For information about Gennady Timchenko’s business activities and interests please visit: www.volga-resources.com
|Mr. Timchenko also has a strong interest in philanthropy and has founded a number of charitable foundations.|
|For more than 20 years, the Timtchenko family has been involved in charitable giving, both in Russia and abroad. The family’s Ladoga Foundation was formally established in Moscow at the end of 2010. In September 2013, the foundation was renamed as the Elena and Gennady Timchenko Foundation (“Timchenko Foundation”) and has consolidated all of the family’s programmes into one portfolio that focuses on supporting elderly people, sports, culture and foster families. These strategic priorities are aimed at driving positive social change in Russia. For more information about the Timchenko Foundation please visit: www.timtchenkofoundation.org|
|For information about the Kluch charitable foundation, which develops professional foster homes in Russia, please visit: www.fondkluch.ru
|For information about the Neva Foundation, which seeks to create stronger ties between Russia and Switzerland through cultural exchange, medical and
scientific research, please visit: www.neva-fondation.org
04 August, 2014 | ITAR-TASS
Gennady Timchenko has given an extensive interview to the ITAR-TASS news agency in which he discusses the impact of sanctions on his business.
22 May, 2014 | Reuters
Gennady Timchenko expects a flurry of deals in his new role as a key figure in Russia’s business relations with China.
02 April, 2014 | Volga Resources
Gennady Timchenko gave an exclusive interview to Sergey Brilev of Russian TV programme “Vesti v subbotu” during a trip to China.
10 October, 2013 | Volga Resources
Russian businessman Gennady Timchenko, the main shareholder in Volga Group, gives an insight into his business philosophy and the future strategy of his investment vehicle in one of Russia’s leading business newspapers “Kommersant”.
10 October, 2013 | Volga Resources
Russian businessman Gennady Timchenko, the main shareholder in Volga Group, believes that Russian energy companies can benefit from working with Chinese firms, and calls on Russia to be open to Chinese investment in return.
10 July, 2013 | Volga Resources
Gennady Timchenko has been elevated to the rank of Knight of the Legion of Honour.
28 June, 2013 | Volga Resources
Gennady Timchenko has teamed up with Arkady and Boris Rotenberg to buy the Hartwall Areena in Helsinki and a share in Jokerit, the leading Finnish ice-hockey team that has its home ice at Hartwall.
20 June, 2013 | Volga Resources
Volga Group, the private investment group that combines 18 assets of its principal shareholder, Gennady TImchenko, made its first ever official presentation on the opening day of the St Petersburg International Economic Forum (SPIEF). The presentation can be found here.
16 April, 2013 | Neue Zürcher Zeitung
Question: Mr. Timchenko, a few years ago you were still – as far as the general public is concerned – an unknown commodity trader. Nowadays, you are being called “Putin’s friend”, you are a successful investor in Russia and elsewhere and you have risen to become one of the richest men in Russia. Why did you profit more from Perestroika than others?
Answer: The processes that took place at the time of Perestroika, such as the abolition of the export monopoly, opened a lot of opportunities, for everyone, me included. After the collapse of the Soviet Union, Russia developed from a socialist to a capitalist system. This process has not yet been completed. Under such conditions, able people could make a career and become rich. I was by no means the only one - there were many others who became rich.
After studying engineering in Leningrad (now known as St. Petersburg) I started as a shift master in the Izhorski plant which specialized in manufacturing high quality machine parts. It was an important experience for me. My German was fairly good at that time and as a result, I started to work in the export department and came in contact with foreign trade.
In the Soviet Union there had been a monopoly for foreign trade. However, in 1987, at the time of Perestroika, this monopoly was abolished and several companies in different industries received permission to trade with foreign entities on their own account. At this time, with a lack of people with experience in foreign trade, I was approached by the state owned oil refinery Kirishi and started working for them. My experience in the oil and petrochemical industries therefore dates back to more than 25 years today.
Question: Your rise has often been linked to your friendship with Russian President Vladimir Putin.
Answer: Yes, I know him, this is not a secret. I have never denied that, and neither has he. Still it is nonsense to connect my success with the fact that I know him. As a small example: I was already a successful business man in my own right and flying on private jets when Vladimir Putin was still Deputy Mayor of St. Petersburg. There never has been, and never will be, any linkage between my success and my acquaintance with Putin.
Question: Yet, it is not a disadvantage to know Mr. Putin?
Answer: Putin is not only a charismatic leader but also an interesting man. I guess everybody would be interested to meet him.
We both have a few common platforms where we meet. For instance at the Russian Geographic Society, where I am a member of the advisory board, Vladimir Putin is the honorary president of the Society. Putin was a sportsman and still is in good shape. The Javara-Newa Judo Club is also something we have in common. I was a co-founder and sponsor of the club. Putin was not even Prime Minister at this time. My co-founders, who were also rich businessmen, and I understood that it is important to support sport. Putin agreed to become honorary president of the club. Our club has gone on to enjoy numerous successes in various International championships and tournaments. Hence, Judo is another common platform. I am also chairman of the board of the Continental Hockey League (KHL) in Russia and member of the Council of the International Ice Hockey Federation. Putin is very interested in this sport. Sometimes, we even play in matches with Olympic champions and other famous sportsmen.
Question: When did you meet Putin for the first time?
Answer: I remember the first meeting well. It was in 1989 or 1990. I was still working for the foreign trade division of the Kirishi refinery. There were some discussions on developing an oil terminal in St. Petersburg. Back then Putin was an advisor of the then Mayor, Sobchak. I was not the one who had organized the meeting and neither was I alone there. Later, when Putin, as Deputy Mayor and Director of the Office for Foreign Trade, was leading negotiations in connection with trading oil and oil products I also often took part in them.
At this time we scarcely had any foreign currency and therefore we often did barter transactions. For example: we exported fuel oil to Iceland and received herrings in return. In order to organize such transactions we had to have contact with the mayor’s office.
Question: Many people who originate from St. Petersburg are currently successful in business and politics. Is this city a particularly special breeding ground for successful people?
Answer: St. Petersburg is the cultural capital of Russia. If you take the absolute number there are not that many inhabitants. But the people there have a certain charisma, which is why they attract attention. In Moscow there are currently many people from St. Petersburg who are successful in different fields like the economy or culture. However there is nothing extraordinary or strange about that. It just proves that certain individuals are more efficient and therefore also more successful.
Question: In the past year you have reinforced your investments in Russia. The Russian media have already reported that ‘Timchenko is back’.
Answer: The media pays too much attention to me. Many reports about me are wrong. The rumors started when I transferred the investment company Ural Invest, which handles my private investments, to Moscow. The reason for this transfer is simple: I am concentrating more and more on investments in the Russian infrastructure sector. My companies have already built oil distribution terminals, bridges, roads and tunnels. I invest in Russia, not because I am Russian, but because I believe that Russia actually offers some very interesting business opportunities, especially in the field of infrastructure. Therefore I am currently focusing my investments in this area.
Me personally - I have not moved to Russia. I have only transferred the registration of one company. I have my tax domicile in Switzerland and have no plans to change this, even though tax conditions are more favourable in Russia.
Question: Are you convinced of the economic prospects for Russia? Putin has become President for the third time. What does this mean for the country - stability or stagnation?
Answer: I do not think that we can say anything about stagnation. I have been living abroad for more than 20 years and I have had the opportunity to see how the country is developing from both inside and outside.
It is true that there were severe problems, especially during the transition period of the 1990s. However, you have to consider the political change that happened in a very short time.
Russia can consider itself fortunate to have a President like Putin. We could have had a complete collapse of the country. Instead of a single unified country, several smaller countries could have emerged. The process that happened is therefore positive and we have a chance to continue to develop in a stable way.
Question: You intend to establish an infrastructure group in Russia. Where are you with that?
Answer: Historically Stroytranzgaz specialized in pipeline construction and had Gazprom as its main client. However when I purchased my stake in the company, it had almost no orders of Gazprom. So we had to search for new opportunities. Therefore we found partners like the company ARKS which is mostly active in road construction. This company however also plans to participate in a project to renovate wastewater treatment plants in St. Petersburg. We have invested in the SK MOST company which is one of the leaders in the field of tunnel and bridge construction. This company has, for instance, built the bridge between Vladivostok and Russky Island.
Question: This was an expensive bridge.
Answer: It was a huge project and is was completed within budget. The company is building part of Moscow’s metro and participated in bridge and tunnel projects in Sochi. These latter works have already been concluded.
Question: In the infrastructure sector you have competition. For instance, there are the companies of Mr. Rotenberg who has also been called a friend of Putin. How tough is the competition?
Answer: In Geneva, there are maybe two or three companies which handle the construction of major city projects, houses etc. Why not 20? Because these three companies are the best and most efficient ones.
In Russia there are huge projects. One company could not handle either the number or the size of those projects. And these companies have to win the business in transparent public tenders.
Therefore, the fact that Rotenberg knows Putin doesn’t matter. Rotenberg has known Putin for about 45 years. Rotenberg is a successful businessman but not all businessmen who know Putin became successful.
Question: Are you also looking for joint ventures / cooperation with Western companies?
Answer: Yes, we would like to benefit from Western experience. But there are also difficulties. Russian standards may differ from others. That can complicate cooperation, but we are definitely interested in it.
Question: Your most important investment vehicle, the commodity trader Gunvor, developed during the 2000’s into the most important company for trading Russian crude and into one of the biggest commodity traders worldwide. How did this happen?
Answer: Gunvor is one of my investments. The establishment of Gunvor dates back to the year 1997. I met my partner in Gunvor, Torbjörn Tornqvist, in 1994 or 1995. He had started his career as an engineer at BP, worked in Geneva and then established a small company for trading commodities in Estonia later on. When we met, we realized that we both had a lot to do with heavy oil, heavy fuels and diesel, but he also had experience in trading crude oil. Then I had the idea that it could make sense to start a common project. That is how Gunvor was established.
At the beginning we only traded Russian products - Russian crude, diesel and petrol. Today, we trade all kind of commodities and turn over more than 130 million tonnes per year. Commodities from Russia make up only a relatively small part of the whole trade volume, with about 30 to 40 million tonnes. Today we are a global trading company with a global brand. We have two main branch offices, one in Geneva, the other one in Singapore, and we are active in 35 countries. Moreover, we are now a vertically integrated company with both downstream and upstream investments.
Question: Why did Gunvor not receive any contract for the export of Russian crude in 2012?
Answer: There is a lot of speculation and false rumours in the media about that. The truth is as follows: when we started business in Russia and with Rosneft in particular, we entered the Russian market in an aggressive manner. In order to win the crude tenders we paid very high prices. The consequence was that our margins were very small. We did this for several years. Other companies like Vitol and Glencore did not want to compete anymore. Therefore, we were always awarded the contracts at the auctions and tenders. These auctions and tenders were always public and open to everybody. Rosneft can confirm this information.
We also worked with companies like TNK-BP, Gazprom-Neft and Surgutneftegas. This cooperation still exists. However, we do not want to pay more than the market price. In the meantime we do not work exclusively with Russia but buy the crude where we can get it at the most favourable price. Today we work in 35 countries. This is the difference. Still, we are convinced that there will be opportunities for us to buy Russian crude again in the future.
Question: When you say Rosneft’s prices are too high, does that mean that Vitol and Glencore are paying too much for Russian crude today?
Answer: Perhaps. We now have our own refineries at Gunvor today, in Germany and Belgium. We therefore also know exactly what we need and where we can get the cheapest crude. I don’t know how the other traders handle these excessive prices in their books. It must be difficult for them to resell this crude. When we buy from them we will not pay an inflated price.
Question: Do you see the possibility of doing business with Rosneft again at a later stage?
Answer: We continue to work with Rosneft, exporting their oil products including heavy fuel, and the volumes are substantial. There may be opportunities to trade their crude again. It’s not like we don’t want to do business with Rosneft anymore. We are simply not willing to pay the current, high prices. We do not want to record losses in our books.
Question: How come then that Rosneft can ask such high prices?
Answer: We always used to pay relatively high premiums to get the contracts. Rosneft got accustomed to that. And so if others do need certain quantities of crude then they also have to be prepared to pay a high price.
Question: Do you expect that Rosneft will have to adapt the price in the near future?
Answer: That obviously depends on the demand. But I expect that Rosneft will have to reduce the price. Maybe the companies who currently paying the excessive prices do so to get other business with Rosneft, for instance in order to develop common production projects.
Question: How high was Gunvor’s turnover and its profit last year?
Answer: We have not finalized the accounts for the past year yet but the trade volume amounted to around 130 to 135 million tonnes. In 2011 the turnover was around 120 million tonnes. I also expect that the profit will be somewhat higher than last year.
Question: Is Gunvor comfortable in Switzerland?
Answer: We are very comfortable in Switzerland. The country has an excellent infrastructure, the standard of living is high, safety is guaranteed, and we have very good relations with the local and national authorities. Geneva also has a very well educated population, making it easier for us to recruit staff with the necessary expertise in commodity trading. But it is not only us here at Lake Geneva. There are also many other commercial enterprises, brokers and shipowners. We therefore have no plans to move away from Geneva.
Question: The EU is currently exerting pressure on Switzerland to enforce a modification of its corporate taxation, simultaneously there are calls to abolish the flat-rate tax in Geneva. If it comes – from a commercial viewpoint – to negative decisions in both those areas, would this have any consequences on Gunvor in Switzerland?
Answer: There is nothing wrong with flat-rate taxation. That’s why rich people settle down here and spend a lot of money. This is for the benefit of the city and the state. I came to Switzerland and to Geneva in order to establish a company and to work. Nowadays Gunvor employs 200 people in Geneva. I also have a second company located here in the city. Geneva and Switzerland are gaining advantage out of this. We pay high salaries, the employees are paying income taxes and the companies are paying corporate taxes. We are talking about big money. Gunvor pays about 100 million Swiss francs for taxes per annum. There is nothing wrong with that, is there? I am located here, but if I wasn’t, then probably Gunvor would not be here either. As mentioned before, we are very comfortable in Geneva, but if the government changed the basic conditions fundamentally, we would have to make new calculations. We could move to Singapore at any time. We already do have an office there. Singapore is also a safe and stable location. Perhaps the climate is a bit different but you can get used to that.
But it should not come to that. Switzerland is a sovereign state and is also autonomous within Europe. Therefore I regret, in a sense, Switzerland’s rapprochement to Europe. I disapprove of the accession to the Schengen agreement. Recently, someone tried to break into my villa. Such incidents are becoming more frequent nowadays.
Question: The Geneva authorities have proposed – under the pressure from the EU – to unify company taxation and to launch a tax rate of 13 percent for domestic and foreign companies. Could Gunvor live with such a tax rate?
Answer: Gunvor feels comfortable here and it fully complies with the current rules. I would not comment on any proposals or discussions till any decisions are taken. For me personally the tax rate is not an issue. I have lived my life. I’m more than 60 years old. What I do not think is in order are tax rates like those in Finland. When I was working in Finland, I had to pay 60 or even 66 percent tax. I was among the top 27 people who paid most taxes in Finland.
But to come back to Switzerland, the tax rate is not the only issue. However Switzerland shouldn’t let its locational advantages slip out of its hands.
The whole development of Europe at this moment is alarming. The idea to unite Europe was not bad in general but Brussels wants to proceed too fast. It is simply not possible to unite countries with very different levels of economic development, very different levels of industrialization and large income disparities. With a good leadership in Brussels it might work, but at this moment I can’t really see a true leader there. Europe – not Switzerland – is suffering from a lack of leadership personalities. I therefore don’t think that Europe has the prospect of economic prosperity ahead of it.
Also in the energy sector, Europe is not developing. Due to the crisis, gas consumption and also other energy consumption is declining. I was in China recently - they are burning 1.5 billion tonnes of coal per annum. Russia has enormous reserves and is able to meet this demand. We are building the terminals, the roads and we can supply the Chinese market. The future market will be in Asia. We do not mind investing in Europe though. We have refineries here but we are also investing in the USA, in Russia, in South Africa, in Indonesia. For us it is important to act globally. Nowadays, Europe is not that important anymore.
Question: What are the trading volumes in Geneva and in Singapore?
Answer: I think the volumes in Geneva are higher than in Singapore but I cannot tell you exactly. My partner Tornqvist certainly knows that better than me. I am co-owner of Gunvor but I am not closely involved in the daily business. I mainly discuss big decisions of strategic importance with Tornqvist, particularly when it comes to future investments.
Question: Does Gunvor plan to enter oil production itself?
Answer: We already have an oilfield. We own the Lagansky Field in the Caspian Sea. However, due to Russian legislation we cannot currently develop this field. Only Russian companies which are at least 50% state owned are allowed to develop offshore projects. Maybe this legislation will be amended or we will find a Russian partner. We are always open for any kind of development and we are also prepared to invest in production projects. I am also a co-owner of Novatek, a natural gas company which currently has the fourth biggest gas reserves of the world. So you can see I already have a significant production business.
Question: Many commodity companies have turned themselves into public companies in the recent past. Do similar plans exist for Gunvor?
Answer: This is an open question – between me and my partner. The question is why should we do that? A public company facilitates access to considerable financial funds. However, the transformation into a public company also brings with it a lot of regulatory restrictions. We therefore have to consider whether we should do this. Maybe we will make this step when we need large amounts of cash. It is not currently being under consideration.
Question: Is Gunvor currently capable of providing the financial means required for trade and investments?
Answer: We have no problems getting money from banks. We have existing relationships with the major banks and very good business relationships with Swiss banks. We are therefore at the right spot in Geneva. Of course, we need a lot of financial means - we have a turnover of USD 90 billion approximately and we have to raise money for that. We do not have that much equity capital, but we have always been able to fulfil all the banks’ requirements without problem.
Question: Did you have problems to find credit during the big financial crisis of 2008/09?
Answer: We were somewhat affected by the problems, especially in Europe. The credit lines were slightly reduced by certain banks but this happened due to their own problems not due to our situation. When we realized this we immediately started to refinance ourselves in the Asian market. There, plenty of money was available and we also had the confidence of the banks. And we had our office in Singapore. Therefore, we never really had any credit problems.
Question: Mr. Deripaska (the Russian oligarch) recently mentioned in an interview that he would like to divide Gazprom in two parts, an Eastern and a Western part. How should Gazprom ideally look like according to you? Without an export monopoly?
Answer: We are business partners of Gazprom - Gazprom is a shareholder of Novatek. They have a 10% stake. We therefore basically have a good working relationship. Concerning the trade monopoly for gas exports I can understand Gazprom. They want to keep the monopoly and not change it. They have long-term contracts with the consumer nations in Europe. We also would like to work with margins like those of Gazprom though. Gazprom is Europe’s leading gas supplier, but European countries also receive gas from other countries for example from Norway and Holland. We therefore see rather more development opportunities for us in Asia. Besides, the energy consumption in Europe is declining.
As you know, Gazprom still has a trade monopoly. Nonetheless we are confident and continue with work on our project on the Yamal Peninsula. The LNG project is a joint venture with Total and aims at exporting gas to Asian countries. One of the reasons for my last visit in China was to find out whether China has any interest in our LNG. I am convinced that the Russian government would open the market, not only for Novatek but also for others, if we could negotiate a constructive deal with Beijing.
The market is there. Last year China consumed a little over 10 million tonnes of LNG - in the next decade this volume will increase to more than 60 million tonnes. In my opinion, it does not matter for Russia whether this gas will be exported by Gazprom, Novatek or another supplier. There is no conflict of interest there. If pipelines are involved that is a different matter, but for LNG they do not play a role. Here we have a chance to participate in exports.
Question: Is the rise of Novatek connected with the fact that the Russian government uses the company to make Gazprom more efficient and drive it to invest in the LNG field?
Answer: I met Mr. Miller (the CEO of Gazprom) last month in Moscow and we discussed Gazprom’s LNG project near Vladivostok, close to the Chinese border. They will however be entering the market later than us. We will be on the market in 2017, Gazprom only in 2018. But Gazprom is interested in the development of LNG.
Question: Do you have to reach an agreement with Gazprom regarding Yamal-LNG to be able to export your gas at all?
Answer: We already have an agreement with Gazprom Export, an affiliate of Gazprom. Even now Gazprom Export trades our gas, sells it and exports it. But in order to really make a step forward, the government in Moscow has to take a decision in principle. So far, only Gazprom can export, not Novatek. However, we already have this first agreement. That can also serve as a basis for trade finance.
Question: Could Gunvor also participate in such an agreement?
Answer: I don’t want to comment on this. Gunvor is already involved in LNG trading. During the last two years Gunvor has traded more than 30 shiploads of LNG. Gunvor also has a trading desk for LNG, for coal etc. As I mentioned earlier, Gunvor is pursuing a process of diversification.
Question: There is also an agreement between Novatek and EnBW. Could Gunvor participate in this transaction.
Answer: We have opened a trading division for Novatek and its desk is in the same building as that of Gunvor in Singapore. The two companies work together very well, not only in the field of LNG. We have an ambitious contract with India for future LNG supplies. Gunvor is assisting Novatek with drafting the contract in this case. We are now also considering a deepening of cooperation in gas condensates and naphtha.
Question: Rosneft has declared its ambition to become number 2 of the Russian gas-market. Will Rosneft become Novatek’s competitor?
Answer: Rosneft is a very big company, probably the biggest oil & gas company in the world. In the gas sector they have merged with Itera. I assume they have a good chance to establish themselves in the gas market. However, that will still take time and investment. Novatek currently produces 60 billion cubic meters of gas, and we hope to reach 100 billion cubic meters in a few years. This figure includes the production of Yamal Energy. There the production will amount to 62 million tonnes (20 billion cubic meters) approximately. In the field of gas production we are therefore ahead of Rosneft. Perhaps they will also consider the option of LNG projects in the future.
Question: The fact that Gunvor didn’t receive any crude from Rosneft also produced speculation on whether your relationship with Rosneft-CEO Igor Seltschin was strained?
Answer: We have a very good relationship. I have known him even longer than I have known Mr. Putin. The reports in the media, that we do not get along well, are completely unfounded.
Question: But you are direct competitors?
Answer: I would not say that. You cannot be a competitor of Rosneft. They are the biggest ones. They produce more crude than we trade. If they started trading too, they would absolutely be the most powerful one. We do not compete - we are trying to cooperate with them. In areas where there are interesting opportunities for cooperation we do that.
Question: But is there the possibility of a joint-venture for the Lagansky Field?
Answer: Yes, the negotiations are ongoing. The problem is that there are only two companies in Russia which are allowed to drill near the coast: Rosneft and Gazprom. There are certain rules. It is not easy to handle the situation. Rosneft owns an oilfield nearby which they develop with Lukoil. We are negotiating with them.
Question: What happens on the Stockman-Field?
Answer: This is a natural gas field that is owned by Gazprom. I therefore do not follow the development there particularly closely. I only know that have been some delays but I do not know what happened exactly. I have plenty of other things to do.
Question: Don’t you follow the development of Gazprom closely?
Answer: No. We do not compete with Gazprom. They are a similar size to Rosneft. We therefore do not try to compete with them but to cooperate. This is more sensible.
Question: The fact that Gazprom has a share in Novatek does not bother you?
Answer: No. The fact that we are partners obliges them to treat us as equals. We might also get an easier access to their pipelines as a result.
Question: Over the last years, you also used sports for relations. Are you more of a tennis player, a judo or an ice hockey fan?
Answer: I am a sponsor of judo and an amateur tennis player. I like this sport but with advancing age it is getting more difficult. The English say that above the age of 50, everything is about maintenance. I have certain knee problems, especially on hard surfaces. Therefore, I do not play regularly anymore but still participate in tournaments. Often we play tournaments with professionals. Recently I played with Elena Dementieva, then also with Marat Safin. He has already ended his career but still is a top player. I really enjoy it. But more and more I focus on ice hockey. I grew up in Armenia, in Eastern Germany and in Odessa by the Black Sea. There were no possibilities to play ice hockey there. Thus, I had no opportunity to learn how to ice-skate. I only started learning it three years ago. And today, yes, over there is a photo on the wall that shows me on ice.
Question: Currently you are chairman of the Continental Hockey League (KHL), the Russian equivalent of the NHL in North America. How are you planning to promote the league? Recently there were rumours that a Swiss team will participate in the KHL. Are you actively looking for a Swiss team for the KHL?
Answer: This is a sensitive topic. The KHL started in Russia - Vladimir Putin was the initiator of the League. Ice hockey is a Russian game, even if it was invented in Canada. In Russia, people began to play ice hockey in 1946. The Russians went literally crazy for ice hockey. After the collapse of the Soviet Union this fell apart – like so many other things. However, over the last couple of years, Russia has become world champion several times again. The KHL is part of this development. To some extent, the KHL is the competitor of the NHL. In the NHL, a lot of foreigners play. Finns, Swedes, Russians – the best players are there. But why shouldn’t we get these players back to Europe? It is an ambitious project but doable. About a year ago, I became chairman of the supervisory board of the league. I have been the chairman of St. Petersburg’s ice hockey club SKA for two years.
It is our aim to expand the league. Especially in countries that have an ice hockey tradition. We are currently in negotiation with the Finnish federation. We are trying to get into talks with Sweden this week, and then maybe Germany. After that, we will come to Switzerland. This is our goal. How fast we can achieve this is uncertain. But I believe that the KHL brings a higher standard to every country. Switzerland is also developing well as an ice hockey country. We, Gunvor as well, are supporting Servette Geneva financially and are helping Hugues Quennec, the chairman and owner of the club. We intend to even win the Swiss Championship one day.
Question: How about the football club Servette?
Answer: No, football is not my game.
Question: Alexander Medvedev is the President of the KHL. He is CEO of Gazprom Export and also an “alpha male” like yourself. Is the cooperation difficult?
Answer: Akexander Medvedev is a good friend of mine. As President he is involved in its daily operations. On the Supervisory Board we take strategic decisions. As we share the leadership, we don’t have any personal problems.
He does a good job. However, there is one area that needs to be improved. Medvedev had the idea that it would be OK to have a Croatian club, a team from Abu Dhabi, etc. The Supervisory Board’s strategy is to develop a league of high quality. And this quality comes from countries with an ice hockey tradition.
Question: You mentioned that the construction company MOST is performing some construction projects in Sochi. Apart from this, are you somehow involved in the development of the Olympic City of 2014?
Answer: Not at all. I cannot do everything. Also my wife complains that I am doing too many things. And I believe she is right.
Question: You never considered investing in Sochi?
Answer: I haven’t so far. But it is an important place for Russia and we are lucky to have this unique geographical spot in Russia. Sochi is situated right on the sea, yet at the same time you can go skiing.
At this moment I have the following observations: many sport facilities are currently being built in Sochi. It looks as if – after the Olympic Games – there will be too many of them in the same place. How should they be used in the future? I am considering establishing an ice hockey club in Sochi. The catchment area is large. It is an advantage that there is already an ice stadium, something that other cities do not have. It would be interesting to have a club there. Also in the NHL there are clubs that are located by a sea, like Los Angeles or Miami. This is how my future commitment in Sochi might look like.
13 March, 2013 | Reuters
The leading national museums of France and Russia, the Louvre and the Russian State Museum, have teamed up to host a historic international chess tournament dedicated to the memory of the fourth World Chess Champion
The leading national museums of France and Russia, the Louvre and the Russian State Museum, have teamed up to host a historic international chess tournament dedicated to the memory of the fourth World Chess Champion, and Russia’s first such champion, Alexander Alexandrovich Alekhine (1892–1946). Some of the world’s leading chess players will take part in the tournament organised by the Russian Chess Federation on the initiative and with the support of businessmen Gennady Timchenko and Andrei Filatov.
6 March, 2013 | Vedomosti
One of Gennady Timchenko's companies invested over 1bn RUB in a business aviation terminal of the Pulkovo airport, which will increase the current passenger flow of the airport multiple times.
Another business terminal in which Mr Shamalov has a stake, Pulkovo-3, is to be commissioned this year. Together with Vnukovo Airport's co-owner Vitaly Vantsev, Shamalov invested c. RUB 2bn in this project. The first apron of the terminal was commissioned on 20 June 2012. After reaching the projected capacity, the new 4,000 sq. m passenger terminal will be able to service up to 1,500 domestic and international passengers daily, announced JetPort SPb.
According to the business jets operator's information, last year Pulkovo's business aviation flights serviced 17,038 passengers (8% up from 2011).
75,000 passengers is a great annual capacity for St Petersburg. The terminal will be enough for Pulkovo to grow into over the course of the next decades, says Evgeny Bakhtin, Vice President of Russian United Business Aviation Association (RUBAA). He estimates the annual number of business jet flights arriving in St Petersburg at 600 to 800. Mr Bakhtin also pointed out that prior to the recession, the market was growing 50–60% per year, but now the growth has slowed down to 10–15%. In St Petersburg, as well as in Moscow, the cost of servicing a business aviation passenger is several times higher than in Europe on average, reaching RUB 10,000 per person. Fostering competition in this market, says Mr Bakhtin, should curb the prices and enhance the passenger experience at the airport.
1 Nov, 2012 | Forbes
Interview with Gennady Timchenko (Principal Shareholder in Volga Resources)
IN HIS FIRST BIG INTERVIEW, GENNADY TIMCHENKO SPEAKS ABOUT HIS ROAD TO RICHES.
UNFAILINGLY SMILING AND RESPONSIVE.
“I know how to talk you into, say, buying this tea from me,” asserts our interviewee, gesturing convincingly. Until recently he could only be identified by a single photo available on the Internet. We are sitting at the table with “citizen Timchenko" – the richest businessman of all Vladimir Putin’s old friends.
Timchenko claims to have become a millionaire back in the 1990s. By the late 2000s, his company, Gunvor, which was making lots of money on trading Russian crude oil and petrochemicals, was the world’s third largest oil trader by revenue.
You can’t fail to notice that Gunvor’s rise to riches coincided with Putin’s rise to power. In the 2000s, the company exported a large part of the oil produced by Rosneft, which acquired the business assets of Yukos, as well as one-third of the total Russian oil exported by sea. Soon, Gunvor was trading oil from TNK-BP and Gazprom Neft, and Timchenko himself was alleged to have a stake in Surgutneftegaz. However, every time the media tried to link Timchenko’s business success to Putin’s name, the businessman or his representatives fiercely denied it in court and in retractions. Even now that Gunvor is losing new tenders, which many attribute to the smouldering conflict between Gunvor’s boss and Rosneft’s President, Igor Sechin, Timchenko still reiterates: it’s only business, nothing personal.
Timchenko’s first big interview for a Russian magazine is taking place in the depersonalised setting of a small conference room on the 41st floor of a Moscow business centre. A simple table and chairs complements a panoramic view. We are looking around for a portrait of Putin, but there isn’t one in sight. Through the whole conversation Timchenko keeps persuading us that the President has no part in his success. Often his answers on the topic start with “that’s a lie”, coupled with an emphatic raising of his hands that seems to say “Guys, I have nothing to do with it”.
It appears that Timchenko’s business philosophy is best described as “a flexible way to victory”. His way is very flexible indeed. The whole expression is a rough translation from Japanese of the first part in the name of Putin’s favourite judo club Javara-Neva.
You have long ceased to be just Gennady Timchenko. Nearly every article on you starts with ‘Putin’s friend’. Are you really friends with the President?
How am I supposed to answer this question? You may want to ask Vladimir Putin.
But do you personally consider him your friend?
You see, we’ve known each other for years, and we do meet from time to time. These days, mostly at sports events or to discuss the work of the Russian Geographical Society. I have a lot of respect for President Putin.
I think he is the leader that Russia needs today. He is a very deep and deliberate person. A good listener. You can say whatever you like, but he is a man who has really done a lot for Russia. Without him, there would long have been no country – we would have fallen apart like Zbigniew Brzezinski foretold. I remember party membership cards being eliminated in the 1990s, food stamps being introduced again, and you could buy expired sausage, or a chunk of meatless bone. My wife would sign up and stand in queues for those things in Saint Petersburg for two or three hours. Today, we are living in an entirely different country, and much of the credit for this should go to the President.”
Do you see each other often?
Not too often. We met in Sochi a while ago. President Putin had invited some hockey players, as well as Olympic gold medalists with their wives. I was there too, as a representative of the KHL. Sometimes we’ll even meet on the ice. For instance, I played in the match between the national amateurs team and the Olympic champions at Khodynka, when Vladimir Putin scored.
Do you ever take the opportunity to talk about business?
Never! We really mostly talk about sports. For example, my business partners and I were among the first sponsors of the Javara-Neva club. By the way, its name comes with an interesting story. In the 1990s we opened Shogun, a Japanese restaurant, in Saint Petersburg. Back then, Vladimir Putin was neither prime minister nor president yet and, if I’m not mistaken, he worked for the city administration. So once the future club’s board of trustees held a meeting at the restaurant, and we started picking a name for the club. I went to ask advice from our Japanese chef, who is a fair judoka too. ‘What shall we call the club?’ I asked. And he said, ‘Call it Javara – it’s the old name for judo and means something like ‘a flexible way to victory’.” Putin noted that the name was good, but it needed some place indication, so he proposed Javara-Neva. Since then, our club has been European champions nine times.
Whose idea was it to found the club?
I don't really remember. Arkadiy Rotenberg once appeared in KiNEx (Kirishineftekhimexport – Forbes) and proposed this project to me and my partners. That was when we got to know each other. He needed money for the club and as we already were well-off businessmen we agreed to help him.
Your wealth is actually often linked to Putin’s ascension to power. Do you see any connection?
This theory is quite widespread in the press. I’ll give you one argument: in 2000, when he became President, I was already a millionaire and the 28th richest Finnish taxpayer.
But haven’t you become a billionaire since?
Excuse me, but remember the voucher auctions and tell me how much the 1990s’ oligarchs paid for their companies?
Tens and hundreds of millions. But how much do they have today?
Billions. Exactly, they’ve multiplied them. I did the same, only without ever privatising anything. Even KiNEx was privatised by my partners when I was abroad, while I bought my stake in it on the secondary market later. I’ve been in the oil business since 1987. You’d think I’d be able to make money over such a long time.
Would you mind sharing your version of how you, an electric engineering major, became an oil trader? How did you choose your profession?
I’m a graduate of the Military Engineering-Technical University in Saint Petersburg. I can’t say my choice of school was well-informed: it’s just that my dad was in the military. For the same reason, we moved a lot – when I was six, he took me from Armenia to the GDR, and I finished high school in a small town near Odessa. After my graduation from college, I got assigned to the Izhora Plant near Saint Petersburg. Nuclear power plant construction was booming in the Soviet Union at the time, and [Chairman of the USSR Council of Ministers Nikolai] Ryzhkov decided that young professionals in the sector should be paid double salary. As a shop foreman I was paid 280 roubles a month, while a university professor’s salary was 300 roubles.
Where did the Perestroika find you?
Already in foreign trade. I had been a foreman for five years when they cut our bonuses. At that point, when a former classmate offered me if I’d like to take over his position in the plant’s foreign relations department, I took it without hesitation. After working in a huge shop where your hands are always elbow-deep in oil, the job, and the prospects of travelling around the world and taking part in expos seemed exciting. I got it because I had a fair command of German, and they needed an engineer who would know a thing or two about construction and equipment. I wanted to try and enter the Foreign Trade Academy, but to get it you’d have to be Lenin’s own kin, or have a claim of similar validity. You at least had to have a reference from a regional party committee.
But you didn’t need to be in the KGB?
No, you didn’t. Or are you interested in the whole press story of me being in the KGB and meeting Putin there?
Well, there is a story indeed...
That’s a lie! I have always been in plain sight. The Finns would have had to carry out a thorough background check to issue me with a passport.
Yet you were in the Communist Party, weren't you?
Yes, I was. Though I had not been admitted for long. Simple workers were preferred over engineers at that time. When I was finally admitted, I actually became a secretary of the local party office at KiNEx. I did not manage to get a degree in foreign trade because the Soviet Union collapsed. Just before it, when the government once again introduced rationing, my party colleagues Andrey Katkov and Yevgeniy Malov – there were only three of us in the local office – strongly protested against it. Saying that they could not be regarded communists anymore, they handed back their party cards. I paid party dues for them and stamped their party cards for a couple of months more and then left the party myself. You know what happened next – democracy and liberalism (together with Adolf Smirnov, KiNEx CEO, Andrey Katkov and Yevgeniy Malov became Timchenko's partners in KiNEx, his first big business – Forbes).
“WE WEREN’T ELBOWING OUR WAY TO IT”
You once said that landing a job with KiNEx was the first great luck in your life. How did you get there?
In 1987, Ryzhkov issued a resolution authorising about 70 companies to take part in foreign trade. Among them was the then state-owned Kirishinefteorgsintez (the Kirishi refinery). By then, I was already working in the Saint Petersburg Foreign Trade Department (with a reference of the same former classmate from the plant). The Kirishi refinery had been completely cut off from the outer world, they’d never seen a foreign trade contract in their life. The refinery’s commercial director Adolf Smirnov came to our Department and found Evgeny Malov. The latter recommended Andrey Katkov and me to him [Smirnov, Katkov and Malov became Timchenko’s partners in his first big business, KiNEx – Forbes]. That’s how we got to KiNEx. The company was founded by the refinery to sell its petrochemical products and supply the refinery with imported goods. The job took some training, of course. We did our internships in foreign subsidiaries of Soyuzkhimexport.
What was the distribution of responsibilities in KiNEx?
Since Malov had a degree in foreign trade, he was made the CEO. Katkov was responsible for the import operations, and I managed the exports. Apart from the three of us, there was a secretary and a cleaning lady. We hired a former Lenin Museum employee as the secretary, because she could type in English. The first KiNEx office was located next to the Wolf and Beranger café on Nevsky Prospekt. And that’s how we became the only entity in town authorised to trade in petrochemicals and use quotas for oil product exports.
There was quite a hype around the distribution of quotas...
They were distributed in Moscow. There were, of course, scandals around it. One official was later discovered to have a Rembrandt in his office, another a safe full of cash. But we weren’t elbowing our way to it: the refinery procured the quotas itself, and our task was to use them. I remember Sobchak asking for a quota to finish the construction of the library in Moscovsky Prospekt. My thought was if the city had food left for two and a half days, how can he push that library? But you have to give him credit for thinking beyond the daily bread, and the library was later completed.
Speaking of food supply, how did KiNEx get involved in the scandal around the investigation by Marina Salye, a deputy of the Leningrad City Council. She claimed you had sold oil products and were supposed to buy food for the city with the money, but never did. Also, the programme was supervised in the Mayor’s Office by Putin...
That’s not true. KiNEx had nothing to do with the whole thing. For a long time, I couldn’t even figure out where the story had come from, because we were regularly audited by all authorities. But lately I have finally been able to get my hands on the documents proving that KiNEx had nothing to do with that diesel story. It turned out there was a company with a similar name. But I also have to add that I have never come across any solid ground for that story whatsoever.
You were nevertheless engaged in petrol sales in Saint Petersburg, weren't you?
Well, we constructed a couple of petrol filling stations there.
But despite criminal control over petrol retail sales? Neither Lukoil nor Surgutneftegaz entered the Saint Petersburg market.
We were not linked to the Petersburg Fuel Company (PTK is one of the largest fuel retailers in Saint Petersburg believed to be controlled by criminal businessmen – Forbes). They tried to press us but we managed to escape.
How could anyone escape PTK at that time?
Well, there were ways...
How did you get in touch with Yuri Kovalchuk, another of Putin's friends?
We purchased a stake in Bank Rossiya.
Banks were unreliable and often collapsed, so we realised we had better control the situation from within. Katkov was appointed Chairman of the board, and we could see how things were going on. When we purchased a stake in the bank, Kovalchuk already was its shareholder, as were certain other joint ventures. We acquired the bank's share through a legal entity, and when we split KiNEx business between the partners we also divided our stake in the bank.
MOVE TO FINLAND
In 1991, you went to Finland and got naturalised in 1999. What is your citizenship now?
I have both Russian and Finnish citizenships. But in nature and spirit I have always been Russian.
Still, you are a Swiss tax resident?
Yes, I am a tax resident of Switzerland. I had been paying my taxes to Finland for a long time, and by Russian standards, it was too much – over 60% of my income. After ten years I decided to move to Switzerland, though not on account of taxes but in order to give my son a good European education.
But what about the taxes there?
I have an agreement with the Swiss tax authorities. They have a system allowing you for a certain period to pay a fixed amount in taxes, whatever the income.
So, on average, it’s less than 60%?
To be sure. Considerably less, I would say.
Well, the income tax in Russia is a mere 13%. Don’t’ you think you might be better off here?
As a matter of fact [long pause], I really recommend moving to Russia to a lot of foreigners. I am also considering it myself. From the fiscal point of view it is probably one of the best states in Europe to pay taxes and still make decent money. But, by the way, it’s not only my own personal tax residence that matters, but also the place and environment in which my companies do their business. And my companies mostly pay taxes, create jobs and develop here, in Russia.
You do not want to become a Russian tax resident, do you?
I am considering it.
Why did you move to Finland in the first place?
In 1989, joint ventures with foreign participation were allowed in the USSR. They were given tax holidays of several years. People from Soyuznefteexport [the Soviet oil and petrochemical trade monopolist – Forbes) approached us with the idea. Thus the Urals Ltd. trader emerged. It was founded by the Kirishi refinery, Volgotanker JSC, and the Swedish company Sadko Oil. We were employed by its subsidiary, Urals Finland. The pay was good, and it was much like working in a state-owned company. Katkov, Malov and I basically drew lots to decide who was going to move to Finland, though I personally wasn’t too eager to leave.
How come? Were you against going abroad?
Look, I started working in foreign trade in 1987. We travelled abroad almost every week, and I also had my training in Sweden. But I never aimed to leave Russia. It was our friends and Saint Petersburg that were important to me and my wife. But the die was cast, and I had to go even though my English was not that good. By the way, I had passed my English exam when I worked in the foreign trade office at the plant. At that time I could not even imagine it would be of any use in my life. The thing was that knowledge of a foreign language gave a 10% supplement to the salary. Later I learnt German, too.
Is it true that the idea of Urals belonged to Andrey Pannikov, a former Soviet agent expelled from Stockholm?
It is but I did not know then he had worked for Soviet intelligence. We never read foreign newspapers in the USSR. And when I met Andrey Pannikov he worked in Soyuzneftexport, so I knew him only as an oil professional. There were several Soyuzneftexport's high-class professionals working in Urals whose experience and contacts were very useful for us. In a couple of years we were able to run the whole business on our own, and my KiNEx partners bought out Urals' subsidiary in Finland.
Is it true that your responsibilities in Finland included receiving guests including officials and auditors? Is it true that you taught Putin mountain-skiing there?
Vladimir Putin was the chairman of the Russian-Finnish Committee. Naturally, we were involved in its events, like any other Russian organisation. But we never went skiing together. I met Putin before my departure to Finland. His organisation would request our expert opinion on oil product export matters, and we discussed the quotas.
So when exactly did you make your first million?
I don’t remember and never thought of it. Money doesn’t matter much to me.
You said you learnt languages to get a 10% raise in salary, didn't you?
That was a different matter – I had to feed my family. And it is not crucial anymore when you have $500,000 or $1 million.
KiNEx was privatised around the same time as Surgutneftegaz, which got the Kirishi refinery. Even as a private company, Surgutneftegaz remained KiNEx’s main client. How did you manage to retain it?
That’s an interesting story. The Kirishi refinery had other shareholders besides Surgutneftegaz. In particular, KiNEx and Alfa-Eco had between them around 15% of its shares, bought on the secondary market. [General Director of Surgutneftegaz Vladimir] Bogdanov wanted to control 100% of the refinery, and KiNEx made him an offer: why don’t we sell you the shares at any price but on the condition that you keep us as the refinery’s broker for a while? He accepted, and for a couple of years we worked under that agreement. Later he found he just liked working with us and extended the contracts.
Bogdanov is hard to please. This is exactly why many consider you a co-owner of Surgutneftegaz.
I crossed my heart when I said it first and I would say it again: that company is not mine, never was and is not likely to ever be. I bought its shares at the very first stage, but it was far from a big stake.
Do you think Bogdanov controls the company personally?
By no means. There’s no way he can have a stake that large. The company belongs to a community of shareholders in a pension fund. I don’t know his exact stake. I would like to stress that Surgutneftegaz has only ever traded through us because of our considerable logistic advantage.
What exactly was it?
There was an Estonian man Aadu Luukas, who built roads in Surgut, and when Estonia became independent, he went back and built an oil and oil products transshipment terminal in the Muuga Harbour. We helped him do it. By that time, KiNEx had Linkoil shipping to Estonia by rail. Once Luukas came to us and said he needed a loan to build the terminal, but the bank demanded a long-term transshipment contract as collateral. So I went to Bogdanov and convinced him to write a letter guaranteeing that Surgutneftegaz would provide the terminal with certain volumes for a certain period. It wan’t binding on him in any way, and he signed it off. In return, we got the “right of first night” in Muuga: most of the terminal’s capacity was committed to us. Our second-largest transshipment terminal was in Saint Petersburg. We raised funds for its development and also got preference in its services. By the way, at the time, the Director General of the Petersburg Oil Terminal Alexander Dyukov [now the CEO of Gazprom Neft –- Forbes], and the Director of the Sea Port of Saint Petersburg was Alexey Miller (Gazprom’s Chairman of the board). As a result, working with the terminals closest to Kirishi, we gained a critical competitive edge. We had the best oil logistics platform in the North-West of Russia, so the oil companies were eager to work with us.
By the way, weren’t you surprised to see your friend Miller promoted to Gazprom’s CEO?
No. Alexey Miller had demonstrated great leadership skills, and Vladimir Putin knew him well.
He knew you well too...
I’ve had various offers, but I think I’m in the right place. Trading is what I’m good at. It’s not modest of me to mention, but my friends say I could sell life insurance to a dead man.
Why did you part with your KiNEx partners in 2003?
I guess we just weren’t on the same page anymore as to where to grow and which direction to take. I had been living abroad for a while by then, and somehow they decided they could make decisions behind-the-scenes without me.
You practically took oil and products trading away from your partners in that ‘divorce’: Surgutneftegaz started trading through your Gunvor and Surgutex. How did that happen?
Do you know who was spending days and nights in Surgut, and whose liver suffered there? Mine! I would always fly there from Finland. Working with Bogdanov isn’t easy at all. He could call me in the middle of the night and start asking about tanks. He would interrogate my accountants. He is, of course, no ordinary person. Today his company has $30 billion in its accounts! And consider that he hasn’t sneaked out any assets, or created a single offshore company. For a long time, he was even refusing to get a private jet. He would always take regular flights to Moscow and be late. I had a lot of trouble convincing him he should own a private plane, because the most valuable thing for a businessman is time, not money.
KiNExа also had a shipping business, where your partner was Yuri Nikitin...
A really dishonest person.
He said the same about you when he sued Sovcomflot in London.
He spoke a lot of nonsense and told lies in court.
Why didn’t you sue him for libel?
Perhaps the time isn’t right yet.
What happened to KiNEx railway business?
We divided it. Finally, I got my railway tanks back to build Transoil. Now I am in good relations with my ex-partners. I saw Katkov in Saint-Petersburg just a week ago. He is focused on developing Penoplex business which we launched together.
Penoplex faced debt problems and, according to our sources, Gazprombank has recently bought out 20% of its stock.
Gazprombank often invests in production assets, which is the right strategy in my opinion.
CREATION AND SUCCESS OF GUNVOR
Eventually, Gunvor took KiNEx’s share of the market. How did you meet Gunvor’s co-owner Torbjörn Törnqvist?
I had never traded in oil, only petrochemicals and oil products. He is the one who got me into the crude business. How we met is a whole separate story. In the railway business we created a system that ran like a Swiss watch. It was winter, -25 Celsius, but fuel oil from Kirishi was delivered to Estonia warm. We’d unload the tank right in the port, and then the tank would go right back. But this is where Mr. Törnqvist comes in: he set up his own trade company in Estonia and started shipping fuel oil from Nizhny Novgorod and Ryazan. In the winter, this fuel oil turns rock-hard in transit and takes days to warm up. And so my fuel oil, travelling nice and hot, is blocked by this frozen you know what. I was furious! I went to see the Swede myself and told him, “You know what, pal, I can sell you as much as you’re trying to ship, and at a good price too – just don’t leave me out in the cold”. We struck a deal, got to know each other better and became friends. In the end we even became neighbors in Switzerland. He is a highly-qualified expert, I’d say one of the best in the industry. So when my KiNEx partners and I went our separate ways (for some reason, they never got along well with Törnqvist), the two of us started a new company together.
Or was it the three of you, with a partner that still hasn’t been named?
Are you asking if it was Putin? I can answer – no!
Some sources claim that it was your former partner in Surgutex and Yamal LNG Pyotr Kolbin...
He is my childhood friend, who was for a while our financial investor and got a small stake in the company in return. He has nothing to do with the government or large businesses. Today, Gunvor has two big shareholders, Törnqvist and me, and we each own around 44%. Besides, there is an options plan for the management.
Neither Nafta Moskva (successor of Soyuznefteexport) nor Urals were able to keep their market share. Why are they now out of the picture, while Gunvor is the world’s third largest oil trader?
Our main advantage has always been the connection to the Kirishi refinery: we had constant supply of products without having to search the market for it. In addition, we created the unique logistics platform that I have already mentioned.
Gunvor’s rise was in the early 2000s, when Putin came to power, and the attack on Yukos began, resulting in its assets being acquired by Rosneft...
You have to understand that the source of the rise were the oil producers themselves – they started building vertically integrated companies after the privatisation. Their growth spurred ours. From the very beginning, we were an accessory to Surgutneftegaz, whose products alone would be enough to raise any trader above average. But we had other clients too: we worked a little with Omsk, and a little with Nizhny Novgorod. And my connections with Rosneft and its then CEO Sergey Bogdanchikov had been established long before Yukos’s bankruptcy
We started working with him because he needed petrol for his chain of filling stations in the Murmansk and Arkhangelsk regions, and delivering it from Rosneft’s refineries was, of course, much more time- and resource-consuming. Bogdanchikov wanted to supply his oil to Kirishi and buy oil products. But Bogdanov wouldn’t let anyone come near him. I talked him into letting Kirishi process around 100–150 thousand tonnes of Rosneft’s oil a month. We arranged a swap of sorts for Rosneft.
Was that episode enough to make Gunvor Rosneft’s main trader?
Well, think about it. There is Rosneft, with no export subdivision abroad. Who will it sell to? Glencore, Shell, Vitol, Daxin... it sold to all of them, and to us as well. But while initially it produced 20 million tonnes, with time the output grew to 100 million tonnes. So some 80 million tonne increase was spread between all the traders (most likely, in much the same proportions as before). But remember we had a competitive edge with our Transoil. Besides, our price offer was the best. None of our competitors (at least 20 in each tender) had ever so much as expected us to be that aggressive. I have to admit we’re paying the price now. We traders have jacked up the Urals crude prices so high that it’s become more expensive than Brent, which is not healthy, because Brent’s quality is higher than that of Russian crude. On the plus side, we helped Russian oil companies get some extra profits.
What was the peak share of the total export from state-owned companies – Rosneft and Gazprom Neft – traded through Gunvor, and when was it?
That’s more of a question to Törnqvist. I’ve never really kept track of whether we were at 35%, 30%, or 20%. In any case, we received no support: neither I nor Gunvor have ever made requests to the Government or anywhere else to get these amounts.
RELATIONSHIP WITH SECHIN
Igor Sechin is considered to be the architect of Yukos’s bankruptcy, and you know him well enough from Saint Petersburg. Were you involved in the operation?
Honestly, I was never even much interested in their situation. I never talked to Igor Sechin about Yukos. Whatever was going on between the company and law enforcement authorities was none of my business, and I never had any part in it or the nationalization that followed. Any attempts to link my name to the whole story are pure and simple lies.
How do you, a businessman and a long-time resident of Europe, feel about Yukos’s case?
I would rather not express any views of a company I never had anything to do with.
Some traders in private oil companies have alleged that contracts have been given to Gunvor “after a call” even when your company was hardly known on the market. Who could have put a good word in for you?
You had better ask those traders and the management of their companies. Let them answer, because it’s just another misguided belief. Those rumours might have their roots in the losers’ propensity to look for reasons elsewhere. You must have noticed that this year we haven’t been taking long-term contracts in Russia, Rosneft included, we really haven’t taken a single shipment from the recent six-month tender. We can see that the price is considerably higher than the market one and the one we’re willing to pay. Let our rivals try and work in these conditions, and we’ll see how they’ll do.
Do you think your competitors will suffer losses?
We will see in six months. I believe this contract may become a great loss if no military invasion takes place in the Middle East. Though it may turn out to be different but we prefer staying away from this risk.
Is it true that Gunvor has also lost tenders of TNK-BP and Surgutneftegaz this year?
Insane prices made us take a decision to continue spot buying.
Are you saying that the much-talked about personal antipathy between you and Igor Sechin has nothing to do with Gunvor loosing Rosneft’s tenders?
These rumours are greatly exaggerated. Igor Sechin [choosing his words carefully] is a professional, and, I think, a very efficient one. Our relationship is quite smooth. I think Sechin will work with Rosneft, and we will work with him. In fact, we are working with him even now: on oil products and crude contracts remaining from last year.
But the existence of the conflict is admitted by even those as high up as the Kremlin...
I understand that the talks about it are food for the press. Still, this is not true. We have a perfectly normal working relationship. We hold meetings in Rosneft, nobody takes us off any tender lists, we went through all the necessary procedures, we meet all the requirements and are qualified by Rosneft to take part in its tenders.
How close do you know Sechin in general?
I met him even before I met Vladimir Putin. On my way to Putin’s office I would always pass the department where Sechin worked. And all this time I have had only the best opinion of him. He is a very capable person.
Is it true that Sechin made personal efforts to persuade Rosneft and Surgutneftegaz to do business with Gunvor?
I established business relations with Bogdanov before Sechin did it. And nobody supported me in negotiating with Bogdanchikov.
Did you and Sechin compete for influence in Rosneft? They say it was you who introduced Eduard Khudainatov, Rosneft's ex-president, into the company.
This is false. The decision was probably taken by Igor Sechin. He may have consulted someone, but not me. I know Khudainatov well and I believe his work in Gazprom over the Yuzhno-Russkoye field had proved him to be an effective manager. There were neither opportunities nor grounds for me to lobby for his appointment in Rosneft. I’d prefer to rely on facts, not rumours during this conversation.
CONFLICT WITH THE PRESS
Much fuss was made by an article in the Economist stating that Gunvor allegedly manipulated the prices for Urals crude to bring them down. Could you comment on this?
In my opinion, the Economist had a peculiar approach towards selecting a time for their analysis. Statistics for that period show one thing but if they had looked at, for example, further six months down the line they would have seen the opposite picture and made the opposite conclusion about overpriced Urals oil. Such analysis cannot be regarded as accurate. Anyway, we cannot dictate the market because our 100 million tonnes is a drop in the ocean. This whole story is pure fiction. I think Lawrence Neal, Platts' President, was clear about the allegations.
Who and why made the story up? What’s your guess?
I guess it comes from unhappy relations with the magazine. First they published false information about me and Gunvor's business. We sued them, and they issued a statement. The magazine wanted to even the score and again published unreliable materials. Someone could well have helped them to 'correctly' interpret this information – the market is competitive after all. Now it is our turn to make a move, I guess.
Your name became widely known after Ivan Rybkin, a presidential candidate, wrote a public letter about 'Putin's friends'. Since then you have regularly sued various media.
I have my own standpoint regarding it. Russia has global competitors; there are politicians who strive to do something about Putin – remove or compromise him in any way. To do that they needed a man who is rich on the one hand and has connections with Putin on the other. I am the most obvious choice in this regard.
The press says that Gunvor has drawn the attention of the US Department of Justice, and the Swiss Prosecutor's Office has launched an investigation against one of Gunvor's employees. Le Temps wrote that Gunvor's office in Geneva was searched by the Swiss police. Can you confirm this information?
The Swiss investigation is an old story, and Gunvor is not its target. The company's employee under investigation had been fired. Gunvor cooperated with the investigation.
Do you still deny an alleged investigation of the US Department of Justice?
They have never informed me about anything like that. Besides, Gunvor has already commented on the situation (Gunvor published a press release though nothing was said directly about any investigation against the company in the USA – Forbes).
What is Gunvor's ownership structure?
We have a holding company in Cyprus that owns businesses across the world. Our offices are located on every continent. We also hold minor stakes, for example, in the pipeline going from the Atlantic coast to the Pacific. Such investments are small though important for us. As shareholders, we have an opportunity to transport extra volumes.
Does Gunvor have a dividend policy?
We have no fixed dividends. We take very little out of the company because all profit is reinvested. We keep on establishing new offices across the world and acquiring new assets. We have recently acquired Kolmar, which is again an investment in Russia.
Could you quantify 'very little'?
I am talking about some tens of millions US dollars, depending on our sales.
What are your average trading margins?
We received about $87 billion in revenue and over $300 million in profit – now you can calculate it yourself.
Gunvor is actively diversifying its business: now you are trading in coal, gas, and LNG (liquefied natural gas) and you are investing in industrial assets and infrastructure. What’s next?
Gunvor is developing according to the usual laws of business. Initially, we picked the best traders from different companies. Total, for instance, used to complain about it a lot, but now we’re partners in Novatek. Naturally, we see what our rivals are doing, we copy some things and invent others. Today, our portfolio is based on oil, oil products, and coal. We are actively developing LNG trading, we have started trading grain futures through a separate desk. The same goes for metals. So far, it’s a relatively early stage, but we may seriously get into this business.
You had another trader, Surgutex, didn't you? By the way, what are the terms of cooperation between Surgutex and Surgutneftegaz?
Surgutex is not really a trader now – rather an operator receiving a small fee from Surgutneftegaz for administrative work it does. I have recently decided to quit this business because of the changes in the Russian legislation and sold it to my former partners.
What changes affected your decision?
I do not want to go into technical details, so I will not comment on this matter.
Do you have a business plan for the next few years?
I’ll be honest with you: we are a private firm, and our approach to business is not as formal as in public companies. And this might be yet another advantage we have over our competitors. Of course, we discuss the directions of our future development. For instance, right now we are considering the possibility of Gunvor and Novatek working together on the LNG market. I cannot give you the details, because we signed a confidentiality agreement, but I can tell you that the project is very attractive.
Does it have something to do with the Yamal LNG project?
No, it doesn’t.
GAZPROM’S FUTURE AND GAS PERSPECTIVES
Traders say Gunvor has ambitious plans on the gas market. Is it true?
I consider the opportunities in the gas market very important for the company, even though this commodity is likely to depreciate in the foreseeable future. I think it’s a segment where we could join efforts with Novatek. Novatek wants to enter the European market, and Europeans want some other suppliers apart from Gazprom.
By breaking the gas export monopoly?
It is anyway up to the Government to decide who will or will not export gas. You remember, however, that all our national foreign trade was long monopolised. And where is it now? All in good time…
How much time would you give Gazprom's monopoly?
I cannot give you an exact time frame. We do not make public forecasts – this is analysts' domain. By the way, it was in the press some time ago that Novatek broke export barriers and announced it would supply gas to Germany. It is not exactly the case. This will not be Russian gas. It will be bought on the spot market and sold to a German company. Novatek will act as a trader to gain experience essential to sell gas in Europe. I would personally like Gazprom to maintain or even expand its share in the European gas market.
The situation is yet the opposite...
I think that Gazprom's reduced market share has resulted from Gazprom Export’s marketing policy though the most important thing for a trader is to maintain a market share. It is easy to lose and hard to regain. Cheap liquefied gas has become available on the market which means, in fact, a new market environment, and such things should not go unnoticed. Anyway, there is a significant part of the European market left over for other companies. Why shouldn't we try to compete with them? I believe in these prospects. For example, Gunvor bought and successfully sold 26 gas carriers in Europe back in 2010.
Gazprom has already half opened a door for Novatek having agreed to become a fee agent for gas exports from Yamal LNG. How have you managed it?
The project requires about $20 billion in financing. It means we need bank loans, and banks need solid documents. The key document should be a gas export contract. Financing can only be secured with future supplies. We have a contract providing for exports of Yamal LNG gas at a fee. However, Gazprom Export has neither signed any contracts with consumers nor given any guarantees yet. So we say: "If you are not ready to perform under an agency agreement, give us an opportunity to make long-term contracts for LNG supplies. Then we will do it ourselves because we can."
And what is the answer?
Leonid Mikhelson (a founder and shareholder of Novatek – Forbes) is now making the situation clear for the Government. Yamal is a new gas province which needs development and investment. We realise that the Yamburg project is already in the box, and that we have to develop new fields. Thankfully reserves are huge. This is a point where the Government, Novatek, and Gazprom have joint interest. We must therefore look for partnerships.
Do you think you will be allowed to export gas independently?
There is no guarantee though common sense will triumph one day. We have to realise that this project requires amendments to the law. And that is all. As for LNG, we do not intend to compete with Gazprom on the European market. We'll focus mainly on Asia and the Pacific where we will compete with other players such as Australia, for instance.
You and Gazprom could agree and divide the world...
Well, I have never cast my lines that wide (laughs). Although Gunvor has its own way – we have already brought our several LNG tankers through the Northern Sea Route. We have succeeded, it works. As investments in Yamal LNG are huge, this is the Government's task to find ways to support and raise funds on the market. We will soon have to take a well-considered decision. If contracts are already in place, further fund raising would take another year. I believe this issue to be very important, and it is what we are solving now. In particular, Leonid Mikhelson discussed this issue with Putin at a meeting in Salekhard.
You are said to have the most powerful connections in Novatek. Do you personally lobby for the right of independent exports?
No, I do not. As Novatek's shareholder, I do not have to be involved. In theory, I could speak to Vladimir Putin at a meeting of the Russian Geographical Society or a hockey match, for instance. But you know how the President appears for a strictly limited time at public events.
Being four hours late...
I have not said this. On the other hand, what does 'being late' mean? No event starts without a key figure.
That is everyone had come before, hadn't they?
How did you end up being a Novatek shareholder?
Back in 2008, I had a meeting with bankers who told me that there was a company looking for partners, and asked whether I would like to consider this opportunity. After we met and talked with Leonid Mikhelson and looked into each other's eyes, I understood that he was an interesting businessman who had built his company from scratch just as I had built Gunvor. Novatek is one of a few examples of money earned honestly in Russia. Mikhelson has not privatised much either. However, he has an experienced and close-knit team of top professionals who sometimes have more knowledge of that particular business than I do.
So you just looked into his eyes and did not even ask why he needed that deal, did you?
I looked into his eyes and at the market. I asked him: "How will you sell it all to me?" He answered: "Marketwise." And I said: "OK, that’s a deal."
Who was the actual seller and why did you buy your stake in parts?
It was Mikhelson. I bought it in parts because I could not pay so much money straight away. I have not yet repaid a loan obtained for that deal.
In 2008–2009, it was disclosed that, apart from the stake in Novatek, you had an extensive portfolio of assets. You insist, however, that Gunvor's profit is mainly reinvested. What is the source of financing then?
Banks as I have already said. Thanks to the success of the first group companies, we built a reputation as a solid borrower and thus were able to develop the business rapidly. We nevertheless pay dividends, and so do Novatek and Sibur. Thus I repay loans.
Why did you buy Sibur?
I had traded in petrochemicals, so it was a kind of nostalgia. Besides, I had long sized up this company but Gazprom didn’t want to sell. Mikhelson came to me having already bought the asset. By the way, he also offered Sibur shares to Total. They are still thinking it over. I am speaking now about his stake alone – I have already bought mine. He came and said: "Look, we have worked so well in Novatek, why not trying another partnership?" Do you know that Novatek has doubled in size since I became involved in the business?
You see how useful you are!
Novatek grew when I joined the company. No doubt this was teamwork though my arrival was also appreciated by the market ... By the way, I have to give credit to the press for promoting me so much. In fact, new opportunities open up for us on the market thanks to press coverage. All jokes aside, we really do owe our corporate success to effective management and intensive work of our team.
When you bought a stake in Yamal LNG, did you realise that you would become a Novatek shareholder and sell this asset to the company?
Negotiations over Novatek were already under way. However, I did not make shareholding in Novatek conditional upon buyout of the gas field. It soon became clear that it would not be possible to carry out such a project as Yamal LNG alone. We and Novatek already have a partner for that – it is Total. And we aren’t ruling out a couple of other minor partners joining. Novatek continues to acquire Gazprom's former customers on the domestic market.
Sometimes Gazprom seems to create a competitor for itself. For example, the gas giant sold Novatek its Chelyabinsk subsidiary for only RUB1.55 billion and it accounts now for a fifth of Novatek sales which, judging by financial statements, suggest the acquisition has already paid off. Why is Gazprom so generous?
As far as I know, Novatek had controlled over 75% of the Chelyabinsk market even before the acquisition. Gazprom operated primarily in the retail market, and its subsidiary had over RUB1 billion in receivables. Profit made by the Chelyabinsk company after the acquisition owes to the fact that all regional operations of Novatek were channelled through it. In other words, the price of the transaction was fair. As for Novatek, it is moving towards expanding direct sales. This tendency is natural: our production is growing, and so is our domestic share in sales because we actually have no other distribution market. Gazprom also benefits from the situation as it remains Novatek's shareholder. This is a win-win situation.
INVESTMENTS IN INFRASTRUCTURE
You have long known Alexey Miller. Why doesn’t your company Stroytransgaz win construction contracts with Gazprom?
When I bought a stake in Stroytransgaz, it had not had any Gazprom contracts for a long time.. However, I have always had a weakness for infrastructure companies. My idea today is to form one of the largest Russian construction groups with Stroytransgaz and my other industry assets.
Will it include ARKS and SK Most?
Very much so. And this large group will be involved in various infrastructure projects, including some work for the government. Do you really think that obligations will be forgotten just because public money is being used? Far from it. The public budget is not endless. The future of infrastructure projects belongs to public-private partnerships.
Are you referring to anything in particular?
There is, for instance, an idea to build a railway road from the Southern Urals to Arkhangelsk. It will help to lessen the load on the present-day cargo hub in Central Russia.
You hold only 25% in SK Most and certain other construction assets. Could this prevent consolidation?
Don't worry. We have options in every company, to make our share larger.
Is it true that some of your deals in the construction sector were non-cash, and you were given shares in exchange for guarantees of future orders?
All transactions were arm's length. All assets were paid for in cash – either right away or by installments, and all value estimations were transparent.
Your company, Transoil, was considered one of the favourites to buy Freight One. Why did you refuse to take part in privatisation?
I have been long in the logistics business and I know how to manage it. The opening bid price of Freight One already seemed too high to me, although I negotiated with management at Sberbank and other banks and may have gained the necessary financing. By the time of the auction, the financial markets had changed – banks fell short of liquidity and subsequently put up interest rates. The loan interest would have amounted to hundreds of millions dollars annually, and I thought it to be too much of a burden for me.
Transoil has nevertheless received a part of Freight One's rolling stock. Did you make any arrangements with Vladimir Lisin before privatisation?
I first met Lisin after the auction. There were no arrangements.
Now Summa Group, your partner in Novorossiysk heavy oil terminal, is trying to buy Fesco, a railway operator, from Sergey Generalov. State banks have refused to give loans. Rumour has it you do not like the deal.
Please do not attribute it to me. We are not competitors with Fesco – they operate in another segment. I was once offered this asset and said no at once.
Do you plan to take part in the privatisation of Sovcomflot?
Definitely not. It is a successful and globally reputable company and our long-standing partner. I am sure that its privatisation should take a different path by attracting world-class strategic partners to raise money for the company.
What are your principles in terms of acquiring assets?
The key principle is to foster Russian business and create more jobs here in this country. I am now more focused on this than on money itself. Infrastructure is now very attractive to invest in. We have constructed terminals in Ust-Luga and Novorossiysk for over $1 billion. Now we have an advantage over other traders and an opportunity to provide jobs and to pay taxes.
It has recently turned out that you are forming a Russian holding company for your assets. Is it in any way related to Putin's desire to bring capital back to the country? Have you ever talked to him about it?
No, I have not. He once said he would not interfere with my business. I can only add that no one really helps me. I have never left Russia and invest my money primarily in Russian businesses. It is true that we incorporated a subsidiary of Ural Invest in Russia. Earlier it functioned mostly as an investment consultancy and now it is more of a holding company engaged in current operations.
Why have you finally decided to give an interview to Forbes Russia?
I have never striven to be a public figure. It is in my nature to stay away from public attention. It is ‘not my cup of tea’ as the English say. Some time ago I made an exception for certain foreign media and was disillusioned at once. Why am I talking to you? I would like you to simply look into my eyes and, probably, understand something about me. Finally, I would like to tell a story of my business because it will probably help to shatter some of the myths. I have become a successful businessman - I only say this on the basis that you put me on your rich lists - and I have in fact invested across a wide range of major projects. Apart from anything else, last year I was elected Presidend of SKA ice hockey club and this year I was made Chairman of the KHL Board of Directors. This obliges me to be more public.