Dmitry Rybolovlev, who owns Monaco football club, paid €27 million ($30 million) in 2013 to buy “Woman Arranging her Hair” and “Spanish Woman with a Fan” from art merchant Yves Bouvier.
But Picasso's step-daughter, Catherine Hutin-Blay, whose mother posed for the paintings, says they were stolen from her private collection two years ago.
Rybolovlev says he was unaware the paintings were stolen, and invited the press to see them before handing them over to authorities in Paris on Thursday, stressing his “absolute wish to see the truth come out”.
“These portraits of Jacqueline Picasso, the last wife of the master, possess an immense artistic and emotional value for her daughter, Catherine Hutin-Blay,” he said.
Hutin-Blay has denied consenting to the sale or receiving any money for the paintings, and Bouvier was charged in France with handling stolen goods earlier this month, with the court ordering him to hand over the value of the paintings as a guarantee while the case continues.
Rybolovlev told Le Parisien newspaper on Thursday that he sympathised with Hutin-Blay's “bitterness and sadness” over the theft.
I am not crazy
But Bouvier has maintained his innocence, saying he bought the watercolours, along with 58 drawings, from a trust in Liechtenstein that claimed to represent Hutin-Blay.
“I am not crazy,” he told the New York Times. “I'm not going to sell stolen art to someone who has bought two billion in art from me. He was my biggest client. I am not a fool.”
He claims Rybolovlev is exploiting the case because of a bitter business dispute that blew up between them last year, when the Russian tycoon accused him of inflating prices on art works.
Over the past decade, Bouvier has organised 37 sales of major artworks worth two €2 billion to Rybolovlev, who made his fortune in the fertiliser business after the collapse of the Soviet Union.
Bouvier is not only an art dealer, but also one of the leading organizers of offshore storage facilities for wealthy collectors, shuttling masterpieces between high-tech storage facilities in low-tax countries such as Switzerland, Luxembourg and Singapore.
Rybolovlev's collection rivals that of major museums, featuring names such as Van Gogh, Monet, Rodin, Matisse and da Vinci, but is technically owned by offshore companies in the British Virgin Islands, held in his daughters' names.
'I've been betrayed'
In January, he accused Bouvier of fraud, saying he was hiking the prices of artworks, rather than simply finding him the best price and taking a two-percent commission.
Rybolovlev's lawyers say Bouvier pocketed “between $500 million and $1 billion” from the inflated prices.
The case has intrigued the art world and spanned several countries, with Rybolovlev managing to get Bouvier's accounts in Singapore temporarily frozen.
“I have been betrayed,” Rybolovlev told Le Parisien.
“He made us believe he was negotiating the price in our interest… while today he claims he was negotiating for himself as a salesman.”
Singapore's top court was not convinced.
Last month, it unfroze Bouvier's accounts, with the judge ruling that “it is at least doubtful, even if not wholly incredible, that the respondents genuinely believed that the remuneration for Mr Bouvier's services was limited to the two-percent fee.”
But the case rumbles on in Monaco, where a decision is due on November 12th.