Photo: Yuri Chichkov for RBC
Ukrainian businessman Serhiy Kurchenko, who fled Ukraine for Russia after the overthrow of Viktor Yanukovych, met with RBC correspondent Ivan Golunov in his Moscow office. He declined to discuss the details of his move to Moscow or his connections with Russian officials and businessmen, but he did discuss his plans for business development in Russia. Kurchenko's new media project in Russia was announced the day before, on September 23.
"I started under Yushchenko"
You left Ukraine in February. Did your departure affect your business there?
"I had 30% of my business in Russia and 70% in Ukraine. The business climate there is currently unfavorable, but all assets remain under control, and they are operating more or less as usual. The government is attacking them, but we are resisting, and we are successfully doing so. However, we now have the resources and opportunities to do business in Russia, which is much more promising. The government is stable here, and the system is more stable. I am confident that my company will only benefit from this situation, which at first glance seems uncomfortable.
– Do you continue to invest in Ukraine?
"I'm more likely to support current assets and watch what's selling cheap on the market. And right now, practically everything is selling in Ukraine—many Russian and foreign companies are leaving the market."
– Numerous statements from high-ranking Ukrainian officials have appeared in the press about your corrupt ties. Do you have a response to these accusations?
"What they say and what's actually happening are two completely different things. I think the current Ukrainian government is incompetent and incompetent, and what they say often bears no relation to reality. They say what voters want to hear. They say anything to cover up their mistakes and policy failures."
It's obvious to everyone that things are worse now than they were. By all measures—peaceful life, the economic and social situation. They say one thing, and these statements have no basis in reality. The Prosecutor General tells journalists he has a criminal case against me. Our lawyer submits an inquiry the same day and receives a reply that there is no such criminal case. The lawyer holds a press conference, but the authorities have not responded. This seems impossible, but it happens.
– So, for now, the criminal cases against you exist only in the form of Arsen Avakov’s Facebook status?
– Yes. But Avakov himself is on the international wanted list [in June 2014, at Russia’s request, the head of the Ukrainian Ministry of Internal Affairs, Arsen Avakov, was placed on the international wanted list].
The charges against you are based on your possible closeness to Viktor Yanukovych's family. Were you acquainted? Did your connections with high-ranking officials really help you earn money?
I'm 28 years old, Yanukovych is 64. He's from Donetsk, I'm from Kharkiv. I don't have, and never have had, any joint assets or projects with him. I own a large business in Ukraine—probably one of the five largest holdings. Naturally, I interacted closely with all the officials, including the president. But our conversations were 99% sports-related and 1% social. I have never had any business issues with the former president's family. Moreover, my business began to develop even before Yanukovych. I started under Yushchenko [Viktor Yushchenko, President of Ukraine from 2005 to 2010] and interacted with Yushchenko more than with Yanukovych. "Close to the family" is simply a convenient label invented by competitors and seized upon by journalists.
– So, in your opinion, under Yanukovych, you weren’t given the most favorable treatment?
"I didn't buy a single state-owned enterprise. Everything I bought was acquired on the market, including from Russian companies. The plant from LUKOIL, the media holding from Lozhkin [Boris Lozhkin, founder of the Ukrainian Media Holding (UMH Group), announced in June 2013 the sale of 98% of UMH Group shares to Sergey Kurchenko's VETEK group of companies. On June 10, 2014, Lozhkin was appointed head of the presidential administration of Ukraine]. None of this was state property. If I had the opportunity to talk to them behind the scenes, the first thing I would have done would be buy some state assets. Besides, just think about it – Yanukovych has been gone for six months, and we continue to work and expand.
– But are you familiar with Yanukovych Sr., with his sons – Alexander, Viktor?
"I don't know my youngest son, Viktor. I've seen Alexander a few times at football matches. I've seen Viktor Fyodorovich 20-30 times, but our conversations were limited to sports and social projects."
– After the events in Ukraine, did you meet with Yanukovych?
- No, we didn't communicate. He didn't initiate it, and neither did I.
"They're making some arrests, and we're lifting some arrests."
What's happening with your Ukrainian assets today? The media reported that your holding company had to significantly reduce its staff and close its Kyiv office. Is this true?
"The authorities are attacking us as much as possible. 20% through legal means, 80% through PR. At the same time, the authorities are proposing work plans that fall outside the legal framework. So, nothing special has happened."
- What do they offer?
"Today's government is much harsher in its dealings with business. It's more detrimental to the budget, but more beneficial to itself, even more so than under all previous regimes. There's a general trend in Ukraine: each successive president is worse than the last. Yanukovych was better than Turchynov. Kuchma was better than Yanukovych."
– It's known that some of your assets—FC Metalist, the Odessa Oil Refinery—have been seized. Or are these just statements?
"Some arrests happen, and some are lifted. We have over a hundred lawsuits, but we haven't lost a single one yet. It's a never-ending process."
– What assets are currently under arrest?
At this point, neither the Odessa Oil Refinery nor Metalist have been seized. Some goods and some companies operating at the Odessa Oil Refinery have been seized. But some of the companies there are ours, some are not. But these are mostly populist statements. The regime changed in February, and if they had genuinely substantiated claims, by September it would have led to some kind of court ruling, there would have been proven damages, there would have been some kind of confiscation order, there would have been a new owner. If I bought these assets at a high price over the last three years, that means they are liquid. I think any business operating in Ukraine today faces similar problems. The authorities simply have control points, PR points: it's convenient to say that the Yanukovych regime stole everything, it's convenient to say that Kurchenko didn't pay taxes under Yanukovych. This helps them distract attention from their own policies. But if we imagine that the Yanukovych regime stole, and stole, as they say, billions, and now they haven’t stolen for six months, then where are the billions?
Photo: Photoxpress
Odessa refinery
– Is someone trying to take over your assets in this way?
– The Ukrainian market is very narrow: there is the Akhmetov group [Rinat Akhmetov is a Ukrainian billionaire and owner of the System Capital Management holding company. According to Forbes magazine, he is ranked 96th on the list of the world's richest people with a fortune of $12,4 billion], the Firtash group [Dmytro Firtash is a Ukrainian businessman and owner of the Group DF holding company. In March 2014, Vienna police arrested Firtash at the request of the US FBI. Forbes Ukraine magazine estimates his fortune at $400 million], and the Kolomoisky group [Igor Kolomoisky is a Ukrainian billionaire and co-owner of the Privat financial and industrial group. Since March 2, 2014, he has been the governor of the Dnipropetrovsk region of Ukraine. According to Forbes magazine, he is the 1139th richest person in the world with a net worth of $1,6 billion, the Pinchuk group [Victor Pinchuk is a Ukrainian billionaire, owner of the EastOne group, and son-in-law of the second president of Ukraine, Leonid Kuchma. According to Forbes magazine, he is the 545th richest person in the world with a net worth of $3,2 billion], and my group. Naturally, we compete closely with each other. Each of us has our own model for communicating with the authorities. Since my business is closely tied to Russia; and I am from Kharkiv, Russia is close to me mentally and in terms of my business, so I am closer to Russia. Pro-Russian sentiment is currently unpopular in the country, so my assets in Ukraine are currently under greater scrutiny than the businesses of other groups. Although criminal cases have also emerged against Kolomoisky for oil pumped from the pipeline.
– Can Kolomoisky lay claim to the Odessa Oil Refinery?
"There are only a few refineries in Ukraine, so it's clear he's interested in Odessa. But I don't see how Kolomoisky could end up with the Odessa refinery."
– So you are not conducting any official negotiations about the sale of assets?
"I'm not going to sell anything in Ukraine. I'm sure a more competent government will emerge there. You can work with any competent government."
– Did you try to reach an agreement with the new government?
"We have significant disagreements. First, they don't like the policies of my Ukrainian Media Holding because we speak objectively, while many Ukrainian publications are currently biased. Second, I'm not entirely ready for agreements; I don't see any scope for a comprehensive agreement with them."
– So there are no contacts at all between you and the new Ukrainian government?
"I'm not in dialogue with them. My managers communicate with officials on operational matters. But I don't have any substantive dialogue with Poroshenko or Lozhkin."
"I was the only businessman on the list."
Despite problems with your other Ukrainian holdings, you recently appointed Igor Rakhaev as a new coach for Metalist Kharkiv. Are you continuing to finance Metalist? Will there be any budget cuts?
When I bought Metalist, the club was fourth in the national championship. In its first year, it finished second and qualified for the Champions League group. Last season, it finished third, but only just behind second place. We plan to remain between second and third place. There may be budget cuts, but they will be minor. Plus, there will be a greater emphasis on social issues. Metalist has a youth football academy, the largest in Ukraine. I believe that in a country facing such a difficult time, youth football will be more relevant than some new Brazilian bought for €30 million.
– Do you expect any opposition from the authorities regarding this project?
"Metalist's expenses amount to tens of millions of dollars a year. Metalist is absolutely safe, because it's unlikely that anyone in Ukraine would be willing to hand over millions of dollars a month to Metalist."
– You were the primary investor in Kharkiv's preparations for hosting the EuroBasket in 2015 [the European Basketball Championship was scheduled to take place in Ukraine in 2015]. What's happening with that project now?
– At a recent FIBA [International Basketball Federation] meeting, the decision was made to hold EuroBasket 2015 in France, not Kharkiv. This was already clear in February, so we suspended construction and will resume it as soon as the situation returns to normal.
– Are you abandoning your plans to build the Kharkiv Arena [the sports complex that was supposed to become the main venue for the 2015 European Basketball Championship]?
"No. The budget is around $40 million, of which we've already invested $20 million. There's no point in pushing it now, because there's no championship, and without EuroBasket, no one needs it."
Attendance at Metalist Stadium used to be 30–40, but for the last few matches, no more than 10 people have come. Living standards have dropped, and there's no money for tickets, even though they haven't gone up in price and have even halved in dollar terms. People are afraid that something might happen there, afraid of provocations, like what happened in Odessa.
– Do the EU sanctions imposed against you hinder you?
"We're challenging them in court because they're unfounded. They're a bit of a nuisance, but we're fighting them, proving our case, and we're confident we'll succeed."
– In a few words, can you justify your line of defense?
"Firstly, they were added based on false information from the Prosecutor General's Office. The media reported on documents they sent to the European Union, which stated that I was an official, and there were reports that I was under investigation. But at that point, no criminal case had even been opened on any grounds, and I had never been an official. The sanctions are politically motivated. All the other Ukrainians sanctioned were officials or relatives of officials; I was the only businessman on the list."
"Russia has a very stable system."
– This summer, the press reported that you were acquiring several gas station chains in Crimea – LUKOIL, TES, and Sovremennik. Is this true?
"Crimea is a very interesting region. We haven't acquired anything there yet, but we're exploring a lot. We haven't had any deals there yet, but I think Crimea has the potential to be very attractive for investment."
- At the expense of what?
– By combining the capabilities, resources, and management systems that exist in Russia, which are quite effective, with those that exist in Crimea.
– Then tell me, what assets might interest you in Crimea? Oil trading?
"Not only that. The oil market in Crimea is small—around 400 tons of total petroleum products per year. That's not much."
– You said that your business in Russia accounts for 30% of your holding. What are you currently doing in Russia?
We're involved in oil trading and are looking at many assets. We own part of the Ukrainian Media Holding (UMH) here, as well as the magazines Telenedelya and Futbol. UMH's Russian business is comparable in size to Ukraine's. We'll be actively developing it.
– Will you be launching new publications?
– Perhaps we are now carefully studying the market.
– What is oil trading? Gas station chains?
– We look at networks of gas stations, oil transshipments, and trade in petroleum products wholesale and small wholesale.
- Prey?
"We won't be looking at production in the near future, maybe for a year or two. Our segment is still primarily commercial: gas stations, transshipments, and refineries."
Besides oil trading and media, do you plan to invest in Russian projects? What market sectors might be of interest to you?
"Russia is a colossal market. I think many foreign companies will be more cautious about operating in Russia now, given the overall situation. The Russian oil market is dozens of times larger than the Ukrainian one. There are many segments here, and we're exploring them all and entering many of them."
– Are there any completed deals yet?
– If there are any, we will tell you everything in detail.
Looking back at the Ukrainian experience, how much better are investors' investments in Russian businesses protected than their investments in Ukraine? Aren't you afraid...
"Will there be a Maidan in Russia?" [Laughs.] Unlikely. Russia has a very stable system, a strong, effective government, and there won't be any major upheavals in the next decade.
"A federation, a confederation, or something like Transnistria"
– How do you think the conflict in the Donetsk and Luhansk regions will end?
It's hard to say. But the people who live in the east, in Donetsk and Luhansk, will never agree with the regime that has come to Kyiv under any circumstances. They have a completely different mentality and an absolute understanding that their rights will not be respected by the Kyiv authorities. In February and March, there was no uprising in the east yet, but people felt how the Kyiv authorities were treating them. It's clear that the people of the southeast will not accept the fact that they will be under the authority of Western Ukraine, with an American vector, almost under manual control. It's clear to me that there will be ongoing processes in the east through which they will fight for their rights. What this will lead to depends on many factors: how active the Kyiv authorities are, what kind of support they receive. I think it will be a complex process.
– So this will be a kind of Transnistria, a buffer zone between Russia and Europe?
The southeast is very significant for Ukraine in terms of economic potential. The population density there is significantly higher than in western Ukraine. Most likely, the process will continue until the region's rights are fully recognized. The form in which these will be recognized—a federation, a confederation, or something like Transnistria—is a matter for formal agreements between the southeast and the Kyiv authorities.
– Do you plan to return to Ukraine? When might that happen?
I was born and raised in Kharkiv, where I lived until I was 18. Then, for the next 10 years, I divided my time between Moscow, Kyiv, and Europe. I've spent the last five years in Russia, so Moscow is a familiar and comfortable city for me. The question is, where is the most effective location for our head office for the operations we conduct? 100% Moscow. Even if Ukraine were to have an effective and adequate government tomorrow, our main office would still be in Russia. This entire situation has pushed us toward these positive changes.
Ivan Golunov, RBC
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