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Ukraine's Victor Pinchuk: Treading the Middle Ground

As Russian troops roll in, Ukraine's second-richest man, Victor Pinchuk, must choose between his head and heart

Published: Apr 1, 2014 07:22:49 AM IST
Updated: Mar 25, 2014 03:05:03 PM IST
Ukraine's Victor Pinchuk: Treading the Middle Ground
Image: Getty Images
Victor Pinchuk

If you’re standing at the charred wreck that Kiev’s Independence Square now resembles, getting to Victor Pinchuk’s house takes about 40 minutes, through the winding streets of Old Town, past the drab Soviet high-rises and elevated highways and into the woods. Two security agents in military uniforms, fully armed and equipped with radios, make sure you’re an invited guest. And then onto the 280-acre spread you go.

It’s from this gilded perch, complete with six-acre Japanese garden, sculptures from Jeff Koons and Damien Hirst and a glass entertainment pavilion designed by the same team which built the famous “Bird’s Nest” Olympic Stadium in Beijing, that Pinchuk watched his country’s astonishing revolution unfold live on television.

Ukraine’s second-richest man, worth an estimated $3.2 billion, saw the swelling crowds move from rock-throwing to song-singing; he saw the snipers shooting unarmed protesters; he saw a tyrant fall, a new government struggle. And he’s still watching, as Russian troops pour into Crimea and his country flirts with national schism. “We were in shock,” says Pinchuk, 53. “To see death as it happens, live on the air, is horrible.” He wasn’t just a passive spectator. “We were on the phone constantly—with businessmen, with politicians, with our Western and Eastern friends, discussing what all of us could do.” His team ferried medical supplies to the wounded in the Maidan, as the central square is known. “My thoughts were with them all the time,” he now says.

Ukraine's Victor Pinchuk: Treading the Middle Ground
Image: Getty Images
“To see death as it happens, live on the air, is horrible”: Pro-Western protesters in the Maidan

But he wasn’t there with them in body. Not quite. In fairness, many of his fellow Ukrainian tycoons fled the country entirely, sitting out the revolution in places like London. But at least one, the chocolate-mogul-turned-politician, Petro Poroshenko, threw his full support behind the protesters at a time when that looked like risky folly. Pinchuk stayed somewhere in the middle. “The goal of a businessman is to do everything to avoid bloodshed and to bring about peace and compromise,” he told me during one of our conversations as the deadly three-month thriller in the square played out.

That thinking reflects a view he has held for some time: “It’s not necessary to be a member of the European Union,” he told me a year ago. “But European values”—meaning civil society, the rule of law, human rights, freedom of speech—“will solve a great number of Ukraine’s problems.” Yet he added: “Ukraine cannot be successful without Russia.”

Such equivocating stemmed from a harsh reality: Pinchuk’s fortune is tied to trade with Russia. Lest he forget that, Vladimir Putin’s regime recently imposed crippling tariffs on his core asset, the steel tube company Interpipe. His father-in-law is former Ukrainian president Leonid Kuchma, the onetime patron of Viktor Yanukovych, the Moscow-backed president who just fled his own country and reportedly spirited off billions of dollars. Every logical fiber in Pinchuk’s formidably logical head dictated that he defend the status quo.

As oligarchs go, though, Pinchuk is a unique flavour. One of his side trips-away from Ukraine during the tumult was in January, during the World Economic Forum in Davos, where he hosts an annual gathering on philanthropy, attended by the likes of Bill Gates and Richard Branson. “He’s built up an amazing network of people throughout the world,” says Tony Blair, whose education foundation in Ukraine received $500,000 from Pinchuk in 2012. Pinchuk was, in fact, the first eastern European to take the Giving Pledge, the Gates-and-Bufett-driven promise to give away at least half his wealth.

And in a part of the world long dominated by force, Pinchuk is the region’s leading art patron, funneling millions each year into scholarships, grants and shows. During one of the worst weeks of violence in Kiev, Pinchuk quietly opened an exhibition of works by Belgian artist Jan Fabre just 300 yards from the barricades. Why—what good will that do for a country that’s rapidly falling apart? “Beauty will save the world,” says Pinchuk, quoting Dostoyevsky—or, more precisely, the hero of The Idiot.

Ukraine's Victor Pinchuk: Treading the Middle Ground
Image: Joseph Sywenkyj / Redux for Forbes
“Beauty will save the world”: Pinchuk befriends the artists whose works he collects—in this case Anish Kapoor, the Indian sculptor

That reference seems pretty apt. In The Idiot Dostoyevsky chronicles the anguish of a Russian noble with ties to Europe who can’t choose between the woman he thinks he should marry and the one who has captured his heart. Pinchuk faces a similar internal battle, the fate of his country at stake, his head wrestling with his soul.

For anyone above a certain age in eastern Europe—say, 40—rational decisions centre reflexively on a single thing: Survival. That’s especially true of someone like Pinchuk, whose parents’ Jewish heritage had made them a target for the Soviets, who shut down synagogues and barred Jews from many universities. Both engineers, they had masked their background. Soon after Pinchuk was born in Kiev, in 1960, the family moved east, and Pinchuk was burrowed further into the minority, spending his childhood as a Ukrainian in the industrial, Russian-speaking town Dnepropetrovsk, a place best known in the US for two teenage serial killers.

The young Pinchuk, teachers noted, adapted well within the system. Brilliant at school and a skilled networker, he was active in the Young Communist League and thrived in the Soviet version of the Boy Scouts (Young Pioneers). He earned a BA and PhD from Ukraine’s Metallurgical Institute.

His timing was fortuitous. Pinchuk patented a new process for making seamless pipes just before the Berlin Wall fell. He founded Interpipe Corp to manufacture the parts, and his contacts from the university and the Young Communist League helped him sell his wares to the predecessor companies of Russian giants Gazprom and Rosneft. Racking up his first million dollars in 1992, Pinchuk was on his way to making a lot of money—and enemies.

As Ukraine and Russia emerged from the Soviet Union as separate nations, ambitious, connected young men like Pinchuk were well positioned for the chaotic privatisation of big state enterprises. He followed the classic oligarch playbook, opening a bank and taking control of two industrial companies in Dnepropetrovsk by buying up shares from company employees more interested in short-term bread than long-term equity.

“He was a big innovator, and he knew the pipemaking business,” recalls Alfred Kozlovsky, who knew Pinchuk during his college years and ran his first privatised plant.

Rivals emerged, including Yulia Tymoshenko, the former prime minister (and likely future presidential candidate) who was just freed from prison among much fanfare. Back then Tymoshenko controlled the largest gas company in Ukraine.

Danger lurked. Those who succeeded needed more than friends and brains. They needed survival skills. On a snowy winter day in 1996 people he’d never seen before grabbed and handcuffed him, put a gun to his head and pulled a hat over his face. The ordeal took place around the time of his mother’s 60th birthday; his captors brought him snacks and vodka to toast her health.

Even today Pinchuk refuses to provide more detail about the episode—or the people he negotiated with to pay the $2 million ransom, after gaining his freedom two days later. “I still can’t talk about this,” he says. “I stayed alive.”

While eating breakfast with Pinchuk at his estate—syrniki, pancakes served with sour cream and fresh berries—the most fateful connection of this connected man, his wife, Elena, a striking 43-year-old blonde dressed in a black-and-white T-shirt and jeans, strolls into the dining area. “We share the same viewpoints on many things,” she says—art, books and music. It’s a marriage with an important political dimension, too.

Like many oligarchs of the 1990s, who saw government as a safe haven, a chance to plunder or both, Pinchuk ran for office, serving between 1998 and 2006 as a member of parliament. Given his sprawling business concerns, which expanded into natural gas and steel during this period, conflict of interest, or at least the appearance of it, quickly followed.

“It’s very hard to be in politics and, at the same time, in business,” says former heavyweight champion Vitali Klitschko, one of the heroes of Independence Square, who now intends to run for president.

Ukraine's Victor Pinchuk: Treading the Middle Ground
And marriage to Elena quickly made things more complicated.

She was the daughter of Leonid Kuchma, who served as president of Ukraine from 1994 to 2005, a reign scarred by scandal and crackdowns on free speech. (Those conditions, plus a fraudulent presidential election in 2004, led to Ukraine’s original Orange Revolution.) When they met in 1996 at a children’s play he was sponsoring, each was married to other people. “I didn’t know who he was,” Elena recalls. “Almost right away we discovered we had a lot in common.” They wed in 2002. One of the nation’s richest men now called the nation’s president “Dad”.

And almost immediately, Pinchuk was accused of getting special access to deals unavailable to others. “This is absolutely not true,” says Kuchma. “He already owned two landmark enterprises in Dnepropetrovsk.”

Technically correct. But he quickly privatised a few other industrial companies, including steel producer Krivorozhstal, which Pinchuk bought for $800 million with Rinat Akhmetov, Ukraine’s richest man (net worth: $12.5 billion) and others.

The new government instantly pounced on the deal. His old rival, gas titan Tymoshenko, was now the prime minister, and she publicly decried the Krivorozhstal purchase as a “theft” because the auction hadn’t opened the bidding to foreign investors. Claiming that national interest had been violated, she voided the deal, and quickly proved that Pinchuk and his partner had received a way-below-market price: She sold it to Indian steel magnate Lakshmi Mittal, for $4.8 billion.

“I did everything by the law, everything was done right from the business point of view; there was nothing dishonest about the deal,” insists Pinchuk. “My personal mistake was that I didn’t consider the political component. As the son-in-law of the president, I shouldn’t have done this.”

Yet his political drubbing wasn’t over. A second company he had privatised, an alloys producer, was very nearly snatched from him by a rival business group, with a tacit blessing from the Orange government. This time Pinchuk fought back, using TV stations he owned to publicise what they called the militia’s “raiding” of the company that had been bought at a fair market price in full accordance with Ukrainian law. The government backed down. Pinchuk retained his 25 percent stake—and in 2007 formed EastOne Group which, though headquartered in Kiev, holds all his assets and investments from a safe distance in London. And with his money squirreled away, Pinchuk embarked on a rapid re-invention, with a decidedly Western tilt.

In what already feels like a different era, 200 of Pinchuk’s friends, ranging from Israel’s Shimon Peres to Italy’s Mario Monti, visited Ukraine in September. For the past decade Pinchuk has hosted a global conference in Yalta. The location, Livadia Palace, the white Renaissance-style pile overlooking the Crimean city, is where Roosevelt, Churchill and Stalin worked to end World War II—and start the Cold War. That the palace sits in the middle of Ukrainian territory that Russia now seems intent on “protecting” is full of irony. But Pinchuk’s summit has been a strong force in connecting the Western world to Ukraine.

The pairings now seem surreal. Pinchuk riffed on the “The World of Tomorrow” with Tony Blair and Bill Clinton. (Pinchuk’s munificence is no small factor in the A-list turnout: He gave $1 million in both 2012 and 2013 to the Clinton Foundation.) Larry Summers, David Petraeus and the head of Interpol talked about the “Shocks Ahead”. And Hillary Clinton stole the show during dinner under a huge tent next to the palace, giving a pep talk about how Ukraine has got everything going for it: Resources, an educated population and, especially, chocolate. While it would all, within months, flip upside down, it appeared this Western-oriented goodwill had taken hold. As boxer-turned-reformer Klitschko looked on, then President Yanukovych declared: “We have to move towards European integration.” By the end of the event, everyone was dancing on the beach, with Pinchuk, the accommodating host, circulating among his guests.

Image: Martullo-Blocher: Corbis; Del Valle Raiz: Getty Images; Yakobashvili: Getty Images

Ukraine's Victor Pinchuk: Treading the Middle Ground
Image: Corbis
“It’s very hard to be in politics and, at the same time, in business”: Pinchuk’s wife, Elena, is the daughter of former Ukraine President Leonid Kuchma

“If I have resources I must try to be useful to the country,” says Pinchuk. And it isn’t just the heavy hitters who have enjoyed his generosity. Increasingly over the last few years Pinchuk 2.0 has devoted his philanthropy to exposing Ukraine’s youth to outside ideas and global society. He brought Wikipedia founder Jimmy Wales and physicist Michio Kaku to Kiev to talk with young students. His jazzy PinchukArtCentre in Kiev has shown the works of avant-garde artists like Anish Kapoor and Takashi Murakami. Sharing those works, says Pinchuk, “is a very important tool for us, for modernising our country.”

“He’s passionate,” Elton John told me last summer at the Venice Biennale, where Pinchuk held court in a 15th-century palace overlooking the Grand Canal. The entertainer, who has worked with the Pinchuks on anti-AIDS initiatives, attended an exhibition sponsored by one of Pinchuk’s foundations that included a $100,000 prize to an artist under 35. “He’s passionate about everything he’s involved in—business, politics, art, philanthropy.”

Increasingly, he’s become passionate about education, lavishing scholarships on Ukrainian students with the kind of democratic ideals that drove Independence Square. For the past seven summers, he has brought together 350 of the country’s gifted college students, earmarking $810,000 annually to support ideas for social, economic and cultural change. Those who graduate are eligible for more than $500,000 he pays each year to subsidise Ukrainians accepted into graduate programmes at places like Harvard and Oxford.

Addressing those students, he exhorted them to keep taking chances, citing his own progress in downhill skiing and scuba diving, and becoming fluent in English. And he all but called for the change he would later watch from afar on television. “Guys,” he says, “the best of you need to go into politics.”

Ever the survivor, there’s no doubt that Pinchuk’s role as global facilitator and democratic oligarch has insulated him from character assassination and, quite possibly, bodily harm. “The whole Ukrainian elite are serious bandits—he is not,” says Anders Aslund, senior fellow at the Peterson Institute for International Economics. “How do you protect yourself? By making yourself more important internationally, doing good for your country.”

But what does all the low-key diplomacy—and culture and scholar- ships—mean today, when Ukraine is so near the brink on so many fronts? Will good works matter to a country in real danger of splitting in two? To an economy that’s in free fall? Or to a military now confronting an invasion of Russian troops?

Pinchuk is clearly groping for a role to play in the new Ukrainian order. “We have a unique chance to participate in building a new country,” Pinchuk told me nearly two years ago. But after he watched the crowds at Independence Square stand up to the police, “it makes you feel small compared to them. At one point you feel like a leader of the progress Ukraine is making, of the advances in civil society—one of the visionaries.” Now, in the wake of everything that has happened, “you realise that civil society has made a leap forward and left you behind.”

Pinchuk says he is pressing the reset button on his foundation—“and in all our activities”.

He has rejected a call to serve as a governor in an eastern province, saying, “I don’t think it would be useful.” But it’s clear where his heart is: “Ukraine is Ukraine in its current borders—and we must not give up any part of it.” Unlike the hero of Dostoyevsky’s classic The Idiot, Pinchuk has chosen the woman he loves.

(This story appears in the 04 April, 2014 issue of Forbes India. To visit our Archives, click here.)

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