In December 2020, a new resident appeared in Vésenaz, a respectable suburb in Geneva.
He paid an astronomical price of 60 million francs, or Hr 2 billion, to become part of the community and settle on the shores of Lake Geneva.
This young man isn’t a successful businessman. Rather, he is an heir to an oligarchic empire created by his father, the richest man in Ukraine.
The man who bought the house in Geneva is Damir Akhmetov, a 32-year-old son of Rinat Akhmetov, the biggest oligarch of the poorest country in Europe, Ukraine.
According to the records in the public land register, the house is located at Chemin de Botterel 5, 1222 Vésenaz, Switzerland. This is a private street. Here, Damir Akhmetov bought two houses — a luxurious villa and a smaller house next door, as well as 7,600 square meters of land. The seller of the palatial one was Mansour Akram Ojjeh, a French business-man born in Saudi Arabia. He is the co-owner of the TAG empire and the McLaren Formula One team, and is on the list of the world’s 100 most influential Arabs.
Damir Akhmetov’s Swiss nest is located in the immediate vicinity of Lake Geneva. At the entrance to this lane, there’s a sign indicating the area is private. This means that it is not desirable to walk here without the permission of those who live on this street. At the turn to Akhmetov’s house, there is a car with security staff inside. The house is equipped with CCTV cameras.
Damir is Akhmetov’s eldest son. He left Ukraine at the age of 10, studied in Switzerland and the UK, and is a member of the supervisory boards of his father’s energy and metallurgy companies, DTEK and Metinvest. His story has nothing to do with the success of a self-made man, he never ran a business independently, and was involved only in the management of his father’s companies.
It is a depressing reminder of how Ukraine has become a resource base for a select few while leaving 40 million people impoverished. After all, outside of Ukraine, Akhmetov Sr. has no significant business, and the fusion of politics and oligarchic influence has allowed him to amass billions. Forbes Akhmetov’s net worth to be $7.6 billion.
Akhmetov’s previous acquisitions also impressed with their price tags.
In 2007, the Ukrainian billionaire bought then the most expensive apartment in the world, taking up three floors of the residential complex One Hyde Park in London. He paid $220 million for it, which was followed by at least another $60 million for its furnishing.
Akhmetov also bought the palace of Belgium’s infamous King Leopold II on the French Riviera in Saint-Jean-Cap-Ferrat in 2019. He paid €200 million for Villa Les Cedres to the alcoholic beverage producer Campari Group.
This is just one of the many examples of the ultra-wealthy ploughing money into real estate.
It isn’t widely known that Akhmetov also has a house in the French ski resort of Courchevel, shrouded in luxury, at the most prestigious area, on the altitude of 1,850 meters.
Now this collection of real estate has been supplemented by a villa in Switzerland for 60 million francs, or $64 million.
Ukraine pays for it
Akhmetov’s business model is the basic principle of Ukrainian oligarchic clans — privatization of profits and nationalization of losses.
As a member of the supervisory board of Ukrzaliznytsia, I see how this model leads to the deg-radation of the national railway carrier. Akhmetov is the company’s main customer, using it to transport its main source of wealth, iron ore, to Ukrainian ports, from where it is shipped abroad.
Akhmetov’s profits are formed not only by ridiculous rents for iron ore mining. To sell ore on world markets, it has to be transported to Ukrainian seaports on the tracks of Ukrzaliznytsia, national railway company. Tariffs for transportation of iron ore don’t cover the cost — each ton is transported with a 19% loss for Ukrzaliznytsia.
From the territory of Ukraine to the territory of the neighboring Slovakia and Poland the trains follow exactly the same tracks in the same width that lead to the metallurgical plants in Katowice and Kosice. But as soon as the train cars cross the border, the tariff for ore transportation increases. In Poland, it increases 2.5 times. In Slovakia — more than four times.
The reason for this injustice is the Soviet legacy of calculating tariffs, which is beneficial to Akhmetov. And any attempt by the Infrastructure Ministry to increase them for iron ore exporters has been blocked by the metallurgical lobby, led by Akhmetov’s people, that includes the choir of lawmakers and loyal experts.
The nonsense of the rules reaches its peak when it comes to the transportation of empty cars. In Ukraine, there are different tariffs for them and the car that have delivered the iron ore is cheaper than the one that carried grain. This tariff also doesn’t cover the cost.
In total, Ukrzaliznytsia loses Hr 8 billion (approximately $288 million) annually due to unfairly low tariffs for iron ore transportation. On the scale of a state-owned company, this is an astronomical figure, which is equivalent to the amount sufficient to purchase 250 passenger cars — or four houses for Damir Akhmetov.
Damir Akhmetov is the elder son of Rinat Akhmetov, the richest Ukrainian. He sits on the supervisory boards his father’s companies Metinvest and DTEK.
In other words, the surplus profits of the Akhmetov family, which then pay for Swiss, English and French luxury real estate, originate from cash-strapped Ukrainian enterprises. And not only in the field of metallurgy, but also energy. Here, during the presidency of his ally Viktor Yanukovych, Akhmetov bought thermal power plants for nothing. And during the time of President Petro Poroshenko, he profited from the Rotterdam Plus formula, a coal pricing formula that has allegedly cost Ukrainian energy consumers billions of hryvnias. Ukraine’s National Anti-Corruption Bureau (NABU) estimates losses in the amount of Hr 40 billion.
Vicious cycle
Any attempts to change the rules of the game are sabotaged by officials.
The criminal case on Rotterdam Plus is intentionally sabotaged. The first step to raising tariffs for rail transportation was blocked. It was not possible to implement the initiative to increase the tariff even for empty cars that return after transporting iron ore. Officials sided with Akhmetov, left the state-owned Ukrzaliznytsya in poverty, and explained their decision by a desire to protect business during the crisis.
Similar arguments were made by Akhmetov’s “friends” from Yulia Tymoshenko’s Batkivshchyna party last week at a meeting of the Verkhovna Rada’s commission of inquiry into Ukrzaliznytsia. Their concern for Akhmetov’s private business at the expense of Ukrzaliznytsia looks ridiculous given Metinvest’s earnings: In 2020, the company’s EBITDA amounted to $2.2 billion, almost twice as much as in 2019.
Moreover, Ukrzaliznytsia doesn’t even have the right to vote in the logistics committee of the European Business Association, which acts as a regular lobbyist against tariff increases. Do you know the reason why Ukrzaliznytsia, which is a member of the European Business Association, is not allowed on the committee? Because other members of the committee are against it. Among them are several Akhmetov’s structures, which, unlike Ukrzaliznytsia, have the right to vote.
Ukrzaliznytsia is also Akhmetov’s donor not only in terms of cheap transportation, but also the transfer of cars to his private company Lemtrans. This happened during Viktor Yanukovych’s first term. Another example of the surrender of state interests in oligarch’s favor.
This vicious circle must be broken if Ukraine wants to preserve its national railway carrier. So, last year the company suffered losses of 12 billion hryvnias ($432 million) when Akhmetov’s family bought a house for the equivalent of 2 billion hryvnias ($72 million) in Switzerland. As a member of the supervisory board of Ukrzaliznytsia, I insisted on a separate instruction to the board to initiate an increase in tariffs for the transportation of iron ore. And any arguing about the impropriety of this step looks pathetic.
Akhmetov’s new acquisition on the shores of Lake Geneva is proving that.
Sergii Leshchenko is a Kyiv Post columnist, investigative journalist, and former member of Ukraine’s parliament.
