The steel magnate—son-in-law of the former president and once a symbol of post-Soviet nepotism—now advocates for the rule of law
By Maria Danilova — Dec 13, 2013
One breezy evening last September, Viktor Pinchuk, Ukraine’s second-richest man, stepped onstage at the Livadia Palace in the Black Sea resort of Yalta to introduce the star speaker of the annual international conference he hosts to promote his country’s ties with the West: former Secretary of State Hillary Clinton. Nearby, at a table set for an exquisite five-course meal, sat her husband; they were joined in the hall by Shimon Peres and Tony Blair, as well as a number of former European heads of state, top diplomats, and business tycoons. “Mr. President, you are really a super star,” Pinchuk told Bill Clinton in a seemingly apologetic tone, “but Secretary Clinton, she is a real, real mega star.”
Pinchuk, a Jewish son of the Soviet system who became a steel and media magnate and, more recently, fashioned himself into a billionaire philanthropist, was in his element. At age 52, Pinchuk basks in his newfound role as a global philanthropist and a leading Westernizer of his country—and a man rich and powerful enough to crack jokes at the expense of a former American president.
It’s been a remarkable transformation. Just nine years ago, Pinchuk—the son-in-law of Ukraine’s then-President Leonid Kuchma—was denounced by many of his compatriots as a robber baron who used his personal connections to snap up some of the most valuable assets in Ukraine for a song during the post-Soviet privatization wave while millions of his countrymen struggled to make ends meet. In the fraud-ridden election that triggered Ukraine’s so-called Orange Revolution in 2004, Pinchuk backed Kuchma’s handpicked successor—Viktor Yanukovych, who eventually won the presidency in 2010 and whose recent decision to shelve a key treaty with the European Union and instead embrace Russia triggered the demonstrations that have seized Kiev in recent weeks.
As in 2004, the appearance of flag-waving pro-democracy protesters occupying the capital’s Independence Square divided Ukraine into those whose hearts lie with the West and those whose hearts lie with Moscow. A decade ago, Pinchuk found himself stung by the Orange Revolution: The new Orange government, led by Viktor Yushchenko, renationalized a steel mill Pinchuk had purchased from the state during his father-in-law’s presidency and then promptly sold it to a foreign investor at a much higher price. Pinchuk was forced to fight to hold on to the rest of his assets.
But Pinchuk held on. He has spent the years since the Orange Revolution working to build a profile as a philanthropist. He recently pledged half his fortune, estimated by Forbes at $3.8 billion, to charity and has underwritten large-scale AIDS campaigns, opened up a free museum of contemporary art in central Kiev, and teamed up with Steven Spielberg to produce a documentary about the Holocaust in Ukraine. As pro-European reforms have stalled, Pinchuk has emerged as his country’s top advocate in the West, using his annual Yalta summits to push for Ukraine’s closer integration with the European Union.
“When the system collapsed, a certain number of people received access to something, even though everybody wanted it,” Pinchuk told me when we met last week. “As a result, a few rich people emerged and a great many poor. The gap is crazy, and it’s all absolutely unfair. And everybody understands that it is unfair. I, by the way, also think that it’s unfair.”
Pinchuk initially stayed silent as protesters barricaded themselves in the capital this month, even though his television channels covered them energetically. (His father-in-law Kuchma, one of the targets of the 2004 revolution, has joined two former Ukrainian presidents in signing a letter of support for the demonstrations.) But in the last few days, as the government moved to violently disperse the encampments, Pinchuk finally broke his silence, showing up at the protest camp himself and praising the demonstrators’ spirit. “The most important is that Ukrainian civil society has shown its strength,” he told the Financial Times this week. “Nothing is more powerful. It gives me huge optimism for the future of our country.”
It’s an evolution that people who know Pinchuk say makes sense: The experience of nearly losing his business empire after the Orange Revolution made clear that the post-Soviet system he helped create, in which fortunes could crumble with a change of political winds, was flawed. “He would like to be in a situation where it doesn’t matter to him who the next president of Ukraine is going to be,” said Steven Pifer, who has known Pinchuk since serving as the U.S. ambassador to Ukraine from 1998 to 2000. (Pifer now works at the Brookings Institution in Washington, which receives funding from Pinchuk.) “The advantage for him of Ukraine becoming a rule-of-law society is that it doesn’t matter.”
Pinchuk has close-cropped hair, shrewd brown eyes, and the confidence a wealthy man. His headquarters, in a high-rise in the center of Kiev, is decorated with contemporary art sculptures, part of his multimillion dollar collection. Photos displayed prominently in his office show Pinchuk in the company of Spielberg, Henry Kissinger, and the Obamas. When I visited earlier this month, Pinchuk was accompanied by three aides, armed with a set of recorders. “Are three voice recorders enough?” he teased his staff when we sat down.
Born in Kiev in 1960, Viktor Mikhailovich Pinchuk was raised in the industrial city of Dnipropetrovsk in eastern Ukraine, in a family of Jewish intelligentsia. The classics of world literature filled the shelves of the small two-room apartment, and trips to theaters and museums were a staple of his childhood: He still remembers a visit to the renowned Hermitage museum in St. Petersburg, where he stood in awe for hours in front of Rembrandt’s The Return of the Prodigal Son, until his mother whisked him away. Pinchuk’s parents, Mikhail and Sofiya, were both engineers, who were constantly living from paycheck to paycheck, borrowing money from friends and at one point even having to sell a treasured 16-volume set of the collected works of John Galsworthy.
Pinchuk’s parents met on a boat sailing from Kiev to Dnipropetrovsk, where they went to attend university—two young Jews forced to leave their hometown for a less-prominent city because most good schools in the capital were closed to them. Yet the Pinchuks were decidedly Soviet, eating pork and, on the rare occasions they could afford it, black caviar. They decorated a tree at New Year’s—the secular Soviet replacement for Christmas. “When I was young, I felt myself a Soviet man and was proud of it,” Pinchuk recalled.
But Pinchuk’s grandparents spoke Yiddish at home, and his great-grandmother, who was observant, demanded a separate set of dishes for Passover—prompting Pinchuk to once buy her a camper’s set. He was secretly fed matzo by his grandfather, who nevertheless was a devoted Communist known to condemn Jews who immigrated to Israel as unpatriotic to the Soviet Union. But as a child, Pinchuk was taught little about Jewish traditions. Once, after coming to understand that his great-grandmother was religious, he tried to please her by crossing himself, as he had seen his Orthodox Christian friends do. “She said ‘Vitya, what are you doing?’ ” Pinchuk told me. “I didn’t understand what she was talking about.”
He began to understand when, as a boy, he was stopped by a policeman who whispered the word “kike” into his ear. In school, some of his teachers like to count the number of Jews in their classes and made Pinchuk stand up from his seat and answer humiliating questions in front of the entire class, even though the answers were well known to all. “Where does your mother work? Where does your father work? What is your nationality?” Pinchuk recalled. “For some kids, it was an execution of sorts that you had to spell it out. Some were unable to endure it and said they were Ukrainians. The class laughed, because everybody still knew everything. This was the Soviet system: You had to be humiliated. Or, on the contrary, hold your head up high.” Pinchuk did the latter.
As a young man, Pinchuk considered going to medical school and becoming a psychiatrist, but instead he chose to continue the family tradition of engineering and enrolled in the Dnipropetrovsk Metallurgical Institute, where his mother, who is now 77, still teaches today. While at university, Pinchuk worked as a night watchman at an auto repairs factory, writing his term papers at night and earning some cash to pay for a stereo system. His mother, initially shocked that her son had become a night watchman, eventually started packing him dinners—his favorite dish of meat patties with mashed potatoes. Over summer break, Pinchuk signed up for construction work—a popular choice with many Soviet students at the time—pouring concrete at a pig farm in Siberia. Soon, another job followed—carving metal at a pipe factory that he would later buy. “As it turned out, I have a commercial frame of mind,” Pinchuk said. “I don’t know who it came from—both my mother and father were intelligentsia.”
Pinchuk earned a doctorate in industrial engineering in 1987, the year after Mikhail Gorbachev launched perestroika. As the government tried to encourage innovation in industry, Pinchuk traveled to a pipe factory in Mogilyov, in then-Soviet Belarus, and offered to introduce a new form of pipe production there. Pinchuk was supposed to get a 7.5 percent royalty on any extra profits if the new design was successful—but after the changes worked, Pinchuk’s research institute kept most of the money to itself, paying him only a token amount.
After that, Pinchuk ventured out on his own. In 1990, he founded Interpipe, an engineering firm that introduced new designs and technologies at pipe factories. Soon Pinchuk was earning about 10,000 rubles per month, a sum unthinkable for a Soviet engineer, whose average monthly salary was about 150 rubles. But Pinchuk deposited a large chunk of his earnings in a savings account—which evaporated amid the hyperinflation that followed the Soviet collapse in 1991.
With the end of the Soviet command economy and the launch of free-market reforms, the state was no longer in charge of economic planning, and the industrial supply chain was crumbling. Pipe factories stood idle without steel, steel plants required coke, coking plants needed coal, and coal miners were in desperate need of pipes—but also wanted the impossible-to-get consumer goods such as refrigerators, microwaves, juicers, and cars that every Soviet man had always dreamed of. Enter Viktor Pinchuk. By procuring the coveted juicers and clunky Tavria cars for coal miners at an exchange in Moscow, he was able to obtain coal for coking plants, which he traded for coke to send to steel factories and then metal for pipe production, eventually walking away with several thousand tons of pipes—which by then had turned into prized hard currency compared to suddenly worthless banknotes. “Juicers turned into pipes,” Pinchuk said of how he became a millionaire.
As his business grew, Pinchuk started buying into steel plants and then teamed up with a woman named Yulia Tymoshenko, a protégée of the feared Dnipropetrovsk governor Pavlo Lazarenko. In the mid-1990s, Pinchuk and Tymoshenko founded Commonwealth, a firm that imported much-needed natural gas from the energy-rich Central Asian states to Ukraine. But the alliance was short-lived: Tymoshenko soon ditched Pinchuk and set up an energy trading firm of her own.
All the while, Pinchuk indulged his passion for the arts. He befriended the renowned Russian conductor Vladimir Spivakov and brought him to perform for his compatriots in Ukraine. In advance of Spivakov’s concert in Dnipropetrovsk, Pinchuk donated a classic Steinway piano to the city so that the orchestra would have a proper instrument.
In 1997, while attending a popular Moscow play in a Kiev theater, Pinchuk met Yelena Franchuk, a delicate blonde—and the daughter of then-President Kuchma. Both were married at the time, but they nevertheless felt the spark of romance. Pinchuk asked Spivakov, who was giving a concert in Kiev that he knew Franchuk was attending the day after her birthday, to perform an encore for “one Kiev birthday girl.” Franchuk realized the surprise was for her, and Spivakov later became a witness at their wedding. (She recently changed her last name to Pinchuk.)
When they met, Pinchuk already owned two pipe factories that are now worth billions. He likes to say that the only gift he received from Kuchma was his daughter—but not everybody is convinced. Kuchma, now 75, who served as the second president of independent Ukraine, is credited with launching the crucial reforms to steer his country out of the economic ruin that followed the Soviet collapse, but he is also accused of allowing a group of hand-picked businessmen—including Pinchuk—to acquire the country’s top industrial assets at a discount in exchange for their support of his rule.
While in neighboring Russia, oligarchs like the late Boris Berezovsky spent years working their way into the inner circle of Russian President Boris Yeltsin, Pinchuk, his critics say, was spared the effort—Ukraine’s president sat across from him at the dinner table. As Kuchma was nearing the end of his final term in office in the early 2000s, he put top metallurgical and mining plants up for sale; Pinchuk, who by then was also serving as a member of a party in parliament loyal to Kuchma, took an active part in the tenders.
In 2003, Pinchuk won an auction for the majority stake in the Nikopol Ferroalloy Plant, one of the world’s largest producers of ferroalloy, in a tender his rivals called skewed in Pinchuk’s favor, prompting a protracted and messy ownership dispute. The following year, Pinchuk partnered with another oligarch, Rinat Akhmetov—today Ukraine’s richest man—to snap up the country’s biggest steel plant, Krivorozhstal. A year later, the deal was annulled and the plant was sold to British-Indian steel magnate Lakshmi Mittal for $4.8 billion—six times the price paid by Pinchuk and his partner. The sale of Krivorozhstal became a metaphor for corruption under Kuchma, and the affair dealt a harsh blow to Pinchuk’s reputation, not just at home, but in the United States: In a diplomatic cable to Washington released by WikiLeaks, former U.S. Ambassador to Ukraine William Taylor wrote that the two auctions were “rigged” in favor of Pinchuk and sold “for a cut-rate price.”
Ten years later, Pinchuk says he would have handled some of the privatizations differently, knowing then what he knows today. “Being a member of the president’s family is not an easy test,” Pinchuk said. “Yes, I did make some mistakes in that capacity,” he said of the Krivorozhstal purchase. “From the legal standpoint, it was all honest and right,” he went on. “But I shouldn’t have participated in that from a purely political standpoint.” Nikopol, he went on, is a different story. “In the culture, traditions, and aesthetics of that time, it was one of the best examples of privatization,” Pinchuk said. “Clearly, it was not all smiles and sunshine, it wasn’t kosher, but it was one of the best examples. It was in line with the aesthetics of that time.”
But even with all the obvious flaws of post-Soviet capitalists, many experts say that they skirted laws in an environment when laws were still being written and that without their wits and risk-taking, Ukraine, like neighboring Russia and some other ex-Soviet republics, risked sliding into a full economic collapse, a reversion to communism and authoritarianism. “It’s a special kind of people on which capitalism rests,” Aleksandr Paskhaver, head of the Center for Economic Development think tank, said of Pinchuk and other oligarchs. Without them, he added, “I would like to see what this country would have looked like.”
In the freezing winter of 2004, at the height of the Orange Revolution, opposition leader Yuri Lutsenko took a stroll through a protest tent camp set up on the capital’s main street, Khreshchatyk, a prominent tourist destination. Ukrainians had turned out in tens, even hundreds, of thousands to protest what they perceived as an attempt by Kuchma’s protégé Yanukovych to steal the vote and call for a new, honest election. Rich and poor, young and old, urban and provincial, wrapped in orange scarves, hats, arm bands, and whatever else they could attach to themselves, they stood freezing in the center of Kiev for days, then weeks, ditching work and university lectures. The protesters slept in tents despite cruel temperatures, warmed themselves with hot tea brought in thermoses by Orange-minded babushkas, ate buckwheat kasha from soup kitchens, and stomped their feet against the frozen ground, united and euphoric in their drive to defend Ukraine’s democracy.
Accompanying Lutsenko that evening was Viktor Pinchuk and Maria, his grown daughter from his first marriage, who had just flown to Kiev from London, where she was then studying. Pinchuk—Kuchma’s son-in-law and a public supporter of Yanukovych—was an unlikely figure to show up in the heart of the Orange protest camp, which was dotted with posters and caricatures denouncing Kuchma and even Pinchuk himself. As if to make that point, a young female activist approached Pinchuk and, as Lutsenko remembers it, handed him a ribbon that said “Down with Kuchma,” which he accepted politely and passed on to his daughter. Lutsenko believes that Pinchuk was moved by what he saw around him, even though he probably realized that a victory of the Orange Revolution did not bode well for him personally. “Something historic was happening and if you are a patriot of your country, it doesn’t matter which candidate you support,” Pinchuk told me. “You love this country, you want to take part in building it.”
After the courts annulled Yanukovych’s fraud-marred victory, his opponent, the pro-Western Orange candidate Viktor Yushchenko was elected president in a repeat vote. He picked Yulia Tymoshenko, Pinchuk’s business partner-turned rival, as prime minister and Pinchuk’s fortunes started to dim—literally. After annulling the Krivorozhstal sale and auctioning it off to Mittal Steel, Tymoshenko went after Pinchuk’s Nikopol plant—a key piece of his business empire. But after less than a year in office, Tymoshenko—recognizable to many in the West for her the blond braid she wears coiled around her head—was fired amid accusations that she was lobbying in the interest of Pinchuk’s rival Ihor Kolomoisky, Ukraine’s third richest man. (Both denied it.) A protracted and messy ownership dispute with Kolomoisky over Nikopol ensued, leading to a shaky settlement in 2006. (The truce hasn’t lasted: This past spring, Pinchuk filed suit in London against Kolomoisky and his partner Gennady Bogolyubov—both, like Pinchuk, Jewish oligarchs from Dnipropetrovsk—over the rights to a major ore-mining company.)
While he still lives like an oligarch, buying one of the most expensive mansions in London, paying $23 million for a Jeff Koons sculpture, and spending $5 million on his birthday party at the French ski resort of Courchevel, according to the New York Times and Forbes, he has been devoting an increasing amount of time and effort to philanthropy.
In 2006, Pinchuk left politics and established an eponymous foundation, which has distributed several hundred million dollars on a variety of projects, from funding an English-language economics school to building neonatal clinics. While his fellow post-Soviet oligarchs splurge on soccer teams, Pinchuk has opened a museum of contemporary art in Kiev, one of the largest in Central and Eastern Europe, bringing star artists—Koons, Damien Hirst, and Takashi Murakami—to new terrain and placing Ukraine on the global cultural map.
Pinchuk has also partnered with Steven Spielberg to produce Spell Your Name, a documentary about the Babi Yar massacre of over 33,000 Jews in a Kiev ravine in Nazi-occupied Kiev in one of the bloodiest chapters of the Holocaust in Ukraine. Pinchuk, whose family managed to escape Babi Yar but had friends who perished there, invested some $1 million into the movie, according to Lifestyles magazine. The film was also made into a learning manual for Ukrainian teachers to promote tolerance among Ukraine’s young. Pinchuk has also funded Holocaust by Bullets, a project of Fr. Patrick Desbois, a French Catholic priest who has spent several years canvassing Ukraine, Russia, and Belarus in search for the unmarked graves of hundreds of thousands of Jews who were gunned down by the Nazis and their collaborators before gas chambers were put to use.
He supports Ukraine’s resurgent Jewish community both financially and morally. On Pinchuk’s invitation, Tony Blair donned a yarmulke and toured Dnipropetrovsk’s gleaming new synagogue; the billionaire also took Chelsea Clinton with her Jewish husband Marc Mezvinsky, whose ancestors are from Ukraine, to the synagogue in Kiev.
In 2008, he invited Paul McCartney to sing in front of several hundred thousand euphoric Ukrainians on Kiev’s Independence Square, the site of the Orange Revolution protests and to millions more who watched Pinchuk’s TV channels, saying that a country cannot be considered democratic unless the Beatles sing there. The charity concert, which raised about half a million dollars to fight cancer, cost Pinchuk $5 million, according to the New York Times.
Pinchuk’s two other pet projects, the Yalta European Strategy conference and the Ukrainian lunch at the annual World Economic Forum at Davos, have helped open Ukraine to the West. The speakers at Yalta have included Shimon Peres, Newt Gingrich, Condoleezza Rice, Richard Branson, and, this year, Tony Blair and the Clintons. (Pinchuk is a generous contributor to both Blair’s and Clinton’s foundations.) But in the past three years, since Yanukovych, the target of the 2004 protests, was elected president, Pinchuk’s Yalta summits have become platforms for drawing Yanukovych, and Ukraine, toward the West, away from Moscow.
The conferences have also provided a kind of open debate that has been unseen elsewhere in Ukraine in recent years, let alone in much of the post-Soviet Union. This year, Vitaly Klitschko, the world heavyweight boxing champion and a top opposition leader, stood up from his seat, towering over the audience at 6 feet 7 inches, and asked Yanukovych point blank whether he would have the guts to resign. Lutsenko—who was jailed, along with Tymoshenko, after Yanukovych came to power—stood and begged Yanukovych to set Tymoshenko free. Finally, Hillary Clinton used her keynote speech to compliment Ukrainian chocolates, which are banned in Russia as retaliation for Kiev’s moves toward the European Union. This week, after Yanukovych flooded Kiev with riot police, Clinton called on the government to “choose dialogue with its people, not force.”
“Pinchuk was the first one to understand the necessity of capitalization of not only of his business, but also of the country,” Lutsenko said. “Today he is the promoter of Ukraine’s European path.”
Earlier this month, Pinchuk summoned a group of young Ukrainian artists to his museum to award an art prize, which he set up several years ago to promote contemporary art here. The top winner could talk about nothing but the protests outside, saying that the “performance” on Kiev’s streets was even more powerful that their art. Pinchuk took that as a compliment. “Perhaps you inspired them for it,” he told the artists.
Pinchuk is clearly also aware that his charitable work gives him a valuable venue for improving his reputation, befriending influential people in the West and, ultimately, securing protection for his family and assets at home. Last year, he signed up for the Giving Pledge, a movement led by Bill Gates and Warren Buffet to get the world’s billionaires to donate half of their money to charity. “It doesn’t really matter what a person begins from,” Pinchuk said, waving off a question about his intentions. “What matters is what he does and what he achieves in the end.”
Source: Tablet Magazine