Luxembourg-based investment firm LetterOne is holding back around $300 million in dividends due to two of its co-founders being sanctioned. Mikhail Fridman and Petr Aven, both Russian billionaires, were hit with EU and UK sanctions after Russia invaded Ukraine, making them ineligible to receive payments.
The unpaid funds include a $200 million dividend approved at the company’s annual meeting in February 2023 and a portion of a $172 million payout approved in 2022. According to company accounts, $68 million from the 2022 distribution was paid before sanctions were imposed, leaving about $104 million still outstanding. These unpaid amounts are recorded as liabilities in LetterOne’s accounts.
LetterOne’s investments span multiple sectors, including the health retailer Holland & Barrett and Turkish mobile phone operator Turkcell. Despite the company itself not being sanctioned, it is legally prevented from distributing dividends to individuals on the EU and UK sanctions lists.
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A company spokesperson explained, “The dividends declared relate to LetterOne’s performance in the 2021 financial year, before the start of Russia’s illegal invasion of Ukraine. LetterOne is required by law to set aside and freeze the portion of these dividends due to sanctioned individuals.”
Fridman and Aven founded LetterOne in 2013 alongside business partners German Khan and Alexei Kuzmichev after selling their stakes in the Russian oil giant TNK-BP to state-run Rosneft. The four previously partnered in Alfa-Bank, Russia’s largest private lender, though in recent years they sold their shares as they fought to overturn EU sanctions.
After sanctions were imposed in 2022, LetterOne froze Fridman and Aven’s shareholdings, and the pair resigned from the board. They continue to hold just under 50% of LetterOne. Meanwhile, Andrei Kosogov, a billionaire not subject to sanctions, acquired stakes previously held by Khan and Kuzmichev. Kosogov decided not to receive a dividend in the most recent round, and his potential payout has also been included in the frozen amounts.
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LetterOne’s management has emphasized that no dividends were declared for the financial years from 2022 to 2024, highlighting the impact of both sanctions and internal governance adjustments on its financial operations.
Ongoing Legal Challenges and Sanction Status
Fridman and Aven have actively contested their inclusion on EU and UK sanctions lists. In 2023, the EU General Court partially annulled the sanctions, stating that there was insufficient evidence to prove their involvement in efforts to undermine Ukraine. However, the sanctions remain in place on the grounds that both men are “leading business persons” whose economic activities generate substantial revenue for the Kremlin.
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The Russian oligarchs have separately challenged this justification in legal proceedings. The sanctions are a key reason why the $300 million in dividends remains frozen, despite LetterOne performing strongly in the period the dividends were originally approved.
Sources close to the company noted that the delay in holding the annual general meeting for 2023 until February 2024 meant that some dividend distributions from prior years could not be properly reflected in earlier accounts.
LetterOne has maintained that it strictly complies with international law, emphasizing that sanctioned individuals are prohibited from receiving financial benefits. Fridman and Aven did not comment on the matter when approached.
This situation illustrates the complex impact of international sanctions on private businesses, particularly when founders and major shareholders are involved. Even though LetterOne continues to operate in multiple countries and sectors, legal restrictions prevent it from distributing funds to its sanctioned co-founders, keeping a substantial $300 million in limbo.