Vasyl Khmelnytsky: There are three things I don’t engage with – weapons, drugs and business in Donetsk

His assets include “Kyiv” Airport, Unit.City and the UDP company, which implemented the “Novopecherski Lypky”, “Parkove Mistechko” and “Ocean Plaza” projects, as well as hundreds of hectares of land in Kyiv city area. How was the Khmelnytsky Empire built and what does Kyiv government have to do with it.

Vasyl Khmelnytsky was retrained from welder to businessmen by his friend’s from the student’s days brother, Russian millionaire Dmitrii Varvarin.

In 2000, Varvarin was killed near his own house in St. Petersburg. 

Back then, Khmelnytsky had already moved to Ukraine, where he was developing his own business. However, the businessman remembered his teacher’s tragic decease for the rest of his life: for 20 years of its history, Khmelnytsky-controlled Kyiv Investment Group (KIG) has never been a participant in major corporate wars.

This fact is especially surprising considering that the field where Khmelnytsky has been playing all these years is extremely conflicting: land resources and real estate. One can be successful here only upon condition of having a well-established relationship with the city authorities. Khmelnytsky neither denies these connections, nor considers them to be so close.

People with good memory find it difficult to agree with this assessment.

They didn’t forget neither notorious “Kyivenergoholding”, created by then-mayor of Kyiv Oleksandr Omelchenko with Khmelnytsky’s offshore companies, nor the additional issue of “Khreschatyk” bank shares under another mayor Leonid Chernovetskyi, which resulted in the city’s share “dilution” in favour of companies affiliated with KIG.

To Khmelnytsky’s credit, he is ready to talk about the events of those days, although quite briefly. Now he is more interested in the future: since recently Khmelnytsky is developing the UFuture business group. The most liquid assets of a businessman are outsourced for its management. Khmelnytsky is also engaged in completely new projects.

He considers Unit.City – a business quarter under construction in Kyiv, for just the high-tech sector companies – to be his most promising project.

To turn this project into Ukrainian “Silicon Valley”, Khmelnytsky is ready to invest in it over the next ten years. By the way, Unit.City is built on the land of the plant, which the businessman bought from the SPF for the production of motorcycles.

We talked about his buying up energy companies, metallurgical plants and the MPPs, his relations with the three Kyiv heads, his desire to leave the country after he had met with the presidents of Ukraine, about his deal with Yurii Ivanushchenko, and the planned one with Arkady Rotenberg, as well as about his plans to develop the UFuture group projects.

“I won a box of champagne from a guy who produced real diamonds, while we made artificial ones”

“You were a fellow student of Oleksandr Varvarin, the brother of a prominent Russian businessman Dmitrii Varvarin (founder of the “Orimi” concern — EP), whom you started working under. Did you do business before?”

“No.”

“So, it turns out it was Dmitrii Varvarin who brought you into the business?”

“It was his brother Sasha. We lived on the same floor of a dorm. We were both builders, and his older brother had a cooperative building society. First, I went to work for him as a worker. It was in 1988.”

“Can you say that you entered the business thanks to this acquaintance? If it were not for it, would you work as a welder, within your specialty?”

“I don’t know. Maybe not, maybe yes. Maybe I would have been in another company, an oil one. Would be a super oilfield worker.

I have a business acumen. I’m from a poor family. I strived to succeed, was looking for opportunities. Those who seek opportunities will find them sooner or later. At that time, I found an opportunity there, in the building trade. Even now I invest in construction sites. 30 years have passed, but I’m still walking down this road.”

“What, besides the oil direction, were you responsible for in the “Orimi” concern?”

“First there was building trade, then – the oilfield direction. We came into the oil industry by accident: we were engaged in well surveying and repair, but for this work they gave us not money, but oil. And so, it began: we refined oil and got gasoline. Then we sold it. We had built a good business.”

“When did you separate from Varvarins and become an independent businessman?”

“In 1992, when I moved to Ukraine.”

“Why did you move to Ukraine?”

We supplied oil products made of our oil to Ukraine. There was a branch network already. I was responsible for it.

When the Soviet Union collapsed, I had a choice between Ukraine and Russia. My mother, my brother, all my friends live here, and I made my choice realizing that I would have to not only make money, but change my life.

I chose Ukraine. Varvarin and I wrote down the balance sheets and I returned the money I took from him within a year literally, and then I began working independently.”

“At the time you broke up, were you an equal partner of Varvarin?”

“No, I was certainly a minor one. When we broke up, Varvarin got a bigger share, mine was smaller. I got enough with that share. At that time, there were much more innovations in Russia were than in Ukraine: they began privatization, exchanges were opened. When I returned to Kyiv, I had more skills than the local businessmen, it was easier for me to start a business here. I brought here 180 thousand dollars then.”

Andrii Ivanov became your main business partner in Ukraine. You met him in “Orimi”. Why did Ivanov move here with you?

“It was Dmitrii Varvarin who introduced me to Andrii Ivanov. He was on a vacation in the Crimea and somehow met Andrii in Sevastopol. So Andrii became the head of “Orimi” oilfield direction, and I was the deputy director.”

“Why did he come to Ukraine with you?”

“Ivanov is from Ukraine too, from Sevastopol. He had to choose between Sasha Varvarin and me: to stay with him or to go with me. Sasha was a very kind and religious guy, but he devoted less time to business. He was not as pragmatic as me. Probably less efficient. So Andrii probably thought that I was more hard-working and productive.”

“Why did Ivanov change his last name from Dirnberger?”

“He was thinking of changing his last name to a more European one when he planned to develop business in Austria. I didn’t follow what happened next. I always knew him as Ivanov.”

“After moving to Ukraine, you bought asset after asset: from Poltava Diamond Plant to Donbasenergo. Did you buy everything in sight?”

“We worked as an investment fund. The market was too undervalued. Whatever you bought, if you finally made it to making some kind of a product, the asset cost more. It was cool at the time. Then the trend has changed and we have changed as well.

Today we should better be cool in three directions than have twenty directions which we have little understanding of. We bought the diamond plant together with NCHCapital (American Foundation NewCenturyHoldings. —EP) and Varvarin.

By the way, there is an interesting story behind buying the diamond factory. I won a box of champagne from a guy who produced real diamonds, and we made artificial ones. Poltava Diamond Factory makes such products as nail files, so those products are also measured in carats.

This guy goes, “I’m the largest in Ukraine, I produce 5 million diamonds.” And I go, “You don’t understand. I’m the largest. I produce 100 million diamonds.” We made a bet. And then he goes, “Wait, these are other diamonds.” I say, “We didn’t mean carats but diamonds, right?” “Right”. So, he lost.

“Who was it?”

“I won’t say his name. Diamond business is not as big as it seems.”

“If I had graduated from Stanford, I would have probably behaved differently.”

“How did you become Donbasenergo shareholder?”

“Oh, I had a cool case with Donbasenergo. I bought Donbasenergo shares at UAH 30 and sold for UAH 40. Then I bought them for UAH 40 and sold for 60. Then I bought them for 60 – they started to drop to 40, but I bought more. When they fell to 20, I already bought a lot of them, and then they fell to 10 and it lasted ten years. Everything burnt.”

“Have you been interested in the energy business in a consistent manner?”

“Definitely not. I was not interested in energy business at all. We bought shares, believed that the company was growing, if it grew, we sold more. We had both Krymenergo and Zaporizhzhiaoblenergo. As a portfolio investor, we invested just in order to sell later.”

“Sooner or later, a businessman has to choose a profile. Why have you not decided on your profile being an independent businessman for 10-15 years?”

“I lacked knowledge and capabilities. A man comes to me and says: ‘You can buy an apartment for 100 roubles and sell for 300’. I say: ‘Sounds interesting, let’s see what will come of it.’ I bought it and sold for 300, so I earned. I liked the way it happened and began to understand more about how it worked. I see from an investor’s point of view, if there is an opportunity.

There are three things I surely don’t engage with – weapons, drugs and business in Donetsk and Luhansk.

“When did you get these rules?”

“These conditions were prescribed in our Articles of Association back in 1994. Even if we can earn 1000% on weapons, we will not deal with this. It destroys reputation.”

“I see your point about drugs and weapons, but why was such a decision made regarding Donetsk and Luhansk?”

“There was a dangerous criminal environment. We were afraid of this. We came from St. Petersburg and were not completely adjusted to it.”

“Was it really better in Zaporizhzhia where you bought Zaporizhstal?

“It was less criminal, of course. How can you compare Zaporizhzhia and Donetsk? What do we need those risks for? For example, am I ready to do business with Zambia? No, I’m not. There are big risks there. Why do I need this? I love to do business in the sphere I understand. Whether we won or not – I don’t know. Maybe it was necessary to do business there, and now everything would have been different, Donetsk and Luhansk would be with us. I don’t know.”

“What was your and Ivanov’s block of shares with Zaporizhstal?”

“33%.”

“Was this plant also bought by chance?”

“No, I’ll tell you now, it’s another interesting story.

“I told about oil products, we processed them and then sold in Ukraine, mainly through “BASPP” (Boryspil administration for the supply of petroleum products. – EP). The capacity of their base is quite large – 100 thousand tons. I remember, there was a director whose surname was Moroz, a cool guy.

So, what we did on “BASPP”, we gave them oil products and then sold them at retail, but received money in coupons. An inflation rate was furious, and when we received money from sales, they were already devalued. Therefore, we were looking for some options.

One of the options was to buy metal for coupons, sell it for export, get dollars and thus take real payment for oil products.

The privatization of Zaporizhstal happened later. I worked with Varvarin in St. Petersburg, he told how these processes take place. I say: ‘We earn. Let’s take part in privatization.’ So that’s the way it turned out.”

“Did you have any shares in MPP?”

“Yes, I had 15% in Inhulets MPP. I sold them either in 1992 or in 1995 to Vadym Novynskyi. Honestly, I didn’t understand that MPP is more powerful than a plant at that time. I just really didn’t understand that this business is better than Zaporizhstal. This business is really cooler.”

“Why aren’t you interested in its potential?”

“I can make any assumptions, but I was 28 then. I’m not educated, just an assertive confident businessman who wanted to do business. If I had graduated from Stanford, were 42 years old, I would have probably behaved differently, but I look back at my 28 years old self, managing millions, being a millionaire.

Have I made a mistake? I don’t know. Maybe it was a mistake, but it could be an advantage, on the contrary! I would have gone to another system and would have been unsuccessful there.”

“There were three groups of shareholders on Zaporizhstal: you and Ivanov, Ihor Dvoretskyi with Vitaliy Satskyi and Eduard Shifrin with Alex Schnaider. These three groups have always been perceived as heterogeneous.

They say, Shifrin lent you money to buy shares in the plant. Why should he lend money to his competitors and increase their block of shares?”

“There were 30 groups at Zaporizhstal, everyone of them bought metal. Those were all different businesses. There were more powerful groups where I could not get at all. There was a company that shipped hundreds of thousands of tons. And we all had small businesses and communicated with those we were acquainted with. We bought metal, delivered something… Those we were acquainted with were Dvoretskyi and Shifrin.

I came to them and said: ‘Guys, there is an opportunity to buy Zaporizhstal.’ I was persuading them, and I saw that those people were not passionate about it at all. I convinced them that the three of us could buy Zaporizhstal for such and such amount.”

“Who was the third one? Ivanov?”

“No, the third one was me. Shifrin and Dvoretskyi were from different groups.

I go: ‘When the plant is bought, we won’t be here anymore, don’t you understand? An owner will do everything here.’ At that time, the price could be $ 50 million – easily (snaps his fingers – EP). At that time, it was huge money. I didn’t have it. I say: ‘Let’s make it this way: I buy the plant with your money, then we divide the profit, and I repay you.”

“Did he agree because the idea belonged to you?”

“Not just the idea, we still need to understand the processes: to know what funds are being bought out, how the work team buys shares, whether they can be bought back from it and at what price. This is still a whole system to create.”

“Did Satskyi’s group stand apart from your group and the groups of Dvoretskyi and Shifrin?”

“Satskyi’s group formed along the way, when they united with Dvoretskyi. I was in charge of privatization. Edik and Alex were responsible for the export of metal, they had a branch in Toronto. Ihor was in charge of local issues. Good combination. I borrowed $ 20 million from them, bought my share, and then I repaid them from the profit.”

“Am I an oligarch indeed? With no press and no political influence?”

“You have been a people’s deputy since the late 1990s. Based on the fact that you were not an active legislator, you probably classically used the mandate as a defence for your business. Whom did you protect yourself from?”

“Everybody.”

“Who attacked you?”

“Everybody. Prosecutors, police, tax agency, also politicians loved to do it. In fact, throughout all of time, we were not a super-large, but well-off, independent team. There are super-oligarchs, we don’t belong to them.”

“Are you average oligarchs then?”

“I would not use the word ‘oligarch’ at all. Am I an oligarch indeed? With no press and no political influence?”

“How did your being people’s deputy help with the business protection?”

“What happens in practice? Somebody is put in jail – the company collapses. So it was with Khodorkovsky and others. And you know what? I could not be put in jail anymore. If there was no other way, if my companies had any problems, I was free to get busy with providing legally protection for them.”

“Can you recall any attacks on your business?”

“I remember a lot of attacks, but I would better not tell about them, unless you object. There were attacks even after Maidan, when I was no longer a deputy.”

“When did you decide to stop dealing with regional industrial assets, which were non-core for a group, and to focus on investments in Kyiv?”

“I learn and read a lot. I read a book of Welch, CEO of General Electric; he was the best manager of the last century. He says: ‘We are interested in either the first or the second company on the market’. That is, ‘we should be either the first or the second. Everything else is not interesting.’

Well, we sat down to list in what industry we can be first or second. Can it be metallurgy? It can’t. So, we decided to focus on construction investments. And we technically have kept the brand of the first or second company for seven or eight years.”

“What year was this decision made?”

“Probably in 1999-2000.”

“So you decided to invest in the capital?”

“We decided to invest in real estate, and the capital is the most investment-attractive city.”

“Have you met Omelchenko straight away?”

“We are not a small company by Kyiv standards, we are trying to maintain smooth relations with all mayors, but not to be too close with them.

I have met with Omelchenko exactly as many times that I have met with Chernovetskyi and Klitschko. I saw Klitschko three times in five years and I saw Omelchenko maybe two times and Chernovetskyi about three times.”

“To make decisions, private meetings are not necessary.”

“If you analyse the construction business of Kyiv, you will see that we are a company that meets the standards. Suppose we are building “Novopecherski Lypky”, 700 thousand square meters of housing, but we are also building 140 thousand square meters of parking lots. Nobody wants to build parking lots ‘cause it’s not profitable, but we still do it, because we understand: nobody wants traffic jams.

We build schools and kindergartens, and I’m not ashamed of any of our objects. What we do is good for whoever governs the city. If today I call the mayor from Unit.City and say: ‘We are building a high-tech park, creating workplaces. Can we meet and talk about it?’ He will probably make an appointment, but I just never had questions.

We’ve got “Zhuliany” airport. How can I not communicate if the mayor asks for something? If this is something reasonable, then he will also help.”

“I was not acquainted with either Kuchma’s wife or Kuchma himself”

“Whose idea was to create “Kyivenergoholding” (established in 2006, the company in whose ownership the Kyiv authorities transferred the city owned blocks of shares of Kyivenergo, Kyivgaz and Kyivvodokanal – EP), and how did you become a co-owner of this project?”

“Frankly speaking, I don’t even know. Some time, Andrii Ivanov was engaged with this. I don’t understand why. We had some small shares of Kyivenergo, on which basis something was cycling. Now I can’t even remember.”

“Well, it turns out that companies affiliated with Ivanov and you were partners of city companies in this project. Obviously, the city authorities don’t take in partners anybody out of the blue. So, I come to a conclusion that then there was a relationship between you and the city authorities.”

“Haven’t I told you the story behind “Zaporizhstal”? I spelled it out for you. People from the outside are trying to dress it up somehow: ‘No, it was Kuchma who helped him to buy the plant through his wife.’ I was not acquainted with either Kuchma’s wife or Kuchma himself. I was in his office only once in my life when I still was a deputy, but people still overinterpret things.

Was it right to start “Kyivenergoholding”? With hindsight, it was probably wrong. We should have bought shares on the stock exchange and made the holding private. It was a hybrid and it fell apart. If you want to know whether I had unsuccessful businesses – yes, half of them. Just the other half overlaps them.”

“The question is that this project is the evidence that Khmelnytsky and Ivanov were partners of the city authorities in a specific project.”

“I’m a specific partner of the city authorities in “Zhuliany” project, I’m building an airport. Now I finish the new terminal that costs 630 million UAH. People will be flying comfortably. This is a positive public-private partnership project.

Do I ask Klitschko’s permission? No, I don’t. This is just a project. No schemes. The same thing happened with “Kyivenergoholding”.

“When did you resign from “Kyivenergoholding” shareholders?”

“Frankly speaking, I don’t remember. It was Andrii Ivanov who was responsible for it and knows more. The thing is, we divide our projects between ourselves. We are not partners in every project. For example, he is not a partner in Unit.City project. There are projects where I’m not a partner. I think the project is complicated, and he believes in it.

Besides, I have many partners in my projects except for Ivanov. I love the partnership, but even if we have a joint business, we have a responsible person. Suppose, I’m responsible for this, he is responsible for that. With “Kyivenergoholding”, he was more responsible.”

“That is, I may not even try to ask why Suprunenko (Viacheslav, the son-in-law of the then mayor of Kyiv Leonid Chernovetskyi – EP) bought your package in the holding.”

“No reason. Probably, because he paid good money. Would it be not Suprunenko…”

“Was there any pressure from the city authorities on you both as businessmen? The larger the business, the more opportunities to influence it.”

“Want a frank answer? First, there wasn’t any, but even if it were, why would I tell you this?”

“You could say ‘Next question’ and everything would be clear.”

“Business doesn’t like to share when it loses. I’m telling you that there was nothing here, it just was not quite efficient business. They offered money and we probably sold it. There was just no profit.

We have no conflicts with any business group.”

“This is another thing.”

“We’ll better give way somewhere, we don’t like conflicts. Usually people get into conflicts, spend a huge amount of money and time on them, and after a while, both their groups lose. We are quite a flexible team. It happens so that we even compromise, but who we fight to the bitter end with are raiders and extortionists.”

“Has this flexibility anything to do with Dmitrii Varvarin’s tragic end?”

“Nothing of the kind.”

“Perhaps, that example taught you that it’s more profitable to be flexible.”

“I don’t know what exactly happened to him, to be honest.”

“He was killed.”

“Why was he killed? Because he played a little in local politics, had a big business in Russia and in Ukraine?.. I absolutely don’t understand what it was connected with.

He was killed around 2000, and we broke up with him, stopped doing business together in 1996. For four years, he had been building his own business there, and I was building mine here, in Ukraine. At that time, we almost didn’t communicate. I was at the funeral, it was a tragedy for me.

It was for me like losing a teacher. Whatever it cost, it was a loss. However, I don’t know why. Maybe because of the rigidity, or maybe he stepped on somebody’s toes.”

“There was no goal to bankrupt “Khreschatyk”. It was the National Bank strategy.”

“Your business is called “Kyiv Investment Group” (The name originates from the company of the same name, which since 2005 has managed the key assets of Khmelnytsky and Ivanov. It was liquidated in 2013. – EP).

You call it the investment fund, but it accumulated what you could buy, working on the principle ‘buy cheaper, sell more expensive’.”

“Yes, exactly.”

“How did you become an owner of “Khreschatyk” Bank?

“Khreschatyk” Bank? I don’t remember the story, because Ivanov was responsible for this. I just remember how we didn’t agree on the “Khreschatyk” Bank issue.”

“Tell me, please.”

“I have had different businesses, I see where the world moves. Why did we sell “Zaporizhstal”? We sold it a year before the crisis (in 2007 – EP). If we kept it for a while, we would have collapsed. We sold it because we saw: Ukraine has only 10% on the market. Everything is connected with export.

Those plants to which we export begin to construct new plants. For example, Turkey and China. I can see that when they finish constructing plants, our exports will decrease, and the cost will fall. Therefore, while the construction is not completed, we decided to sell the business.

All in all, it was the right decision. Then another crisis hit, and “Zaporizhstal” was affected substantially. Although today it’s not on a bad score.

I saw it in advance. This is like now I see that the Internet is replacing shopping malls. Not that much here, but it happens gradually, and now it’s global.

In America, they have 20% of online sales. Take away 20% from shopping centre’s profit – and they are bankrupt. In the US, some hypermarket goes bankrupt every day. We watch this, so I’m not building hypermarkets outside Kyiv right now. This is not a trend any more.

Now back to “Khreschatyk” bank. We’ve got 40 banks that got collapsed. The tendency of the state was clear: they would crush the banking system in order to reduce the number of participants. Moreover, new technologies make it possible to pay by card, by phone, and the banks are no more as profitable as before.

I can see it because that’s what I deal with. I told Ivanov a year before the bankruptcy of the bank, saying: ‘Let’s sell it to the partners. The partners (Dvoretskyi) were ready to give us pretty good money for it. But he went: ‘No, it’s not enough, we can get more.’

I still confirm that there was no goal to bankrupt the bank. It was the strategy of the National Bank – to clear up the market. If there was only “Khreschatyk” Bank which went bankrupt, then it would be possible to find fault with us, but there were 80 banks, and they were larger than ours.

It was clear to me that we would not get the better price, that there would be stagnation of the global banking system, and the state’s goal is to clear up the market. I said to Ivanov: ‘Sell it, or buy out my share’. So, I went out of the deal. If you look up the NBU registers, there is a record that I quit a year before the bankruptcy. I saw where it was going.

Andrii stayed, doing his best, this was his right. I was no longer a shareholder.”

“Before your quit, an additional issue was made, as a result of which the share of Kyiv was diluted. How, in this context, is it possible to correctly estimate the relations of KIG owners with city authorities? Why did the city authorities not respond to this case?”

“I can’t say for sure, but what is an additional issue? All parties must invest money. One side says, “Listen, I have no money. Well, I have no money now.’ It could be me or you.”

“How, in your opinion, Ivanov’s image losses from “Khreschatyk” bankruptcy related to the benefits from the absence of settlements on the bank’s debts? Was there more harm or benefit?”

“Bankruptcy is always bad. Any bankruptcy has negative consequences. There was such a situation that it was not only one bank – the system collapsed. This was done on purpose. There was no chance for banks to survive. I thought at that time that “Khreschatyk” bank was doomed, just like the rest of the banks.”

“You still had “Real Bank”. Why do you need a bank in Kharkiv?”

“No idea. It was Andrii Ivanov’s business. To tell the truth, I visited that bank just twice in my life, and I visited “Khreschatyk” once.”

“Was it Serhiy Kurchenko who bought “Real Bank” from you?”

“We sold it to one of our bank’s shareholders, and then he resold it.”

“Who was it?”

“Seriously, I didn’t keep an eye on it.”

“Nobody calls me about the land bank. Today it has no value”.

“Is it true that KIG has 2 thousand hectares of land in Kyiv?”

“Well, probably now it’s less than 2 thousand hectares. This was a long time ago. Now we still have some land, not quite right in Kyiv. There are some collective farms on the outskirts that have land in Kyiv, maybe 300-500 hectares.”

“That is, there were about 2 thousand hectares, and now there are 500 hectares?”

“It’s false information about 2 thousand hectares. We had a bank of land in Kyiv and in the region. Suppose, we had a collective farm with 500 hectares on its balance. Now this land has no value, it’s a burden. We don’t have such amount of land in Kyiv.”

“Didn’t you increase your land bank in the Klitschko years?”

“In the Klitschko years we just successfully lost the land bank.”

“Was it taken from you?”

“No, one day we gave up the land, another day we sold it. Today it’s not an asset.

Today a person calls me and says: ‘Vasyl Ivanovych, I have 2 hectares of land in the outskirts of the city. I want to do something with them.’ I go: ‘Give me $ 1 million, and I’ll take it from you.’ He: ‘What do you mean?’ Me: ‘I will take and serve it, pay rent, hold it for ten years.’ He: ‘You don’t understand, it’s me who wants 1 million.’ Me: ‘Then don’t call.’

Therefore, nobody calls me about the land bank. Today it has no value. Probably, in the centre of the city, on Khreshchatyk, 2 hectares is a value, but we are not building on 2 hectares. We are only interested in complex development.”

“If you didn’t increase your land bank under Klitschko, it means that you have formed it under Omelchenko and Chernovetskyi. Can you say that these purchases were civilized, not for bribes?”

“They surely were not for bribes. Quite the opposite, they were made in accordance with current legislation. That’s how it was. I give my word.”

“We have very flexible legislation.”

“It’s flexible, but there are different approaches. You can buy not land, but property. We are in Unit.City now. We bought not the land, but a plant on 20 hectares of land. We can consider it a plant, and we can consider it as land. Is it violation? Of course not.”

“You bought it as a motor factory from the SPF?”

“Yes.”

“You probably bought it with an investment commitment to start producing motorcycles.”

“Was there an obligation to produce motorcycles here? There was, and we have performed it. There were workshops where we have been producing motorcycles and spare parts for five years. When this time has expired, we went to the Kyiv City Council and changed the assigned purpose of a project, started a new one. Now there is Unit.City here. Are there any violations? No.”

“When was the last time you bribed?”

“I never personally bribed in my life.”

“It’s clear that you personally didn’t do this, but you have assistants.”

“So you need to ask them. How can I say for my assistants? Do you know what’s disappointing? Nobody ever gave bribes to me. Actually, no one at all. I would have probably refused, but I would like to know what it feels like.”

“Let’s go back to the present times. There is, for example, Ihor Kolomoyskyi, whose group is conventionally called “Privat”. Is your group called “Kyiv Investment Group”?”

“There is no “Kyiv Investment Group”. My current businesses and social projects are collected under the brand UFuture.”

“Are you the only owner of UFuture?”

“I’m the only one, but in separate businesses I’m the co-owner with Andrii Ivanov.”

“UFuture website distinguishes its nine main directions of activity. In how many of them is Andrii Ivanov your partner?”

“He is my partner in seven directions. We have known each other for 25 years. We are in a transition period – we want to bring the issue of holdings out of the shadowy economy, officially register the shares, bring the shares together.

It used to be difficult, because we were in a wild business. Now it’s more and more civilized, we are heading to Europe, we need to show a more systematic and transparent structure. Our lawyers and attorneys are working on this.”

“You used to say: ‘Ivanov goes where I go, I go where Ivanov goes’.”

“You see, everything has changed. Now I go without Ivanov, and Ivanov goes without me.”

“Why is everything changed so much?”

“We have different strategies. For example, he doesn’t pursue innovation, he just doesn’t believe in this business. He believes that it’s risky and low-profit. This business is really risky and not very profitable, but I like it. I think it’s not profitable now, and in five to ten years it will be a cool business. I play longer game than Andrii.”

“Now you have an ad hoc partnership? Different but equal partners?”

“We are not equal after all.”

“Is he less?”

“I’m senior, I have 65%, he has 35%.”

“In all these seven directions?”

“Yes. Two years ago, we had seven partners, we bought shares from five of them and just two of us left.”

“Please name these five.”

“Valerii Kodetskyi, Vadym Hryvkovskyi, Oleh Polishchuk, Mykola Shmidt and Serhii Pavlenko.”

“Can we say that you’d gone your separate ways?”

“Somewhere we invest together, and somewhere separately. The world is changing, people are changing. I feel comfortable working with him, but we don’t always go together right now.”

“Which of the nine UFuture projects is prioritized?”

“It’s UDP Renewables (investment and development company in the renewable energy sector — EP). ‘Green’ energy is a good trend. Andrii Ivanov is my partner in this project. We are planning to build 300 MW in five years, and also considering WPS projects for a 100 MW.”

“Is belonging to you “Biopharma” your core business?”

“At first we thought it was a “buy-sell”, but now we see it more of a core business. It develops well. We have two plants and are building the third. I think it may be a cool core business. I have two more partners there.”

“I want to work not with DTEK, but with Google”.

“Is the Unit.City project the main one of these nine?”

“I don’t know. Time will tell. I think this will be known in a year, when the degree of its readiness will increase. The success of the project will depend on how we’ll form the market, whether we can create an ecosystem. Unit.City is not so much a property as an ecosystem, and an ecosystem is also a human factor.

Will we be able to create a community that will “drive”? So far, I’m happy with the project and I think we will. It will be a really cool one.”

“Is big business in Ukraine investing in innovations?”

“I don’t rub shoulders with anyone on innovations, because I’m building not an innovation company, but a platform for innovation. There are different innovations that meet in Unit.City: from medicine to IT. This is the platform where you develop.”

“Are you going to look for a partner for Unit.City development?”

“We are. It will be faster and more efficient. But we need a Western partner who has experience in innovative projects, in construction, in creating an ecosystem. We are not looking for a Ukrainian partner.”

“Do you need a partner not as a money bag, but as know-how?”

“I need a partner’s knowledge. How do I like to make a partnership? Here we are, building something. I need a partner who is super professional in this sphere.

“If we are engaged in solar energy, our partners is Spanish company “Acciona”, which is super cool in the ‘green’ energy. We have a financial flow, but most importantly – their skills are available to us. We understand how they do it in the world and what they are successful in. A year has passed – and we caught up with them.

Money is not actually the question. If I find an innovation fund that invests in start-ups in such projects, I would be interested in this fund. I would get their customers’ database who could be dragged here.”

“Are you looking for partners for other projects? For example, partnership with DTEK in the ‘green’ energy.”

“DTEK is cool in energy. Why do they need a partnership? I’m talking about innovations. These are different things. DTEK Academy has opened its office with us. The Academy is what we are interested in: professors come from Stanford, improving us academically. If DTEK wanted to move here, I would not take it. Coal and mines are something different.”

“Would you not take it as a partner or…?”

“As a partner. They need to work with General Electric, and not with Khmelnitsky. I want to work not with DTEK, but with Google, which has extensive experience in the field of innovation.”

“Everything you’ve sold you call unpromising or of little interest. However, Zaporizhstal is operating quite well now. Have you underestimated the objects being sold or is it due to the talent of their current owners?”

“Who bought Zaporizhstal? The people who have experience and an integrated structure (the plant is owned by Metinvest group of Rinat Akhmetov – EP).

Aside from Inhulets MPP, Zaporizhstal is going to close their processing shop. If I depended on them, and if they took the risk of not selling me the raw materials, my economy would be collapsed right away. There are many dependencies in that sphere. For a person who’s got both MPP, coal mines and coke, it’s easier to control all of this.”

“Have you completely cleared your group of low-performing businesses?”

“Not yet.”

“What else is low-performing?”

“There are objects that we have bought but consider to be not quite good. For example, before the crisis, we bought a project in Truskavets, with more than 100 hectares of land, paid $ 15 million to the budget. The land market has fallen, there is no development, and we still pay the rent. If today someone would buy this land for 50% of the investment price, we would be happy.”

“Which of your industrial projects are worth selling?”

“All that we take, we bring to the end. “Zhuliany” is developing well now.”

“What does an airport development plan look like?”

“The problem is that it’s closed within the city. Even if passenger traffic grows, the development is limited. We have seven low-cost carriers. People can fly inexpensively from “Zhuliany”. Now we need to make it comfortable as well.

There is a subtle aspect. Many passengers can pass through “Zhuliany”, but planes fly just in the morning and in the evening. They are empty at night and at daytime, but full in the morning. I had to build a terminal to make it comfortable.

We are investing $ 20 million, and two months later we are handing over a new terminal. In the afternoon it will still be empty but at rush hours, people will be more comfortable.”

“Is it possible to evenly distribute passenger traffic throughout the day?”

“Impossible. This is due to the airport of entry. For example, Paris doesn’t accept at this time. We would like to pay dividends, but in order to create comfort, we invest in the construction of the airport and going to finish it in two months. Kindly invite you to the opening. It will be a pleasure if Ukrayinska Pravda writes that there is something good in Ukraine.”

“Do you make decisions on the development of “Zhuliany” on your own?”

“I don’t make decisions at all. My system is such that I don’t know what is being built in “Novopecherski Lypky”. There is a partner, he is motivated, he has a share, he is looking for the best options. Sometimes he doesn’t even get my approvals.

The case with “Zhuliany” is the following. I have a partner Denis Kostrzhevskiy. Very pragmatic, down-to-earth guy. She is hard-working and efficient.

“Is the airport completely under his control?”

“Completely. I conducted a tour for foreign guests. I go: ‘Look, we’ve built two terminals.’ And Denys goes: ‘Three.’ Me: ‘Do we have three terminals? Exactly!’ I don’t control the current state. This is a managerial system.

The first person of the company should not be at the top, but be in the thick of things. Therefore, my managers, as a rule, often know the process better than me. It’s dangerous if I start making decisions and managing projects emotionally.”

“Then what is the role of Yurii Ivanushchenko in “Zhuliany” project?”

“There was a company that offered us to invest in an airport at that time. We cooperated with it. We are open, and we need investments. Then I learned that this company was related to Ivanushchenko.

They didn’t invest, so I bought their share in “Zhuliany” from them, by the way, quite inexpensively. Now our group has 90%, 10% is Denis Kostrzhevskiy’s share.”

“That is, Ivanushchenko quit the airport project. When did it happen?”

“About three years ago.”

“You have too many social projects for a person who is not going to return to politics or doesn’t want some kind of feedback from society. Why all these social investments?”

“Suppose, people came to you and say: ‘Please give us 200 UAH for the construction of the cathedral.’ Will you give them?”

“I will”.

“What’s so pragmatic about it? It’s just 200 UAH for you is like 200 thousand or 1 million UAH for me. I think the way you would: ‘Well, cool. I will build a school and people will learn, they will raise their level of knowledge, I’ll have a new community.”

“The question is why do you invest in these projects?”

“I invest to develop my business. If I invest in small and medium businesses, I train people, then I look for projects with them and we invest together. I earn a little from this, but I still have an indirect benefit: the market is growing, small and medium businesses are growing, and together this improves the economic situation in the country.

You can save the country by raising small and medium businesses. This is our task. There is a good proverb: ‘I do what I can, but it will be as it will be.’

I try to create an ecosystem that will encourage people to wake up, not to bide their time, but to do something on their own. When I speak, my main message is: don’t waste your time, make decisions, learn, invest your knowledge, create a product, earn some money, create workplaces, move the economics.

This should be the goal of any big business: to raise a small one. Subsequently, the economy will rise, and there will be additional buyers.

The economics is profitable for all businessmen. In Ukraine, people are not very fond of business, but it’s really cool – to raise small, medium businesses, when people take risks, earn money, pay taxes, and then the economics moves.”

“After meeting with the presidents, I wanted to sell everything and go abroad”

“Aren’t these investments related to your desire to return to politics?”

“Oh dear! If you ever see that I have given at least one kopeck to some presidential candidate, I will do somersaults. I’m not going to be a people’s deputies either.”

“You have been a people’s deputy for 17 years. Why are you so distanced from politics now? Are you sick of it?”

“The world has changed. Now it’s reputational friendly to be neither deputy, nor a businessman. Besides, the world has tightened so much that if you are a deputy, you will not open a bank account. You are a PEP (politically exposed person – EP), you are perceived differently. Yes, it used to be that way, now it’s different.

I better now be away from politics. When a person tells me that he has a political idea, I reply: ‘Listen, you are to the wrong quarter. Go away.”

“So, you no longer need to protect your business?”

“I’m not a deputy now, but I’m also not a director of any company. I’m more of a mentor, shareholder. Why would they want to put me to jail? Of course, any person can be jailed. Including a deputy. The president of Brazil is imprisoned. That’s not the point. The point is that I have no field for violations or infringements.

I pay taxes. Over 2018, I received 25 million UAH of dividends and paid a tax from them. I’m served by law firm of Baker McKenzie, they accompany all my declarations. Can I be imprisoned? You can find fault with me crossing the road in the wrong place and put me in jail. Everything is possible in this country, but with me it will not be easy.”

“Don’t you think that large Ukrainian business stuck in the late 1990s, concentrating on assets built in the Soviet era?”

“This is true. Three times a year, I travel to Israel, the USA, Korea, China with my team. I see how everything is moving forward. Many Ukrainian businessmen have a primitive view of the things.”

“People from large business occasionally meet. Do you see Kolomoyskyi, Akhmetov?”

“I’ve been to those meetings quite a few times. I’d rather have an individual meeting with a businessman with whom I have the same vision. Recently, three presidents met with business and non-governmental organizations. I respect all three of them, but the impression of the meeting left me with a desire to sell everything and go abroad. Me, a guy who is not afraid of difficulties.”

“Were the three presidents Kravchuk, Kuchma and Yushchenko?”

“Yes. I wanted to ask them a question: ‘Please, give some advice, what do we need to do in order for the economic situation to improve?’ The response was: ‘Corruption. The budget is plundered.’ You come out in such a depression that there is little choice but to emigrate. I get home, calm down and next morning I roll up my sleeves again and go forward.

Anyway, there are some positive things. I give you 90% that I will come to any governor (the head of the regional state administration – EP) and say: ‘Please give me a piece of land, and three or four plants will be built here.’ I’m sure that 80% of them will say: ‘You go and do it. We think it’s good for us.’ And they will not ask for money.

Another thing is that they don’t have the skills, that this needs to be stimulated, this needs to be developed, they need to learn themselves. It turns out that the most important thing about plants is not the future taxes, but the people who earn their wages. This is what people don’t understand. They say: ‘How many taxes will we have to pay? Will you build us a road instead?’

The task is to build a factory and pay a good, decent salary to people who then come to the store and buy things that are also starting to be produced. It’s just a model. Even without realizing this, they are ready to support you and not to interfere when you do something. This is already an important step.

I communicate with young people. There are hundreds of guys whose eyes are burning, they want to do something. So you need to support them, as it was in Poland. Give them grants, cheap loans and let them build. It drives me up.”

“Am I right in understanding that you are not even trying to talk to Pinchuk, Kolomoyskyi or Akhmetov about the implementation of some major project in Ukraine? You say you like partnership.”

“I don’t have an interesting commercial offer for Pinchuk, Kolomoyskyi or Akhmetov. For example, Unit.City will have been built for 12 years. Do you understand this? I have only been adding funds for three years. They will say: ‘Vasia, are you OK?’ They will ask the same question as you: ‘Are you going to return to politics?”

“Then explain why it takes 12 years to complete the project? Is this investment so stretched in time due to lack of free money?”

“No. This project is built as a staircase. We first built one cluster. If I had built 200 thousand square meters in a year, and only 5 thousand square meters were occupied, then 95% of the area would have been empty, and the whole market would have said: ‘He probably miscalculated.’

So I build not 5, but 3.5 thousand square meters, and thus create a stir: ‘Oh, you have five there, we want more!’ There will be the same 200 thousand but in five years, and everything will be occupied. There is an economic model of consistency.”

“Why is a large Ukrainian business not making long-term investments?”

“I invite you to the opening of the plant for plasma production. We open it in May. You will see how innovative this plant is.

To build it, you need four or five years and some talent. This is really a very complicated machine. Just so you understand, there is no such plant for 2 thousand kilometres around. We are alone in this space, therefore the world brands are fighting against us.

The whole world wants Ukraine to buy, not to produce. They have a problem with selling to us. We say them in the West: ‘Do you want to build a plant here?’ ‘No, guys, buy from us. We will give you a loan so that you can buy from us.’

I say: ‘No way, we will build and you buy from us. That’s the free market’. They say: ‘No, we only need raw materials from you. Grow wheat and we will make pasta to sell it to you.’ But this won’t do.

Come to the opening of the plant! You are Ukrayinska Pravda (‘Ukrainian Truth’) after all. Aren’t you those with innovative minds? Don’t you understand that you need to show some positive things going on in the country? When we laid a foundation of this plant, just two cameras came, in only one of them showed the event, and when there was a problem, 50 cameras came.

Start changing society with me. For example, make a “Positive News” column. I want to warn that you will lose some audience, but don’t worry, you will reach out to those people who will say: ‘If Ukrayinska Pravda says that something changes, we will definitely start acting.”

“Did you have anything to do with “Ocean Plaza”?”

“I did.”

“Considering how we now treat Russian capital in Ukraine, have you received offers from Rotenberg to buy this project?”

“Yes, I wanted to buy “Ocean Plaza” off at some stage, maybe I will even do it someday. The thing is, “Ocean Plaza” is now cheaper than when we sold it.”

“Is Rotenberg ready to sell it?”

“I don’t know, I don’t communicate with Rotenberg. I communicate with his management company. They are ready to consider quitting the “Ocean Plaza” for some money.”

“Were it they who approached you or was it you who approached them?”

“It was me because I saw problems there. I said: ‘I’m a Ukrainian entrepreneur, I will buy it. Let thousands of tenants not worry.’ This is a small and medium business. Imagine “Ocean Plaza” closing and three thousand people who invested money finding themselves on the street. What’s good in this?”

“How much you are ready to pay?”

“I don’t know, I have to see their cash flow. I don’t know anything about their cash flow.”

“Given that Ukraine’s value is somewhere at the bottom, how do you estimate your business?”

“This is the most interesting question. I’m ready to estimate what I’m ready to be paid for, but today nobody is willing to pay.

I’m rated the 60th among the top 100 richest people in Ukraine. 50% of people on this list who are above me are bankrupt. I just know it. They only have assets. But I don’t have accounts receivable and payable balances. Do you understand?

Their assets are estimated somehow, but it’s not shown how much a person owes, how much he is owed. When you bear it in mind, you’ll see that these people have no money.”

“What is the financial balance of your group now?”

“We have a positive balance. The whole group owes $ 100 million, and we used to owe $ 500 million. Here is my balance.”

“Is your capital position up to $ 0.5 billion or more?”

“The group’s capital position? About 0.5 billion. I’m not a billionaire for sure. More or less 20% of 0.5 billion. We can cost 600 or 400. Something like this.”

“Businessmen often say that everything is sold and bought, it’s only a matter of price. Can you sell everything your group owns?”

“No. I will see what the perspective will be.”

“What is it you surely won’t sell?”

“It’s Unit.City, because it has a really powerful perspective in three or four years. Really powerful. It may cost more money. This is my prototype for creating ecosystems in developing countries.”

“Why is it so valuable? For example, tomorrow a Chinese corporation will buy a hectare of land in Kyiv, construct a 20-storey building using state-of-the-art technologies and say: ‘Thank you, Vasyl Khmelnytsky, you’ll drop off here.”

“Why in Kyiv? It’s cheaper to construct in Zhmerynka.”

“Explain, please.”

“You can construct something in Zhmerynka, but there is no community there. You will be alone in the village, there will be cows and a man on a tractor around. What’s the point? And I’m doing an ecosystem here.”

“So you are doing some kind of brain concentration hub?”

“Exactly. Brains, talents, all the advanced resources.”

“Why is it so important given the level of logistics development? Why concentrate brains in one place of the country?”

“Do you know how start-ups are created? Suppose you go to some event, we have 300 events a year here, and you meet someone and go: ‘Listen, my friend, what’s your business?’ He: ‘I sell shoes.’ And you go: ‘I have a system of sales all over the world. Let’s make a sale of shoes of such a such size in Africa.’

So you talked and created a new product. Then you went to the next office, and there they say: ‘We are a law firm, we work around the world.’ They have an accountant, a lawyer. Whoops! -Everything is done. This is an ecosystem. What are the odds of meeting all these people in the village? And here I have a great chance.”

“Are there any important things I didn’t ask you about?”

“My main message is: the world is changing fast, you have to keep up with the times. Not to catch up, but to create new products and new trends. We do it at Unit.City.

I can advise your readers to learn, to invest knowledge in specific projects and to do business. This is the only way you can keep the lights on. There is no point in complaining about life, about politics, about presidents, about deputies. It’s ineffective, it drives a person into negative emotions.

I hope, Ukrayinska Pravda will create a special good news department to tell about promising projects and will support start-ups.”

“You will be the editor of this department.”

“I’m ready!”

 

Sourse:  www.epravda.com.ua