Interviews and articles

15.09.2005

Interview: Her main weapon is populism

"Son-in-law of the former president of Ukraine Victor Pinchuk has become, perhaps, the main victim of the Orange Revolution. Until recently, as a People's Deputy of Verkhovna Rada, he was one of the wealthiest Ukrainians. According to Forbes Magazine, his fortune was assessed at $1, 4 bln, and now he has to do his best to protect his industrial empire from the threat of nationalization. In his interview for "Vedomosti", Victor Pinchuk was telling about his business prospects and on how the developments around his Nikopol Ferroalloy Plant had influenced the political events in the Country. 

- Is it true that your father-in-law, ex-president of Ukraine Leonid Kuchma assisted a lot in setting up your business? 

- Well, you know, by the time when I met Lena [Elena Franchuk, daughter of Leonid Kuchma], my business had been set up already. I was a multimillionaire and owner of several plants. It would be quite silly to claim that aura of a President's family does not accompany a person who had once joined it. I am sure some people were really impressed by this fact. Sometimes I feel regret at my wrong assessment of true reasons of those around me and their attitude to my business. I did not even think about it, because everything I had ever achieved in my life I'd done it by myself. And I'd always resort to a very serious self-restriction. The President Kuchma himself always rejected vigorously any application of his position to the benefit of his relatives. 

- How have you become a multimillionaire anyway? 

 - Metallurgy, before it became my business, used to be my profession. I graduated from Dniepropetrovsk Metallurgical Institute and got a doctorate in 1987. Then there was Perestroika period and I set up a small business "Interpipe", whereby I introduced my inventions at metallurgical and pipe-producing plants. I earned heaps of money form my innovations, several thousand of rubles per month at the end of 80s. And then, I shifted from engineering developments to commercial activity. The market was suffering a collapse, and there no economic relations. One of the plants that I cooperated with requested me to assist them in supplying cast iron and steel sheets. I came to metallurgical works to ask: "Can you supply us with cast iron?" They said: "Sure we can but we need coke for that". I then came to a by-product coke plant. And there I was told as follows: "We can supply you with coke, but we need to coal for that". We visited numerous mines and got the answer: "We need pipes and consumer goods". Since there was no "Gosplan" (USSR State Planning Committee) any longer, we turned out to be the coordinating power that managed to help the isolated enterprises restore an integrated production cycle. This was the time when I became a millionaire. Later, in 1995-1996, we started to acquire shares in pipe plants. Today, "Interpipe" is a diversified holding: we are producing pipes, wheels, and ferroalloy; financial, insurance and media businesses.

 - Some controversial developments pertaining to your assets, eventually led to dismissal of Yulia Timoshenko's Cabinet. What can you tell about your personal involvement with respect to such an outcome? 

- The conflict around our Nikopol Ferroalloy Plant (NFP) did not triggered Tymoshenko's dismissal. It just played a role of a catalyst and opened the abscess. The corrupt actions of officials became evident to everyone. The actions of the former-prime-minister were, for some reason, aimed at not recovering the plant to the state ownership but at transferring it under control of "Privat" Group. There is no proof that the enterprise might have remained a Ukrainian one. 

- And whose then? 

- A close friend of Boris Berezovskiy, Russian businessman Dmitriy Bosov has already acquired half of share holding in NFP that used to be owned by "Privat" Group. By the way, Bosov and Berezovskiy reportedly allocated from $15 mln to $30 mln to Timoshenko during the orange revolution ("This is not true. I have allocated no money to Yulia Timoshenko", - said Boris Berezovskiy as quoted to "Vedomosti". - "Vedomosti"). This being said, one of the reasons of Tymoshenko's actions was fulfillment of commitments that she'd undertook. "Privat" Group lacked only NFP to become a full monopolist within the entire ferroalloy sector. The stakes were very high. Perhaps that's the reason why Tymoshenko was participating so openly in this case. I am sure that courts might have been exposed to pressure, and officials might have been made to take illegal actions. Ultimately, it triggered mass protest actions. The government resorted to sudden and forced takeover of the plant. It was for the first time in Ukrainian history when militia squad "Berkut" was sent against the unarmed protester-workers. It was a blatant lawlessness. I think that the only thing that saved us from bloodshed was because TV channels were broadcasting the developments on air. Everything that was happening in Nikolayev was broadcasted not only in Ukraine but in Russia, Europe and USA. 

- Still, what was the reason of Yulia Timoshenko's government dismissal? 

- Apart from this corrupt scandal, there were plenty reasons for dismissal of the government. What we've arrived at today is very sad. The situation in economy is disastrous, being artificially created by ignorant, stupid, and sometimes even criminal actions taken by the cabinet and its leader. Generating blacklists for the so-called re-privatization have planted complete confusion, followed by the meat crisis, petrol crisis and then sugar crisis. All of them were artificial. As a result, we are experiencing not an increase but decline of production for the first time in five years. Volume of investments goes down. Money is flowing out of the country.

Without having achieved any economic progress, Tymoshenko's government launched into showbiz. You know, her major weapon is populism, being extremely leftist one. She failed to give bread to the people. And she resorted to circuses. Taking away business from big businessmen was the circus. A personal rating of the premier had to be improved somehow! 

- Tymoshenko was not the only one to support reconsideration of the privatization transactions, was she? 

- Statement on re-privatization of 3000 enterprises has caused a serious harm to Ukraine. If the issue had been settled in January, the investment climate in the country would have been absolutely different. The President should have held the first meetings, right after his inauguration, with Ukrainian businessmen. And during those meetings he should have specifically told: "The State makes claims on this and that. The reason for these claims are the following. For instance here, one should pay in addition". We could have discussed everything and reached some compromise settlements both to the benefit of the State and the business. We could have concluded amicable agreements on all disputable issues. We could have turned to the following page and moved forward. As early as February we could have started building up the country pursuant to the rules clear for everybody. There were no meeting though. I have been experiencing a blatant pressure from the government during recent months, and I've grown to understand that a Ukrainian shareholder is a person who, from time to time, has to assert its legal property rights. 

-  When did you meet Tymoshenko? 

- We met in summer 1991 in Moscow. We used to manage a joint business. In 1995 we established "Commonwealth" Corporation and work within Ukrainian gas market for some time. Tymoshenko was an authorized representative of Pavel Lazarenko, the then governor of Dniepropetrovsk Region, and who later on became the most controversial Ukrainian premier. At that time, no businessman from Dniepropetrovsk Region could possibly conduct its business activity without, so to say, contributions to the personal cash fund of the Region's principal. I was quick to refuse to play under Lazarenko's rules. I think I was the first businessman in the country to have become in open opposition to him. I tried to explain how dangerous it was for Ukraine to become a private property of Pavel Ivanovich and once, in the presence of all Lazarenko's ministers I told the President Kuchma about legal mayhem Lazarenko maintained in the region. It was, by the way, my first meeting with Leonid Danilovich. So, it's been a long time since Pavel Ivanovich had included myself into his enemy-list. 

The main reason that Yulia Vladimirovna was trying to get even with myself lies with quite recent developments. In 2001 she was spent several weeks in remand prison during investigation of in the case on abuse of office while she was the president of United Energy Systems of Ukraine". She is directly blaming my father-in-law and she appears to have persuaded herself that I had been involved into it as well. Though she knows petty well that I was never supportive of those actions. I honestly tried to help her because I had always known that any economic crime should be proved up to the hilt first. In court. 

- Did the De-privatization of "Kryvorizhstal" and NFP come as a surprise to you? 

- As for "Kryvorizhstal" instance, the advent of elections played a crucial role. Of course, it was an advantage to use "Stolen from People!" slogan during the election campaign. Perhaps, if "Kryvorizhstal" had been privatized in 2003, and "Ukrtelecom" in 2004, some other people would be proving their case. 

- Was "Kryvorizhstal" transaction a really fair and transparent enough? 

- My partner Rinat Akhmetov and myself paid for "Kryvorizhstal" a huge amount of money - $800 mln. This is twice as much than for the all the rest of privatized metallurgy plants of Ukraine. And when they say that someone could have paid more, I would always remember that "subjunctive mood never applies to history". First of all, nobody knows whether there really could be such a person. Secondly, the State had a more or less clear strategy about privatization. There are a lot of instances in the world history when foreigners were not permitted to participate in privatization process of strategic assets. I reckon that the [investment] condition [providing for at least one mln tons of coke output in Ukraine during three years] was justified enough. 

"Kryvorizhstal" should have been privatized necessarily with the involvement of Ukrainian investors. There exist only several players, which are able to produce from 50 mln up to 100 mln t. of steel per year. And this is only the Ukrainian "Kryvorizhstal" that gives our country a chance to join this club. I must also add that revenue should not be the major goal for the State during privatization process. A domestic investor may be controlled much easier since it bears greater social responsibility. So, when the authorities started to take away "Kryvorizhstal", I could perfectly understand them, you know, "Maidan promises" etc. But when they proceeded to NFP, I could no longer understand the logic of what was happening. 

- What struck you most? 

- The tendering was absolutely open. The amount of [$80 mln] that we paid for 50% of shareholding was one of the three major privatization transactions. For instance, after privatizing two ferroalloy plants [in Zaporizhya and Stakhanov], Ukraine gained, approximately, eight times less than from selling half of NFP. We took over the enterprise with production capacity of 400 000 t ferroalloys per year, and by the time they started to take it away from us the production capacity was over 1 mln t. Average wage of the workers had been $100, and then became more than $300. The enterprise pays more than UAH 100 mln of taxes per year. We have provided considerable investments into the production and social infrastructure. 

"Privat" group was the only one that did not meet the requirements of the tendering. In fact, this is the group that has overblown the scandal. There were no reprimands from foreign contenders. But when true motives of Tymoshenko's re-privatization activity became obvious, the true logic was also revealed. However it was wide of the State's interests.

 - How would you estimate the State's chances as for reselling "Kryvorizhstal" and NFP? 

- As things go, the investors should better measure seven times before they start making decisions on such investments. We have all legal grounds to consider that "Kryvorizhstal" I sour property. We are bona fide buyers and we have violated nothing. An award of the Higher Court of Ukraine confirms it. European Court of Human Rights in Strasburg admitted our case to consideration. A serious investor can not ignore it. So, the organizers of the second tendering acted quite short-sighted. I am still open for an amicable settlement that would clear the way for either a tendering or any agreement with our consortium. It might be an additional payment or transferring a part of shares to the State on the basis of mutually beneficial conditions. But nobody has ever discussed the issue. And as for NFP, we avow determination to fight to the end. We have got incontrovertible evidence that some civil servants put pressure upon courts that issued rulings  on restitution of the shareholding to the state property. 

- How did they do it?

- The courts created an awful precedent, fraught with serious consequences for the economy of Ukraine. The awards on re-privatization were made not on the basis of recognizing the tendering conditions as discriminating or understating the amounts, paid for the properties. One can never prove what has never happened. They rested upon a minor, formal controversy between "Privatization Law" and annual State privatization Programs. Pursuant to the applicable law, any enterprise may be sold only after 30 days upon announcement on the tendering conditions and according to the State Program, this period makes up 75 days. The law has a priority in this case we will prove it in the Constitutional Court. 

They are not going to assert "Interpipe's" or Pinchuk's interests there, they are set to save  the Ukrainian economy from breakdown. Almost all of big enterprises of the country were sold in accordance with the law, i.e. within 75 days. Moreover, they made claims against me only. Should the decision on NFP remain valid, all industrial investors will be hooked and find themselves to be fully dependent on either good or bad will of the authorities. 

- Why then did you decide to sell NFP and start negotiations "Evraz" and "Renova" shareholders? 

- I had no choice in the matter. I could understand then that it was the plant they prosecuted but personally myself. And I did not want the fate of the enterprise to be dependent on Mrs. Tymoshenko's attitude towards me. 

- Your life has changed dramatically for the last year. Do you feel like giving up everything, selling what is left? 

- I got quite a few offers as for selling the business. Moreover, it sometimes occurred to me: "What's the reason in wasting your energy under such circumstances existing in the country?" But I have been doing my business all my life and giving it up just because of a change of political state of affairs would be unfair to myself personally. After I came under attacks it gave even better, elevated and prepared for action mood. I reconsidered my attitude towards life in many aspects. At the "Nikopol Maidan" I was standing up not just for my property. It wouldn't be that romantic. All of us – the workers and myself – felt that we were standing up not for money but for principles. For our right to live in a free country, where there is neither abuse of power nor lawlessness whatsoever. For the country where people would freely and duly work. 

As soon as we learnt that Tymoshenko received a well-deserved assessment for her actions in the form of dismissal, everybody started to speak about a second chance for Ukraine. This chance provides us with an opportunity to start all over again, regain investors' confidence, and overcome the incipient crisis before it becomes irreversible. 

- Do you think the new government is capable of overcoming the difficulties you are talking about? 

- Yuri Ekhanurov is a highly-professional economist. He is aware of the importance of a stable investment climate. He is can set up an efficient and outcome driven team. He is not going to play a personal political game or promote himself within PR. He is  a personality who instills hope that he will be able to repair omissions. 

- Don't you fear for the fate of your main business - "Interpipe" Company? 

- Tymoshenko's Government was supportive of restitution of Pivdennotrubniy (South Pipe) Plant (NPTZ) into the State property. It was a sheer madness. The Plant would have stopped operating for an indefinite period of time and 14 000 of people would have found themselves on the street. By the way, when protest actions started at NFP, the workers of NPTZ were the first to support their compatriots. They remember pretty well what a government management may lead to. They also remember Tymoshenko there. Pivdennotrubniy (South Pipe) Plant was supplied with gas by   "United Energy Systems" Corporation of Ukraine", and a s result the plant went bankrupt. 

I am proud of what I managed to accomplish at  NPTZ. The enterprise was more dead than alive. It was motionless. We submitted a restructuring program of this property to the state. The program was implemented by 2000, during Viktor Yushchenko's premiership. Everybody was very supportive of what we were doing and defined it as being one of the best instances of a new and modern economy in Ukraine. 

- Your TV channels broadcasted very detailed coverage of the conflicts around NFP. How do you influence the broadcasting policy of these TV channels? 

- For me personally, the media-business  is business, indeed. I took it up in 1997, when Alexander Shvets and myself started to publish a newspaper that is now being one of the biggest news papers in Ukraine - "Fakty i kommentariji" ("Facts and Comments"). Then we invested into ICTV channel and made one of the leaders of the Ukrainian television broadcasting. I am interested in media projects. I consider this business as very promising one. Average market growth within this segment  is 30% per year. There is no censorship or influence on the content of TV programs from my side. We only set strategic goals, as for instance, what the market share should be. Today, the audience share is something between 26-29%. This is not bad and we are not going to pitch on what we have already achieved. By the way, we are about to launch "Freedom of Speech", a new project at ICTV with Savik Shuster. There was the first program the other day, where they discussed the government crisis. My name was just dragged through the mire during the program. I am ok with it. One may not influence policy of a program. If we are talking about "Freedom of Speech" then it really has to be freedom of speech. By the way, it was Boris Nemtsov who advised us to invite Savik. 

- Does you father-in-law, Leonid Kuchma, live in Ukraine? How is he? And what is he doing? 

- I don't think that eleven months would suffice to enjoy a full rest after almost 11 years of presidency in the country went through, perhaps, the most difficult historic period. However, we have really enjoyed our time this summer. We were celebrating  the Independence Day at one of the European resorts, crowded with many tourists from Russia. They congratulated very heartily my father-in-law on the occasion. He went for the match between CSKA and Liverpool. He was supporting CSKA. He is a big football fan. By the way, Leonid Danilovich went to Georgia not so long ago to support the Ukrainian National Team. He had a meeting with Mikheil Saakashvili and Eduard Shevardnadze. He also keeps in touch with Boris Eltsin and Vladimir Putin. I am sure that Leonid Danilovich's expertise and ties might be useful for Ukraine, particularly, for consolidation of friendly relations with Russia. 

- How do you think the current relations between the new Ukraine and Russia are developing? 

- They have been seriously cooled down, and I think this is our fault. Every month of Tymoshenko's premiership was worth a year of efforts for our country made towards developing civilized and partner relations with Russia. And with the West as well.

Russia is our main market, our nearest neighbor, cultural and historical relative. So, rapprochement between our states must be a key strategic approach pursued by any Ukrainian power if it is sensible enough. At the same time, I am supportive of the European choice and Ukraine's acceding to Europe. 

- Do you support Ukraine's acceding to EU? 

- I am a realist and I perfectly understand that we'll not join the EU within next 15 years. Besides, Europe has found itself on a conceptual crossroads. It is not aware yet of what it has grown to become after the recent joining of new countries. However I am fully supportive of the idea of European integration for Ukraine. But this is not just an institutional integration. I am talking about introduction of European values in Ukraine, about human rights and supremacy of law. The chief issue if the crisis within the government is that Yushchenko and Tymoshenko were initially trying to build two different countries. Yushchenko was trying to build, an idealized by himself though, however, democratic, civilized and European Ukraine, and Tymoshenko was trying to build an authoritarian and populist state with the economy governed from the top. So when I stand up for legitimacy pertaining to my property I likewise stand up for European choice of my country. 

BRIEF OUTLINE OF THE COMPANY

Ukrainian corporation "Interpipe" was established in 1990. The group includes Nizhnednieprovskiy Tube-Rolling Plant, Novomoskovskiy Tube-Rolling Plant, Nikopol Seamless Tube-Rolling Plant "Niko Tube" and Nikopol Ferroalloy Plan. According to "Interpipe", the company's proceeds in 2003 made up around $904 mln, and in 2004 -$1, 2 bln. The major shareholder is Victor Pinchuk. The Group's enterprises employ more than 30 000 people. 

BIOGRAPHY

Victor Pinchuk was born on December 14, 1960, in Kyiv. In 1983 he graduated from  Dniepropetrovsk Metallurgical Institute with distinction. From 1983 to 1991 he worked at  Dniepropetrovsk Tube Institute, starting out as a metallurgy engineer and then being promoted to  a position of senior staff scientist. In 1990 he set up and ran the scientific-production group "Interpipe". Starting from 1998 he was elected a People's Deputy to Verkhovna Rada of Ukraine."

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