Gregory Surkis
The largest takeover of the Ukrainian electricity sector was supposed to take place back in 2014. At that time, state-owned controlling stakes in six regional power companies and blocking 25% stakes in five others were put up for auction, for a total of 2,5 billion hryvnias (just over $310 million). The auctions would have been a mere formality, as their winners were predetermined through a series of deals between the largest energy oligarchs. Rinat Akhmetov, Igor Gumenyuk, and Konstantin Grigorishin (read more about him in the article) Konstantin Grigorishin, Distinguished Oligarch of Ukraine and Russia) and the Surkis brothers were already counting the profits from their investments when the Euromaidan revolution suddenly broke out in the country, the government changed, and privatization was postponed. It was said that this was revenge by Igor Kolomoisky, who had sponsored the Euromaidan and was pushed out of the energy market division.
And now the situation is repeating itself. Energy assets that weren't privatized two years ago under the Yanukovych regime are set to be put up for sale again. The State Property Fund plans to hold the auction no later than the fall, and this rush is explained by the intense lobbying for the deal from potential buyers. Among them, the names of Grigoriy Surkis and his younger brother Ihor are once again being mentioned, this time playing not only for themselves but also for the team of President Poroshenko's emerging "family."
Hereditary businessman
Grigory Mikhailovich Surkis was born on September 4, 1949, into a highly respected Jewish family, in every sense of the word. His father, Rakhmil Davidovich Surkis, served as a military doctor with the Air Force from the beginning of the Great Patriotic War, and his mother, Rima Yanovna, was the daughter of football commentator Yan Gorinshtein and was far from an ordinary worker in Soviet trade. As a typical military family, the Surkises were constantly moving, with Rakhil Davidovich (according to his own account) serving in East Germany until 1950, and then in Central Asia. How little Grisha managed to be born in Odessa, or why he wrote it down in his biography, is unknown. It's also unclear why he and his brother changed their patronymics in 1996, becoming Mikhailovich.
In 1957, the Surkis family finally settled in Kyiv, where their youngest son, Igor, was born a year later. There, the rapidly growing, restless Grisha also developed a passion for football, and in high school, he was even selected for the Dynamo youth team. However, his athletic career was suddenly cut short for unknown reasons. A failed Soviet football star, Grigoriy Surkis became more serious and focused on his studies at the Kyiv Technological Institute, graduating in 1972 with a degree in mechanical engineering. He was immediately assigned to the position of senior supply engineer at the Main Industrial Enterprise of the Ukrainian SSR. But he passed up the opportunity to indulge in free fruit and berry drinks, transferring in 1974 to work for the Kharkiv-based trust, Ukrremstroymaterialy. A year later, he transferred home, taking a job at the Kyivzhilremstroymontazh trust, where he worked diligently for 16 years, rising from foreman to head of the production and technological equipment department.
Oh no, Grigoriy Surkis didn't build the Obolon and Teremky neighborhoods; he found a better calling: managing the procurement of building materials and plumbing fixtures. A more privileged position in construction (or in general) during that period of widespread shortages was unheard of; it was tantamount to owning Ali Baba's cave! Back then, even Afonya's rank-and-file plumbers from the housing departments earned a tidy profit by peddling faucets and toilets, while the head of the capital's housing department was presented with incredible opportunities and vast connections—after all, many Kyiv officials coveted imported plumbing fixtures. And he wasn't the only one to receive these opportunities: in 1981, Grigoriy Surkis hired his brother, Igor, a graduate of the Kyiv Institute of National Economy, to work at Kyivzhilremstroimontazh. Soon, Igor, too, received a leadership position in the capital's housing department. This is how the Surkis brothers' family business began – they apparently inherited their mother's business acumen more than their grandfather's love of football.
Such a long and successful career in such a lucrative position, especially alongside his brother, was unusual for the time. It is attributed to a close connection with the mayor, Valentin Zgursky, who served as chairman of the Kyiv City Executive Committee from 1979-90 and protected the Surkises not only from the OBKhSS but also from competitors who wanted to take their place. The precise basis for such a truly familial closeness remains unknown, but Zgursky remained inseparable from the Surkises until his death in October 2014.
Valentin Zgursky
The "Kyiv Seven" insurance pyramids
By the early 1990s, distributing Yugoslav toilets had ceased to be a prestigious business. Furthermore, Zgursky was dismissed, followed by his replacement, Nikolai Lavrukhin. The Surkis family realized they needed to restructure. First, they created several "small enterprises" within the capital's construction department, joining the ranks of the late-Soviet "cooperators" and gaining the necessary resources to conduct their now-legal commercial activities. Second, in 90, they established the joint venture "Dynamo-Atlantic" within the Dynamo sports club, headed by Surkis Jr. This typical restructured company, designed for "cost accounting and self-sufficiency," received the right to engage in foreign trade and customs privileges, and immediately began engaging in a typical restructured business: exporting raw materials from the country and importing consumer goods, cigarettes, and alcohol.
In 1991, Kyiv residents Ivan Tsukor and Igor Kozhevin registered the insurance company "Ometa-Inster" with a charter capital of 100 rubles. A few months later, a truly historic event occurred: Grigory Surkis joined the company, instantly increasing the charter capital to one million rubles and becoming the majority shareholder. A million rubles in 1991 was a lot of money!
Along with Grigoriy Surkis and his brother Igor, the following came to Ometu-Inster: Kyiv's former mayor Valentin Zgursky, his relative's husband, head of the credit resources department at Inkobank Yuriy Lyakh, a lecturer at Kyiv State University Bohdan Gubsky, Yuriy Karpenko, and the then chairman of the Union of Advocates of Ukraine, Viktor Medvedchuk, who provided legal cover for the case (read more about him in the article). Viktor Medvedchuk: Putin's crony guarding Russia's interests in Ukraine). Thus, a dynamic team was formed, nicknamed the "Kyiv Magnificent Seven." And they immediately launched into a flurry of activity: the concern JSC "National Investment Fund Ometa XXI Century" was established, which included Ometa-Trust, Ometa-Invest, and Ometa-Inster. Interestingly, the founders of the Ometa XXI Century fund were several recently registered firms abroad, including the Israeli law firm Ben Israel & Co. (P.O. Box 4880, Haifa 31048).
The Ometa Group's reach was incredibly broad, but it remains in the bad memory of Ukrainians as one of the financial pyramids and failed trusts of the 90s. The number of citizens "cheated" exceeded 30! Moreover, Ometa cleverly evaded responsibility: the shares it sold in 1993 for 1250 karbovanets (about 25 cents) with promises of fantastic interest rates were bought back from angry and hungry citizens in 1996 for... 2,6 kopecks (1,2 cents). Thus, legally, Ometa fulfilled its obligations, and blamed the rest on hyperinflation.
However, there is information that the "Kyiv Seven" weren't satisfied with the karbovanets of gullible citizens. Commercial entities associated with them were noted to be closely associated with Kyiv organized crime groups, specifically assisting them in laundering the gang's money, which they obtained from racketeering, prostitution, and drug trafficking.
Football is a profitable business!
Initially, FC Dynamo Kyiv was merely a front for the financial schemes of Surkis's Dynamo-Atlantic joint venture, whose American co-founder, Yefim (Jeff) Ostrovsky, was shot dead in New York by Alik Magadan's men. The size of the foreign currency sums initially flowing through its accounts was quite impressive for the early 1990s. Among other things, these were loans that FC Dynamo took out from commercial banks. For example, in June 1992, $500,000 borrowed by the club from APB Ukraina, ostensibly for the purchase of medical equipment, were transferred to Dynamo-Atlantic account No. 0541995 at Deutsche Bank's Berlin branch. In August, the club again applied to the bank for a loan to purchase equipment for another joint venture created by Dynamo, and received $1,2 million under contract No. 28/19, of which $1,170,000 was immediately transferred to the same Dynamo-Atlantic account.
Igor Surkis
Interestingly, FC Dynamo received these loans from APB Ukraina (at the time, Viktor Yushchenko was the bank's first deputy head, and all such transactions were handled through him) almost on the basis of a promise of honor or collateral equal to the full loan amount. Moreover, the bank's management could not have been unaware of where the funds were being transferred. Subsequently, the club never repaid the bank over a million dollars in loan debt, but for some reason, the bank didn't seem particularly offended. And after APB Ukraina's bankruptcy in 2001, the matter was forgotten entirely.
It was said that most of the commercial enterprises established by the Dynamo club were clones and ghosts of those created by the Surkises brothers, and that the "brotherhood" recruited new "foot soldiers" from sports clubs. This continued until 1993-94, when the debt-ridden club was acquired by the businesslike brothers as Dynamo Kyiv Football Club, and Grigoriy Surkis became its first president. After this, Dynamo began to be used for its intended purpose, and the Surkises, as they say, began to cherish it, becoming the first Ukrainian oligarchs to create their own football club practically from scratch.
It's unclear whether Grigoriy Surkis' motives were noble or selfish, but he used FC Dynamo to cultivate a positive image among Ukrainian football fans, including politicians and high-ranking officials. As the man responsible for Dynamo's restoration, Grigoriy Surkis became close to the first president of Ukraine. Leonid KravchukHe supported him in the 1994 elections and even became his economic advisor. Kravchuk's defeat cost Surkis dearly, forcing him to rebuild a new relationship with Leonid Kuchma. Their relationship didn't work out at first: in 1995, on Leonid Kuchma's personal orders, a comprehensive investigation began into the activities of Grigory Surkis's main company, the Slavutich concern. It had been created the previous year from the part of Ometa that was involved in the oil business, not financial pyramid schemes.
Football helped Surkis here too: several invitations from Leonid Kuchma to Dynamo's VIP box for victorious matches, and Grigory was already rehabilitated in the president's glowing eyes, becoming president of the Football Federation of Ukraine in 1996 (until 2012). A football cult even developed at Kuchma's "court," with ardent admirers including Pustovoitenko and Lytvyn (Read more about it in the article Volodymyr Lytvyn: Does Ukraine need a professional Judas?) and Yushchenko. This is precisely what prompted Rinat Akhmetov to begin the Donetsk team's conquest of Kyiv with massive investments in Shakhtar, which was intended to surpass and eclipse the Surkis brothers' Dynamo. So, behind the long-standing rivalry between these clubs lies a struggle between their owners.
Turn off the lights!
The first wave of privatization in the Ukrainian electricity sector began back in 1997, and Grigoriy Surkis played an active role in it. One could even say that it was largely carried out to suit his interests, or more precisely, to suit the business interests of the "Kyiv Seven." By that time, the group had begun to disintegrate, and the economic winds had begun to blow in a different direction: the large capital earned through various schemes needed to be invested in something substantial.
This was a clear example of the most corrupt "privatization," achieved thanks to the close ties between Grigory Surkis and Prime Minister Valeriy Pustovoitenko, fueled by the latter's passion for football. The first stage was the allocation of management and energy distribution companies as privatization targets. It was very convenient: not to generate electricity, but to deal with fuel and plant maintenance, but merely to collect payments for it. The second step was to justify privatization by "creating an attractive investment climate in Ukraine," promising the people the imminent arrival of a foreign investor who would boost the country's economy. The third step was behind-the-scenes agreements with the future owners of the privatized enterprises. No one bothered to even hold sham auctions; the shares weren't even sold, but transferred to private hands for next to nothing. And in most cases, these were the hands of Grigoriy Surkis, or rather his Ukrainian Credit Bank, which became a co-owner of 58% of the shares of Sumyoblenergo, 59% of Prykarpattoblenergo, 51% of Chernihivblenergo, and 25% of the blocking stakes in the regional power companies of the Kirovohrad, Ternopil, and Kherson regions.
The privatization of the energy sector immediately culminated in the "rolling blackouts" that Ukrainians remember. The sold regional power companies stopped transferring payments to generators' accounts, plants experienced fuel shortages, and power units were shut down. The situation was so dire and provoked such social unrest that in 2000, the Yushchenko and Tymoshenko government decided to use this as a pretext to declare the privatization illegal, in order to return the sold regional power companies to state ownership and then organize "transparent auctions" with other participants. Grigory Surkis was even sidelined from the second wave of privatization, which took place in 2001: then, for the first time, properties were sold at auction, although still by prior agreement. It was then that Konstantin Grigorishin, the new star of the Ukrainian energy business, made a number of very successful acquisitions (read more about him in the article "K").Konstantin Grigorishin, Honored Oligarch of Ukraine and Russia).
However, the Surkis family's nascent energy empire was saved by Leonid Kuchma, who intervened in the scandal. The energy crisis escalated into a political one: Tymoshenko fell into disgrace once again, Yushchenko was removed from his post as prime minister (which marked the beginning of his election campaign), and Surkis's closest business partner, Viktor Medvedchuk, became head of the Presidential Administration—and was immediately targeted by all supporters of Yushchenko and Tymoshenko. This was the balance of power before the first Maidan.
The change of power was accompanied by numerous bizarre "suicides." On December 3, 2004, Yuriy Lyakh, chairman of the board of the Ukrainian Credit Bank and a longtime and trusted partner of Surkis, through whom both privatization and other major activities of the "Kyiv Seven" business empire were carried out, was found dead in his office. He allegedly stabbed himself in the neck several times with a box cutter (three months later, former Minister of Internal Affairs Kravchenko would allegedly shoot himself in the head several times). On the same fateful day, Ivan Rizak, governor of Transcarpathia (2001-2005), allegedly attempted suicide. He was directly involved in the free economic zone in his region, the former business fiefdom of the SDPU(o) and personally of Hryhoryy Surkis. It is worth noting that this zone left its mark in Transcarpathia in the form of areas still controlled by the "Social Democrats", who are in a state of war with the local "Tsymbora" of Viktor Baloha (read more about him in the article inIKTOR BALOGA. PHENOMENON OF THE TRANSCARPATHIAN GOD).
The Great Oligarchic War
After 2004, Surkis's star faded. Of course, he remained an influential oligarch, one of the richest men in Ukraine: in 2006, the magazines Focus and Korrespondent estimated Hryhoriy Surkis's net worth at $606 million, and that of his brother Ihor at $309 million. At his disposal at the time were the Inter and 1+1 television channels, two dozen major companies, and profitable energy assets. However, Hryhoriy Surkis no longer enjoyed his former direct influence on the central government. Moreover, together with Medvedchuk, he became political monsters in the eyes of the "orange" electorate of Right-Bank Ukraine, and an attempt at a political campaign in the East (2006) under the banner of the "Not So!" election bloc foundered against the growing popularity of the Party of Regions. After this defeat, Surkis and Medvedchuk left public politics but remained behind the scenes as "fixers," leveraging their extensive connections. While helping resolve other people's affairs, they didn't forget their own interests. This explains their highly active participation in the failed privatization of 2014.
By that time, very strong players had established themselves in the Ukrainian energy market: Akhmetov, Kolomoisky, Boyko (read more about him in the article Yuriy Boyko – "The Untouchable"), Babakov, and Grigorishin. The latter even managed to wrest a controlling stake in the Vinnytsia regional power company from Surkis, and, in alliance with Kolomoisky, deprive Surkis of his people in the management of the Terpol and Zaporizhzhia regional power companies. This war for the redistribution of already privatized assets continued after the Euromaidan and is still actively underway. Furthermore, this is also preparation for the privatization of the remaining state-owned shares, a balancing and reshuffling of forces before the final decisive push. However, over the past year, the situation has shifted dramatically in Ihor Surkis's favor.
Taking advantage of the standoff between Kolomoisky and Poroshenko that began in late 2014, Hryhoriy Surkis sided with the new president. Fortunately, this wasn't difficult, given that Petro Poroshenko himself is actively gathering allies willing to offer him their loyalty and assistance for a modest benefit. In this case, Surkis couldn't provide Poroshenko with political support, but he did support him as Ukraine's "main football player" (reclaiming this image after Akhmetov's downfall) and as an experienced behind-the-scenes fixer, helping him build his own "family" business empire, adding Ukrainian energy assets to it.
Signs of their connection were revealed during the scandal surrounding the Energomerezha company, when its protégés in several regional power companies began siphoning off funds with an eye on the upcoming privatization. The people "protecting" the company's director were named. Dmitry Kryuchkov: oligarch Grigory Surkis and first deputy head of the BPP faction Igor Kononenko (read more about him in the article Igor Kononenko, the President's Army Buddy ), who is considered the president’s “overseer” and a lobbyist for his business interests.
If the situation does indeed repeat itself, there is a risk that Ihor Kolomoisky, having been "ditched" for the second time, will stage another uprising against the government. The constant threats to stage a "Maidan of the battalions" remaining under the control of Kolomoisky and his important ally, Arsen Avakov, are cited as such a step.Read more about it in the article Arsen Avakov: The criminal past of the Minister of Internal Affairs). They are also supported by the current Prosecutor General of Ukraine, Yuriy Lutsenko, who has involved his department in the hunt for Energomerezha. While Kononenko, the person involved in this scandal, faces little threat as the president's trusted confidant, Grigory Surkis has cause for concern.
Sergey Varis, for SKELET-info
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