EuroChem Group AG said it is exploring avenues to appeal against the sanctions targeting the company’s Lithuanian phosphate fertilizer subsidiary, AB Lifosa, and that the Zug, Switzerland-based fertilizer group has no plans to sell the Lifosa plant, according to an Tass report, citing EuroChem CEO Segey Tverdokhleb.

The CEO was speaking to the Russian news agency on the sidelines of the 2022 St. Petersburg International Economic Forum on June 17.

The Lithuanian government has put Kėdainiai-based Lifosa under a temporary administration. The Lithuanian plant halted operations in April after banks froze the company’s accounts the previous month due to European Union (E.U.) sanctions imposed on EuroChem’s former controlling shareholder and CEO Russian billionaire Andrey Melnichenko on March 9 (GM April 15, p. 1 & p. 35; March 11, p. 1). Reports had been circulating earlier this month that Lifosa was planning to restart production “shortly” (GM June 10, p. 10).

According to a June 21 report by thepostedia news portal, citing the Acting Administrator of Lifosa, E. Kassel, every effort is being made for the company to resume operations as soon as possible in accordance with the requirements of the sanctions.

Kassel assured employee representatives that the business resumption plan already has been prepared and will be submitted to the Ministry of Finance “in time.”

Tverdokhlebemphasized to Tass that EuroChem remains the owner of the plant and has not “lost the plant,” and that the Lithuanian property “cannot be taken away other than through the courts.” He said the group does not intend to lose this business, in which it had invested “many, many tens of millions of dollars.”

According to the report, the CEO said the appointment of a temporary administrator is “the Lithuanian government’s right in line with the law on sanctions enacted in Lithuania,” but that the decision to appoint a temporary administrator “contradicts EuroChem’s position that the company is not under sanctions.”

Corporate lawyers are currently reviewing the format of appealing and continuing interaction, the report cited Tverdokhleb as stating.

Lifosa’s main product is DAP, with a production capacity of some 1 million mt/y. Last year, the company exported 398,881 mt of DAP, according to Trade Data Monitor. It also produces water soluble crystal monoammonium phosphate, monocalcium phosphate (MCP), aluminium fluoride, phosphoric acid, and technical grade sulfuric acid.

EuroChem on June 21 issued a statement on the group’s ownership and control.

In the statement, EuroChem stated the group “is not sanctioned, has never been sanctioned, and is free to continue with its important mission of supplying high-quality crop nutrients to world markets,” and that it “complies with all applicable laws at all times.”

On the ownership of the fertilizer group, it said “EuroChem is majority-owned and controlled by E.U. trustees of a trust, whose beneficiary, Aleksandra Melnichenko, has no majority ownership of, nor influence over, EuroChem.”

“Therefore, EuroChem is not controlled by a sanctioned person,” said the group.

The group said any report that former or current beneficiaries “are majority owners, part of the management structure, or wield influence over company affairs in any way are demonstrably false.”

EuroChem said it would fight such claims vigorously to protect the company’s reputation as a leading global fertilizer producer.

The group added that it is incorrect to state that EuroChem’s founder, Andrey Melnichenko, “handed over” or “signed over” the company, or “control” of the company, to his wife, Aleksandra Melnichenko. It said any such characterization is “completely false.”

On March 8, Andrey Melnichenko exercised “his sole right to irrevocably cease to be a beneficiary of the trust,” and the trustees recognized that Aleksandra Melnichenko succeeded Andrey Melnichenko “automatically as beneficiary,” EuroChem said.

Aleksandra Melnichenko became the new beneficiary of the trust in May (GM May 27, p. 29). Andrey Melnichenko withdrew as main beneficiary of the group and resigned his position as Non-Executive Director following his inclusion on the E.U.’s expanded sanctions list in March (GM March 11, p. 1).

The group said beneficiaries of the trust have no fixed right or income or capital of the trust, and that any decision to distribute income or capital is made at the trustees’ sole discretion.

It added that trustees must comply with sanctions law, which prohibits the provision of funds to sanctioned individuals.

“EuroChem’s full compliance with sanctions law has been recognized and accepted by several national authorities, allowing the company to continue producing and distributing fertilizers to world markets,” said the group.

The Zug-based fertilizer group last week said it intends to comply with Swiss and other laws following sanctions on Aleksandra Melnichenko, according to a Reuters report (GM June 17, p. 31).

Lithuanian Railways (LTG) earlier this month notified Russia’s Kaliningrad railways of termination of the transit of some goods, sanctioned by the European Union (E.U.) as of June 18, Russia’s Prime news agency reported, citing the Governor of the Russian Kaliningrad enclave, Anton Alikhanov, on June 17.

The transit of oil products to the Kaliningrad Region will continue until August 10. Kaliningrad is nestled between Lithuania and Poland.

Alikhanov estimated that about 40-50% of all the cargoes transported from the Kaliningrad Region to other Russian regions would be impacted. Some Russian cargoes, including some fertilizers, are also exported via the Russian enclave, which has a Baltic Sea coastline. Some of Uralkali PJSC’s potash is understood to be shipped by Kaliningrad.

Kremlin spokesman Dmitry Peskov, commenting that Lithuania’s decision has “an element of a blockade,” said the decision to stop transit of some goods through the Kaliningrad Region is “unprecedented” and is seen by Russia as “illegal,” Interfax reported.

Peskov said everything in the E.U. sanctions list has been banned. He said Russia will redistribute the logistics chains for these goods using ferries and deliveries by the sea

Moscow is reported to be considering retaliation if Lithuania does not “swiftly” reverse its decision.

Belgian fertilizer producer Rosier SA is proceeding with the transactions proposed as part of the rescue package offered by controlling shareholder Vienna-based polyolefins and fertilizers major Borealis AG, and will carry out a recapitalization of the company, following approval at an extraordinary shareholders’ meeting held June 16 (GM June 10, p. 26).

The recapitalization will be through a €55 million (approximately $57.9 million at current exchange rates) capital increase provided by Borealis, and will be implemented at the latest by July 31, 2022.

After the envisaged capital increase, Borealis will hold a stake of 98.09% in Rosier, up from the current approximate 77.47%.

As a result of the capital increase, as previously reported, Borealis will have the right to launch a “naked” squeeze-out offer for the Belgian fertilizer company, and to delist the company from Euronext Brussels.

Moustier-based Rosier earlier this year sought investor approval for a debt-for-equity swap aimed at raising €55 million from Borealis after its assets fell to less than a quarter of its statutory share capital (GM Feb. 11, p. 33).

At the same time as the implementation of the capital increase, Rosier will enter into a new committed unsecured intra-group financing facility of up to €15 million.