ensuring energy security: “It is possible to replace the volumes of Russian coal but it will be exceptionally complicated if gas is cut off simultaneously”.
Since the invasion of Ukraine on 24 February, Russian companies have charged the European Union some 1.5 billion euros for their coal, according to the Finnish research centre Crea. Some of this money ended up in Zug. The canton did not wish to communicate on the tax yield of Putin's black diamonds, citing a lack of statistics.
The profiles of the Russian mining companies were written using publicly-available data such as business registers, the Forbes list of the 200 richest people in Russia, articles from international and Russian media such as Agents, Kommersant or Novaya Gazeta. The list of the Swiss coal sector was obtained through a scraping from the 23 cantonal business registers. The list was then double-checked to remove false positives. The share of Russian coal traded through Switzerland was calculated by adding up the coal production of the miners in proportion to their exports. When contacted, none of the Russian miners responded to a set of detailed questions about their Swiss subsidiaries, their coal exports or their strategy for dealing with the embargo.
Gallery of Russian Extractors
Russia’s largest producer, SUEK generates over 60% of its 9.7 billion turnover thanks to coal. The group produces more than 100 million tonnes per year at 19 open-pit mines in six regions of Russia. It also sells coal purchased from other producers. Its office in Zug is now its only structure outside Russia.
What are the links with Switzerland?
- Suek AG, Suek Assets Holding AG and Suek Logistics GmbH, domiciled at Baarerstrasse 37, Zug.
- Suek AG has been based in Zug since 2004. The company manages the sale of Siberian coal to the Atlantic market, its main outlet.
Who owns SUEK?
SUEK is in the hands of the most “Swiss” of oligarchs. A resident of St.Moritz at least until the sanctions, Andrey Melnichenko is also the owner of the global fertiliser producer EuroChem, domiciled at the same address in Zug. As of 8 March, he transferred his shares (at the end of 2021, he still held 92.2% via legal entities) to his wife, former Yugoslav model Aleksandra Melnichenko, in order to avoid sanctions. On 3 June 2022, the EU put her on its list of sanctioned individuals.
After the fall of the USSR, the oligarch gained experience as a forex trader in a Moscow exchange office, then he co-founded MDM Bank in 1993. He subsequently launched imself into three new business sectors: fertilisers, coal and the manufacture of tubes for pipelines and gas pipelines (through TMK).
Melnichenko built up a substantial part of his capital by selling his shares in TMK after its IPO in 2006. His spokesperson says that “Andrey Melnichenko is a self-made entrepreneur (…)”. His fortune was estimated by Forbes in 2021 at 16.65 billion Swiss francs.
SDS or “Sibirskiy Delovoy Soyuz” (Siberian Trade Union) is a diversified group active in the chemical industry, railway engineering, construction and agriculture. But its main activity remains the production of coal through its subsidiary SDS-Ugol. The group produces 27 million tonnes per year, 97% of which is exported according to its website. It is the third largest coal producer in Russia.
SDS has a maritime port terminal in the Far East, but also transports its coal, via Mir Trading, by rail to the port of Riga.
What are the links with Switzerland?
- MIR Trade AG, Alte Haslenstrasse 5, in Teufen (AR), domiciled in February 2000.
- Among Russia’s largest coal producers, only SDS-Ugol has moved away from the canton of Zug. According to price information provider Argus Media, it is through “its commercial arm” MIR Trade that the Russian group exports all of its production.
Who owns SDS?
Oligarch Mikhail Fedyaev is the owner of SDS with 95% of the shares. His historical partner, politician Vladimir Gridin, a deputy of the Duma (the lower house of the Russian parliament) of the pro-Kremlin party United Russia, sold him his 62% stake in 2021.
Mikhail Fedyaev is currently in prison awaiting trial for “abuse of power”, following an accident in November 2021 at the Listvyazhnaya mine (Kuzbass region). An explosion then killed 51 people. Vladimir Putin had publicly held him accountable. Fedyaev, who pleads not guilty and says he never spared expenses for workplace safety, faces a ten-year prison sentence.
Now worth 550 million US dollars according to Forbes (2020), Fedyaev began as a mechanic in an automobile factory. He met Vladimir Gridin in the 1990s and, with the support of the governor of Kemorovo oblast, Aman Tuleev, the two men took over a coal mine.
Mikhail Fedyaev's son, Pavel, became a deputy of the Duma in 2011 under the colours of Vladimir Putin's party. Since then, he has been re-elected twice.
Evraz is a vertically integrated steel and mining company listed on the London Stock Exchange with assets in Russia, Kazakhstan, the United States, Canada and the Czech Republic. It has assets in coal via the Raspadskaya coke mine (in Western Siberia’s Kemerovo region) in which the group holds 82% of the capital. In 2010, an explosion in this mine left 91 dead and 99 injured. The production of the Raspadskayaa mine reached 23.27 million tonnes in 2021.
Before the war in Ukraine, the company aimed to separate its coal assets from the Evraz Group. But this operation was cancelled.
What are the links with Switzerland?
- East Metals AG, Baarerstrasse 131, in Zug, registered in 2002. A 100% subsidiary of the Evraz group, it is the commercial branch through which the group's products are distributed throughout the world (apart from CIS countries), including coking coal. East Metals AG sells coal from the Raspadskaya mine.
Who owns Evraz?
Sanctioned oligarch Roman Abramovich is the main shareholder of Evraz (28.6%), alongside Alexander Abramov (19.3%). Abramovich is known to the general public for being the former owner of Chelsea FC. He belongs to the small group of oligarchs who financed the re-election of President Boris Yeltsin in 1996. At that time, the Russian state, on the verge of bankruptcy, auctioned off stakes in the country's most lucrative companies in exchange for loans. This is how Abramovich entered the capital of the oil company Sibneft. In 2005, Sibneft was sold to Gazprom (becoming Gazpromneft), allowing the oligarch to pocket 13 billion US dollars. It is on the basis of this fortune that Evraz, of which Abramovich then held 57.5%, could continue to prosper.
To maintain his status as an oligarch, Abramovich (who holds Russian, Israeli and Portuguese passports) had to contribute to the political projects of Vladimir Putin. Elected governor of Chukotka in 2000, he had to invest billions of roubles in this very poor region in the far northeast of Russia. His fortune is estimated at 13.48 billion Swiss francs. (Forbes 2021).
Founded in 2018 out of several small Siberian producers (including the eponymous Siberian Anthracite JSC), this ultra-specialised group takes its name from the anthracite (also called “black coal”) that it mines in this region. With its high energy content and low level of impurities, this quality of coal is intended for the metallurgical industry.
Sibanthracite Group mined 22.6 million tonnes of coal in 2021 and claims first place in the production and export of anthracite. The company has three open-pit mines in the Novosibirsk region (western Siberia), as well as two mines in Kemerovo (also in western Siberia).
What are the links with Switzerland?
Sibanthracite Overseas AG, Baarerstrasse 10, in Zug. Domiciled in 2009, this subsidiary is intended for the export of coal and trades in “commodities of all kinds, in particular coal (…), with the exception of operations prohibited by the competent authorities”, according to its company purpose.
Who owns Sibanthracite Group?
The oligarch Albert Avdolyan acquired, via Siban Holding in 2021, 70% of the shares of this coal producer. This transaction amounted to 1 billion US dollars. Sibanthracite Group should retain its corporate name.
The other shareholder is Maxim Barskiy. The 52-year-old Russian-Armenian businessman has long remained little known, despite his ability to gobble up all sorts of assets in telecommunications, mining, coal and gas. According to Forbes, his fortune reached 1.3 billion US dollars in 2021. In 2016, he acquired Maltese citizenship through the Golden Passport Programme.
Sibanthracite subsequently joined the coal empire of Albert Avdolyan, making his group, A-Property, the largest producer of metallurgical coal in Russia. Before him, billionaire Dmitry Bosov, head of the Alltech group, was the group’s owner. His mysterious suicide in May 2020 was widely reported in the Russian media.
In the hands of A-Property LLC, Elga Coal Complex has been one of the largest mining sites in Russia since 2011. Located in Yakutia (Eastern Siberia), it has the advantage of being geographically closer to Asian markets than the traditional Kuzbass mining basin. By 2035, the owners of the site hope to reach an annual production of 45 million tonnes of coking coal for the metallurgy industry (18 tonnes currently); that is nearly a quarter of current coal exports, all qualities combined.
The extension of a 321 km private train line from the Elga mine to Ulak, close to the Chinese border, should encourage the reorientation of Russian exports towards the Asian market.
What are the links with Switzerland?
- Elga Coal Overseas, Baarerstrasse 137, Zug, registered in June 2020
Who owns Elga Coal?
In April 2020, A-Property, the group of billionaire Albert Avdolyan, acquired 51% of Elga from the highly indebted company Mechel in the hands of Igor Zyuzin. Six months later, the rest of the capital (49%) was bought from Gazprombank (a stake obtained during a debt restructuring of Mechel in June 2016).
A year after this transaction, Avdolyan reportedly transferred 5% of its shares to the Russian state-owned military equipment manufacturer Rostec, headed by Sergey Chemezov. A former KGB officer and close friend of Vladimir Putin, Chemezov is according to Russian media one of the protectors of the Russian-Armenian oligarch Avdolyan (who began his career in telecommunications, and later specialised in the low-cost takeover of companies undergoing restructuring). From 2019, Advolyan set his sights on the coal sector, determined to build an empire.
It is Aleksandr Isaev, a former partner of coal magnate Dmitry Bosov, who runs the day-to-day affairs of Elga Coal Complex. He was appointed at the end of May 2020 and appears since July 2021 among the directors of the Zug subsidiary.
Founded in 2004, Kolmar LLC (unrelated to the other Zug-based Kolmar Group AG) is the rising star of the Russian mining sector. It has since opened new mines, built processing plants and transport infrastructure. Kolmar specialises in coking coal for industrial use.
As Russia’s fifth largest exporter, Kolmar plans to increase its production to 16 million tonnes by 2023 (12 million currently). The group benefited from numerous state supports to sustain its rise, e.g. via the fund for the development of Eastern Russia (38.5 million dollars), preferential loans and significant tax rebates. According to Russian investigative media Agents, Kolmar received a minimum of 141 million US dollars (11 billion roubles) in public funds.
To help Kolmar export its coal from its mines in Yakutia (Russian Far East) to promising Asian markets, the Kremlin has also invested heavily in the renovation of two railway lines (the Baikal-Amurskiy-Magistral BAM and the Trans-Siberian Railway).
What are the links with Switzerland?
- KSL AG, Bahnhofstrasse 12, Zug, domiciled in 2019
- Until 2021, the discreet KSL AG exclusively sold the coal produced by the parent company Kolmar in Russia. The Zug trader's site claims, in a press release, that this link was severed a year ago, refusing to comment on the ultimate economic beneficiaries for “security reasons”.
Who owns Kolmar?
The group was founded in 2004, and 60% of its shares were acquired by Gunvor and Volga Resources in 2012, two companies in the hands of the oligarch Gennady Timchenko, under sanctions since the invasion of Crimea in 2014. The company passed in 2012 into the hands of Sergei Tsivilev, a former military official catapulted to the position of governor of the Kuzbass coal region, and psychiatrist Anna Tsivileva, born Putina and a daughter of a cousin of the strong man in the Kremlin, according to the investigation of Agents. The latter was the chairwoman of the board of directors of KSL AG in Zug until February 2018.
In 2018, Sergei Tsivilev publicly declared that he had sold this asset to a third party whose identity he did not want to reveal.
Mechel is made up of more than 20 coal and metallurgical production companies. Once Russia's third-largest mining company, specialising in coking coal (the one used by industry), Mechel has grown in scale through successive acquisitions thanks to its fundraising on public markets. The group got into a lot of debt about ten years ago to develop the infrastructure allowing it to connect its mines and international markets. It now weighs nearly 5.6 billion dollars in turnover and has assets (mines, steelworks, power plants and ports) in the four corners of Russia.
The energy group also has the particularity of being listed on the stock exchange since 2004 in Moscow and New York, where its share price fell by half the day after the invasion of Ukraine on 24 February. Mechel has just obtained government permission to continue trading its shares outside the Russian Federation, despite a law passed in April by Putin.
Mechel produced 11.3 million tonnes of coal in 2021 and traded for 7.5 million tonnes of coke and thermal coal.
What are the links with Switzerland?
- Mechel International Holdings AG, Mechel Trading AG, Mechel Carbon AG, Oberdorfstrasse 11, Baar (ZG)
- The mining company domiciled its trading branch in Zug in 2005.
Who owns Mechel?
Despite the group's listing on the stock exchange, Igor Zyuzin still owns more than half (51.54%) of Mechel's shares, compared to more than two-thirds ten years ago.
Igor Zyuzin began his career at the age of 27 as a foreman in the famous Raspadskaya coal mine (now owned by Evraz). He pulled out of the game two years later, playing mediator during a miners' strike. He then rapidly rose through the ranks, forming his own multinational in 2003.
In 2008, Vladimir Putin personally took care of putting Igor Zyuzin back on track. At a government meeting he had pointed the finger at Zyuzin, accusing him of exporting coking coal at half the price of those for the Russian steel industry, then in difficulty. Amid a crash in the Mechel share price, the Russian anti-cartel authority’s investigation resulted in a fine for violating competition laws just a month later.
Since this call to order, the Mechel group (and the fortune of its main owner) are only half of what they were a decade ago. Mechel is now up for restructuring and sold its shares of Elga Coal in 2021 to the group of Albert Avdolyan.
KTK is 49.7% owned by Safmar Group, through the Cypriot offshore company Kilton Overseas Limited. Safmar is a Russian financial and industrial group (oil, coal, potash, financial assets, constructions, hotel, media). It is Russia's fourth largest coal producer. From 2019, Safmar's coal assets were strengthened, with the gradual acquisition of shares in the “Kuzbass Energy Company” or KTK.
KTK is one of the largest exporters of thermal coal. In 2020, its production was 9.53 million tonnes, of which 6.52 million tonnes were sold abroad.
What are the links with Switzerland?
- KTK Overseas AG, Grundstrasse 12, 6343 Risch-Rotkreuz (ZG)
- This company was registered in 2015, first in Zug and then in Risch (ZG).
Who owns KTK?
The Gutseriev family controls 49.7% of KTK through the Cypriot offshore company affiliated with the Safmar group (Kilton Overseas Limited). The other shareholders are Iskender Khalilov (23.35%) and Viktor Piguchov (24.6%), a former Russian senator also acting through Cypriot entities. Both men are close associates of Gutseriev.
According to Forbes, Mikhail Gutseriev is worth 1.3 billion dollars. He is the founder and principal shareholder of Safmar Group. The billionaire conducts his business with his son Saïd, 34, who is a shareholder in the group and whose fortune is estimated at 1.5 billion dollars.
Gutseriev senior was sanctioned by the UK and EU in 2021 for being a “longtime friend” of Belarusian dictator Alexander Lukashenko.