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How will TUI Group respond to the European Union's sanctions against the tour operator's largest shareholder? The issue goes beyond any potential financial fallout and becomes one of corporate responsibility and the integrity of the TUI Group brand.

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The Russian oligarch Alexey Mordashov, who owns 34 percent of TUI Group shares and is its largest shareholder, on Monday became subject to a series of European Union sanctions, including an asset freeze and travel ban.

Mordashov, who’s based in Moscow and is a member of TUI Group’s supervisory board, is chairman of Russia-based steelmaker Severgroup, which is a shareholder of Bank Rossiya. He has majority ownership of Severgroup and was its CEO for 19 years.

The European Council referred to him as Mordaschov. The world’s largest tour operator, TUI Group, based in Germany with stock market listings in Germany and the UK, calls him Mordashov in financial documents.

In 2017, according to the European Council sanctions announcement, Mordashov had a 5.4 percent stake in the Bank Rossiya., “which is considered the personal bank of Senior Officials of the Russian Federation.”

“Furthermore, Severgroup has considerable stakes in the National Media Group which in turn controls television stations which actively support the Russian government’s policies of destabilisation of Ukraine,” the council said.

The European Council pointed out that Severgroup also owns JSC Power Machines, which sold four wind turbines to Crimea, an areas of Ukraine that Russia occupied several years ago.

The U.S. Treasury Department leveled economic sanctions against JSC Power Machines in 2018 over its role in Crimea.

“He is therefore responsible for supporting actions and policies which undermine the territorial integrity, sovereignty and independence of Ukraine,” the European Council stated, referring to Mordashov. “He is also responsible for providing financial and material support, and benefiting from Russian decision-makers responsible for the annexation of Crimea and the destabilisation of Ukraine.”

On Monday, prior to the European Council decision, TUI Group CEO Fritz Joussen publicized a letter he wrote to employees about Russia’s “war of aggression in the middle of Europe” in a press release and on LinkedIn.

“Some of you have also asked me about our largest single shareholder Alexey Mordashov and our position with him,” Joussen wrote. “Mr. Mordashov has been a TUI shareholder for around 15 years and has held about a third of our company since he propped it up during the Corona crisis. Two thirds of our shareholders are from Germany, the EU, the UK, the U.S. or are funds.

“Mr. Mordashov is also one of 20 representatives on the Supervisory Board elected by shareholders at the Annual General Meeting. However, our company is run by the Executive Board, like any German public limited company, and not by the shareholders or the Supervisory Board. We therefore assume that any restrictions or sanctions against Mr. Mordashov will not have any lasting negative consequences for us as a company.”

A TUI Group spokesperson didn’t immediately respond to a request for comment about the European Union’s action imposing sanctions against Mordashov.

Because Brexit separated the European Union and the UK, the European Union action doesn’t impact his assets in and travels to the UK. Like TUI Group, Severgroup stock trades on the London Stock Exchange. It also trades in Moscow.

The UK hasn’t yet taken any action against Mordachov, one of the richest billionaires in Russia and a vocal Putin supporter.

In addition to freezing his assets in Europe, the European Council action means the Russian oligarch is barred from “entering or transiting through EU territory.”

While TUI Group’s Joussen wrote it is doubtful that any sanctions against Mordashov would financially hurt the tour operator long term, it’s unclear whether or how the company might distance itself from its largest shareholder.

Mordashov sits on three Supervisory Board committees, including its strategy committee. The Supervisory Board has received Executive Board briefings several years ago on European Union-UK Brexit negotiations and the potential impact on air travel, the effectiveness of the UK’s Covid response, TUI Group’s liquidity position, and updates on the tour operator’s technology and product roadmap.

There is no way of knowing if any of this information was passed along to Russian authorities.

Mordashov has a colleage on the TUI Group Supervisory Board, Vladimir Lukin, who is a special advisor to the Severgroup CEO. The European Council, which has leveled “restrictive measures” against 680 individuals and 53 entities, has not added Lukin to the list.

Mordashov wields his 34 percent share of TUI Group’s voting power indirectly through another company that he controls. Under UK listing rules, his is considered a controlling stake in TUI Group, although German authorities do not characterize it as such.


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Tags: alexey mordashov, corporate governance, european union, germany, russia, sanctions, tui, tui group, ukraine, united kingdom

Photo credit: Russian oligarch Alexey Mordashov, TUI Group's largest shareholder, as seen in 2013 when he was CEO of Severgroup. The European Union leveled economic sanctions against him for giving material support to Russian leaders who spearheaded the occupation of Crimea and the Ukraine invasion.

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