LVMH shut down in Russia when the war started. But it kept a storied hotel that serves sanctioned clients

By Tassilo Hummel and Anton Zverev

PARIS, Feb 27 (Reuters) - When the war in Ukraine started in February 2022, LVMH shuttered its Louis Vuitton, Dior and Bulgari boutiques in Russia days before Europe imposed export sanctions on luxury goods. 

The conglomerate – controlled by French billionaire Bernard Arnault – also sold its Sephora stores at a loss, even though their mass-market products were not subject to sanctions. And LVMH donated 5 million euros to the victims of what it called the “tragic situation” in Ukraine.

One of its businesses in Russia, however, has kept operating: The Grand Hotel Europe in St. Petersburg, owned through LVMH’s Belmond chain of luxury hotels and trains.

The storied hotel itself isn’t subject to sanctions and is operating legally. However, it has continued to receive payments for providing services to corporate clients that have been sanctioned by Europe and the UK, including major Russian transport, energy and media companies as well as banks and military contractors, Reuters has found.

Signs of the hotel’s ownership have been scrubbed from public view, including images from social media showing an empty space at the entrance where a placard with Belmond’s logo was once affixed. The hotel was also de-listed from Belmond’s booking site in 2023, according to archived versions of the Belmond booking website.

Belmond’s ownership of the hotel, however, continues to appear in Russian, British and French corporate records. Belmond is 100% owned by LVMH, according to its 2025 accounts. Names of the hotel’s corporate clients, including the sanctioned ones, appear in value-added-tax records reviewed by Reuters.

Asked about the hotel’s operations and business with sanctioned clients, LVMH said the Grand Hotel Europe “operates autonomously and independently from Belmond.”

“It is not part of the Belmond distribution systems and the dedicated local team in Russia manages this historic property separately,” the company said. LVMH declined to respond further to detailed questions from Reuters. Belmond issued an identical response.

Executives at LVMH, the world’s largest luxury conglomerate, considered closing the St. Petersburg property but ultimately decided against it, two sources with direct knowledge of the matter told Reuters. “These are people who work for us, that we have been paying for years,” said one of the people. “Shall we punish them because their country is being run by a fool?” 

Yulia Pashkovskaya, the hotel manager, and a hotel spokesperson declined to comment to Reuters. 

Situated on the Nevsky Prospekt in the heart of St. Petersburg since 1875, the Grand Hotel Europe has hosted guests including Britain’s then-Prince Charles and pop stars Elton John and Whitney Houston. One of its first famous guests was Pyotr Tchaikovsky, the Russian composer.

The five-star hotel features a butler service and a caviar bar famous for its “Egg in Egg” dish – boiled truffle-flavored eggs and three types of caviar.

More recently, the hotel has hosted multiple events involving Russia’s political and economic elites. Last year, it hosted a meeting between diplomatic envoys of U.S. President Donald Trump and Russian President Vladimir Putin to discuss the war in Ukraine, and celebrated its 150th anniversary with a lavish gala that included bank executives, the director of the Russian State Museum, and St. Petersburg officials.

For over a decade, the hotel has been an official partner of the St. Petersburg International Economic Forum, the annual business gathering chaired by Putin.

REASONS TO STAY

The hotel’s enduring allure may make it worth LVMH’s while to hold on to the property, Russian business experts say. “Most likely, they are hoping to wait out the situation, thinking that one day things with Ukraine will improve,” said Artem Zhavoronkov, a partner at the St. Petersburg law firm Nordic Star, who specialises in sanctions litigation but is not advising the hotel. “It’s a good asset, it’s profitable. And it is first-class real estate that will only grow in value over time,” added Zhavoronkov. 

LVMH’s decision to retain the property could be part of a long-term ambition to re-enter the Russian market, said Kristian Lasslett, a professor at Ulster University in Northern Ireland who studies corporate behaviour in Russia and Central Asia.

“Business in Russia has long depended on personal connections and the favour in which one is held,” Lasslett said.

There could be other reasons why LVMH has held onto the property, according to people familiar with the situation. Among the possible reasons are Russian rules requiring foreign companies to sell their assets at a hefty discount if they leave the country, and that the city of St. Petersburg holds a 6.5% stake in the art nouveau building in which the hotel is located, according to Russian property records and Belmond filings to the U.S. Securities and Exchange Commission.

The St. Petersburg mayor’s office didn’t respond to questions about whether Belmond needed the city’s permission to sell its stake in the hotel or whether there had been any requests to do so.

Most Western hotel chains – including Marriott, Four Seasons, and InterContinental owner IHG – have cut ties with Russia. Unlike Belmond, all of these groups functioned through third-party investors, allowing them to withdraw from Russia quickly. Some others including Hilton halted new investments but still operate there.

The St. Petersburg hotel does not face international restrictions on its operations because services like accommodation and catering aren't specifically targeted by sanctions, according to legal experts in Paris, London and Moscow and a EU Commission source. Regis Bismuth, an international law professor at Sciences Po University in Paris, noted that the hotel is a Russian subsidiary, incorporated under Russian law, providing everyday services within Russia. 

SANCTIONED CLIENTS

The hotel is making money from sanctioned companies, though. VAT filings to local tax authorities from the second quarter of 2022 to the first quarter of 2025 show the hotel received payments from sanctioned entities including two units of arms maker Rostec and a subsidiary of Tactical Missiles Corp, as well as from ship building company Sovcomflot and energy giant Rosneft. Other payments came from corporations under asset freezes such as Sberbank, Sovcombank and VTB.

The tax filings don’t specify what services the sanctioned companies purchased from the hotel. But most of the individual payments did not exceed $2,000, in line with the hotel’s offerings for rooms, dinners or meeting spaces. The hotel’s room prices range from roughly $270 to $1,200, with high-end suites from $1,800 to nearly $8,000 per night, according to its booking site. Some companies made repeated payments over the years. Others only once or twice. 

The VAT records do not specify what goods or services were received in exchange for payments.

Rostec, Tactical Missiles Corp., Sovcomflot, Rosneft, Sberbank and Sovcombank did not respond to detailed requests for comment. VTB said the information Reuters provided was incorrect but did not specify.

The European Commission, which has drafted several rounds of sanctions against Russia, declined to comment about the hotel. The Commission has said that its sanctions do not apply outside the European Union, but that parent companies may not “use their Russian subsidiaries to circumvent the obligations that apply to the EU parent.”

Among the hotel’s largest clients was sanctioned lender Sovcombank, which paid $140,000 to the hotel. Another major client was Prezident-Servis, a travel agency owned directly by the Kremlin, which made payments worth at least $270,000 to the hotel.

Most of the payments by both entities coincided with the St. Petersburg forum in 2023 and 2024, the records show.

In response to questions about the hotel, the Kremlin said it was not in the hospitality business.

Europe Hotel LLC, the firm behind the property, is listed among LVMH’s hundreds of 100%-owned subsidiaries on page 401 of its latest universal registration document, a detailed mandatory annual filing with the French market watchdog AMF. Reuters could find no other public mentions of the hotel by LVMH since the start of the war. 

Between 2022 and 2024, the hotel’s annual revenues have almost doubled, reaching 1.9 billion roubles ($25 million), slightly above its top line in the three years preceding the 2020 COVID-19 pandemic, according to Russian financial filings reviewed by Reuters.

The hotel in 2024 generated a net profit of some $5.7 million in 2024, its highest since data was first published in 2004. The cash from these operations reached $13 million on the hotel’s balance sheet published last year, up from less than $1 million annually from 2018 to 2021, according to the documents. The records indicated that the hotel’s profits stay inside Russia.

The totals are tiny compared to LVMH’s annual sales of around 80 billion euros, but the hotel’s storied past and its ties to Russia’s elite give it value beyond the revenue it generates.

“I always say that Grand Hotel Europe is one of the true places of power in St. Petersburg," Pashkovskaya, the hotel’s manager since 2006, told a Russian YouTuber in June 2023. 

The bubbly flowed at the Grand Hotel Europe’s 150th anniversary gala. But Veuve Clicquot, Dom Perignon and other LVMH champagne brands were nowhere to be seen in a video released by the hotel after the party was over. The bottles came from Russian-occupied Crimea. 

(Reporting by Tassilo Hummel in Paris and Anton Zverev in London. Additional reporting by Lisa Jucca in Milan and Gleb Stolyarov in Tblisi, Georgia. Edited by Peter Hirschberg and Lori Hinnant.)