When Swiss prosecutors knocked on the door of DTEK Trading SA’s Geneva headquarters in February, they were on the trail of Rinat Akhmetov, Ukraine’s richest man. The billionaire, who controls the coal broker, was 2,000 miles away in Donetsk, Ukraine, brokering peace after protests had pushed Viktor Yanukovych, the country’s president -- and a longtime ally -- into exile.
The officials were investigating ties between DTEK and MAKO Trading SA, a company controlled by Yanukovych’s son Oleksander, whose assets, as well as those of his father’s and 16 others, were ordered frozen by the European Union. Within weeks of the surprise visit, Dmitry Firtash, another Ukrainian billionaire, was arrested in Vienna on a U.S. warrant.
“The Firtash detention was an alarm,” Oleksiy Haran, a professor of politics and member of the Maidan Council, the political movement that opposed Yanukovych, said in a telephone interview. “It was also a sign that pressure is growing and nobody can feel safe.”
Akhmetov has much to fear. While his industrial fortune has plummeted by almost half to $11.9 billion, according to the Bloomberg Billionaires Index, it remains the country’s largest by a factor of three. Historically tethered to Yanukovych, the 47-year-old billionaire has been forced to navigate Ukraine’s political maelstrom in the hopes of salvaging what’s left.
Since Yanukovych’s ouster in February, the normally understated billionaire has made a number of public pronouncements. He issued a statement on March 2 that said the “use of force and lawless actions from outside are unacceptable.” This week, addressing protesters, he insisted Ukraine remain united, at times cursing in Russian. He also has been meeting with the country’s emerging political leaders.
Elena Dovzhenko, a spokeswoman for Akhmetov, said he wasn’t available for comment. The billionaire controls his fortune through System Capital Management, a Donetsk-based holding company.
“After Yanukovych’s dismissal, Akhmetov had to regain his political influence, including the search of special relations with the country’s new rulers,” Volodymyr Fesenko, the head of Kiev, Ukraine-based Penta Political Analysis Center, said in a telephone interview.
Akhmetov met last month with Vitali Klitschko, the 42-year-old leader of Ukraine’s UDAR party and, at the time, a candidate for the nation’s presidency, to discuss the crisis, according to a March 9 statement from UDAR. Klitschko, a former boxer, dropped his bid for office later that month and voiced his support for Petro Poroshenko, the billionaire owner of Roshen Confectionery Co., Ukraine’s biggest chocolate producer.
Poroshenko is leading the polls in next month’s elections against former prime minister Yulia Tymoshenko, who was released from prison the day Yanukovych fled Kiev for Russia, and has once again set her sights on Akhmetov and the rest of the country’s ruling class.
“One of my top priorities will be transforming Ukraine’s oligarchy to fair business, which will act separately from politics and won’t feed upon the state,” Tymoshenko, 53, said at a March 27 press conference. “We will introduce common rules for them. The chain of money-politics-money will no longer exist.”
In 2004, Tymoshenko took aim at Akhmetov and Viktor Pinchuk, the son-in-law of former President Leonid Kuchma and Ukraine’s second-richest man. The pair acquired Kryvorizhstal, the country’s largest steel mill, for $800 million in a 2004 state asset sale while Yanukovych was in office.
Tymoshenko’s government killed the deal after she took office a year later. It ended up being sold to Mittal Steel Co., owned by Indian billionaire Lakshmi Mittal, for $4.8 billion.
The ties between Akhmetov and Yanukovych go back “more than 20 years,” the billionaire told the Financial Times on March 17. During that time they rose from their origins in the Donetsk region to corner the nation’s two most powerful positions in business and government.
After Yanukovych was elected president in 2010, Akhmetov purchased MMK Ilyich and Zaporizhstal, two steel mills that increased revenue at his Metinvest, the country’s largest steel manufacturer, by 52 percent to more than $14 billion in 2011.
A year later, Akhmetov’s DTEK was the sole bidder in two of five government auctions held during 2011 and 2012, in which Akhmetov bought five power generators and distributors that gave him control of about 70 percent of the country’s thermal power output. His net worth leaped $3 billion in six months.
“His business was like a cup of cappuccino,” Alexander Valchyshen, chief economist at Kiev-based Investment Capital Ukraine said in a telephone interview. “He got all the cream, the others got what was left on the bottom.”
He controls the businesses through closely held SCM, a conglomerate that employs 300,000 people and comprises more than 100 companies operating in metals and mining, energy production, machine building, banking and communications. The billionaire also owns the Shakhtar Donetsk soccer team.
Akhmetov founded SCM in 2000, two years after Yanukovych was named prime minister, and built it into Ukraine’s largest industrial conglomerate, with $31 billion in group assets and $23.5 billion in 2012 revenue, according to the company’s website. DTEK and Metinvest account for around 90 percent of SCM’s revenue.
The assets will remain under pressure as the country’s businessmen face potential legal action from the West and further destabilization caused by military action from Russian President Vladimir Putin, who has annexed part of the country and called its rebellious nationalists “fascists.”
“The possibility of Russia invading Ukraine’s south-eastern districts is still on the table,” Yuriy Yakymenko, director of political and legal programs for Razumkov Centre, a research group in Kiev, said in a phone interview. “In this case, Akhmetov’s assets may turn out to be under threat as well.”
Putin’s government seized the bank accounts of Poroshenko’s chocolate operations in Russia on March 14 and sent riot police to block access to Roshen plants in Lipetsk, Russia, according to the company’s website.
Earlier this month, state-controlled Gazprom OAO, Russia’s largest gas company, and the Russian government canceled price discounts for Ukraine, raising the cost of the commodity 81 percent to $485 per thousand cubic meters. The increase was a blow to Metinvest, which relies on gas to fuel its steel-making operations.
Akhmetov also has interests in Crimea’s offshore oil and gas prospects through DTEK subsidiary Vanco Ukraine, and controls Krymenergo, the monopoly supplier of electricity on the peninsula. The billionaire’s Ukrtelecom services 80 percent of 532,000 fixed-line users in Crimea, according to a April 1 report from Moscow-based research group iKS-Consulting.
“The Russian government may insist that his companies should work according to Russian rules, and Ukraine may insist on the opposite,” Alexander Paraschiy, an analyst for Kiev-based Concorde Capital, said in a telephone interview. “If they don’t come to any agreement, it will damage his businesses.”
Anna Terekhova, a SCM spokeswoman, said the turmoil hasn’t affected the company. The Swiss raid revealed nothing that ties DTEK to Yanukovych, according to Terekhova, who said the company is working with prosecutors to get all of the seized documents returned.
On April 7, Akhmetov emerged as a central player in the standoff in Donetsk, the namesake capital of the region in Ukraine where pro-Russian separatists seized government offices, calling for a referendum to join Russia and a boycott of the May 25 presidential elections.
The billionaire met with the protesters into the early morning hours and urged them to negotiate with Ukrainian authorities, saying that the Donetsk region “is a part of Ukraine,” according to Interfax-Ukraine news agency.
“The privatization deals of Yanukovych and his closest circle may be put under revision,” said Yakymenko. “Questions may be raised on some of Akhmetov’s assets, but, I think, that it will be isolated measures in his case.”
To contact the reporter on this story: Alex Sazonov in Moscow at firstname.lastname@example.org
To contact the editors responsible for this story: Peter Newcomb at email@example.com Matthew G. Miller