A Russian oligarch circumvented UK sanctions by selling his stake in a London mansion just three days before the invasion of Ukraine, openDemocracy can reveal.

Alisher Usmanov’s investment was transferred legally to his Russian business empire on 21 February – less than a fortnight before he was slapped with a “full asset freeze”.

It means the former Everton investor can potentially still profit from British interests, despite the sanctions against him.

The move involved a London property firm called Curzon Square Ltd, which Usmanov controlled a stake in.

Under its old name – Klaret Services (UK) Limited – the firm holds a leasehold for a Grade II listed property in Mayfair, a short walk away from Buckingham Palace.

But his investment was quietly sold off just before Russia invaded Ukraine, amid growing calls for the British government to sanction oligarchs.

It was sold to Russia’s largest iron ore producer, Metalloinvest, which Usmanov founded in the 1990s.

The Uzbek-born billionaire still owns 49% of Metalloinvest today, via a Russian investment group.

But the UK sanctions only applied to Usmanov himself, so Metalloinvest is free to control property interests in London.

Documents seen by openDemocracy reveal that the sell-off happened 13 days before Usmanov was placed under sanctions.

UK taxes were due on the sale of shares, which were paid a couple of days later. But by the time HMRC confirmed the transactions, sanctions had already been introduced.

The UK’s official business register was not updated until April. It eventually published documents that misleadingly suggest the shares were transferred after sanctions were already in place, which would have been illegal.

In reality, confidential records confirm the purchase agreement was signed in February – meaning that no rules were broken.

But the sale raises questions about the UK government’s slowness to dish out sanctions. Boris Johnson had faced calls to introduce financial restrictions on “oligarchs close to the Kremlin” since January, as Russian troops prepared to invade Ukraine.

The setup also raises questions about the effectiveness of the sanctions regime, as it allows Usmanov to potentially profit indirectly from British interests.

Thanks to the sale of shares, Curzon Square Ltd is now owned outright by part of the worldwide Metalloinvest empire, called Metalloinvest Logistics DWC-LLC, after it also bought up the other shares.

In turn, Metalloinvest is controlled by USM, a Russian holding company in which Usmanov owns a 49% stake.

Like most countries, the UK uses a 50% threshold when imposing sanctions – meaning that Metalloinvest is allowed to carry on doing business in the UK, unless it is placed under separate sanctions of its own.

A legal way to ‘circumvent’ sanctions

Charles Enderby Smith, a senior sanctions lawyer at Carter-Ruck told openDemocracy: “It would be difficult for a person designated under the UK sanctions programme to sell shares in a UK company lawfully”.

He explained that regulations prohibit any British person or business from “dealing with funds or economic resources owned, held or controlled” by someone under sanctions. “Making funds available directly or indirectly” to a sanctioned individual is also prohibited.

Another sanctions expert, George Voloshin, said the sale of shares in Curzon Square Ltd provides a “legal way to circumvent them [sanctions] through corporate restructuring.”

He added: “Usmanov can still receive dividends from the business as the ultimate main shareholder of Metalloinvest."

Usmanov’s motive for selling his controlled shares is unknown. A spokesperson for USM told openDemocracy the process was “initiated in 2021” and was “not related to any restrictions or sanctions against him”.

But the result is that a valuable UK asset has not been frozen and Usmanov can legally receive any future dividends from Curzon Square, via Metalloinvest.

Metalloinvest says that Usmanov “does not control the group's enterprises”, but he still appears to be active in the company.

When sanctions against the oligarch were announced in March, Metalloinvest said they were “ungrounded and unfair”. But a spokesperson explained that business could carry on “as usual” and would not be affected by the penalties because Usmanov owned “less than 50%”.

‘Putin affiliate’

In a statement, USM said: “Claims that Metalloinvest or Mr Usmanov himself have close ties to Vladimir Putin are completely unfounded and are false.”

But the US government has labelled him a “Putin affiliate” who is “close” to the president. “Usmanov’s Kremlin ties enrich him and enable his luxurious lifestyle,” it claimed.

The EU sanctions list also describes Usmanov as “one of Vladmir Putin’s favourite oligarchs”.

Two years ago Usmanov himself described Putin as “the number one leader in the world today”.

And in 2010 he said: "I am proud that I know Putin, and the fact that everybody does not like him is not Putin's problem."

The Russian president personally awarded Usmanov the Order for Service to the Fatherland in 2013, which is Russia’s highest civil award.

Putin has also awarded state honours and awards to staff at Metalloinvest and has been pictured with the company’s leaders.

Usmanov’s empire

When shares were sold, the Russian iron ore giant Metalloinvest became the unlikely new owner of the Curzon Square property firm.

Established 16 years ago, it was originally called Klaret Services (UK) Ltd, and is thought to form part of a global network of “Klaret” companies that own Usmanov’s private jets and superyachts across the world.

These include his largest private plane, which is owned by Klaret Aviation Limited in the Cayman Islands. The Airbus was registered in the Isle of Man until authorities struck it off in March, as Usmanov faced international sanctions.

The plane, which could be worth up to $500m, bears the registration number IABU, which reportedly stands for “I’m Alisher Burkhanovich Usmanov”.

Meanwhile, the oligarch's 512ft superyacht, Dilbar, is reportedly owned by another “Klaret” company based in Malta.

With an estimated value of $600m to $735m, it is believed to be one of the world's most expensive yachts, complete with two helipads and an enormous indoor pool.

In response to Russia’s invasion of Ukraine, US authorities labelled the yacht as “blocked property”, leading to reports that the yacht’s staff had been fired because wages could no longer be paid.

This article was amended on 22 June 2022 to reflect the fact that, while Alisher Usmanov had previously invested in Everton Football Club, he was not a shareholder as originally stated.