Kyiv Post publisher says ‘real businessman’ will sell any asset for decent price.
Editor’s note: This interview with Kyiv Post Publisher Mohammad Zahoor was originally printed in the Nov. 13-19 issue of Vlast Deneg (Power of Money), a business weekly magazine. It is reprinted with the magazine’s permission. The original can be found at www.vd.net.ua/rubrics-10/14255/.
Mohammad Zahoor became a multimillionaire due to a paradoxical combination of two business qualities: ability to take risks and extreme caution in decision-making. Having carried out a large-scale project in metallurgy, he is now applying his skills within the media and commercial real estate markets. Since he is only getting the feel of these fields, incidents sometimes occur.
He has made some mistakes in the past. In 1994, during the presidential election campaign, he was approached by then-President Leonid Kravchuk’s advisers to speak on the incumbent’s behalf as a major foreign investor. Zahoor was trading in Ukrainian metal at the time.
His speech was broadcast on TV and was a success. But a few months later, Kravchuk’s rival, Leonid Kuchma, won the presidency. “We had serious problems,” Zahoor recalls. The pressure from the government had not eased up even by 1996, when he decided to invest into a dying Donetsk Metallurgical Plant. Because of th experience, Zahoor decided to never support any Ukrainian politicians.
Nevertheless, Zahoor sometimes gets involved in politics against his will. In September 2008, he had invested $12 million in [TV political talk show host] Savik Shuster’s production studio. For the next year, he was forced to listen to complaints of those who were not invited to the show.
Last summer, the split between Shuster and Zahoor coincided with the start of negotiations between Zahoor and Russian Gazprom Media on possible cooperation. He is trying to ensure investment into his media holding and – at the same time – stay clear of suspicions that he is assisting Kremlin politics in Ukraine. So far, he has been able to avoid serious political risks.
VD: Isn’t it a bit risky for a prominent businessman in Ukraine to refuse to provide financial support to leading political forces?
MZ: We used to get requests from various political forces for many years. Our answer was the same to everybody: We remain neutral. To be honest, at first they didn’t take it seriously; they kept trying to offer collaboration. But it seems that now they have realized that this is pointless. The election campaign is still going but no one is asking for any support.
VD: Have politicians ever responded to the refusal in a rude way?
MZ: We were asked kindly, we answered kindly, so everything was smooth. Those talks were just negotiations. No one demanded anything. People would come in and ask what we thought of a particular party and whether we wanted to help out.
VD: Right now you are creating a holding with varied interests, and political patronage wouldn’t hurt, would it?
MZ: I don’t think a foreign company should get involved in Ukrainian politics. Our concern is business. Politics can help it or hurt it and that’s when you might lose everything. This risk needs to be taken into account. So we don’t give money to any politicians.
VD: There is one more option practiced widely in Ukraine: putting your eggs into many baskets.
MZ: In Russia, Mikhail Khodorkovsky had tried this strategy and it ended up with him in jail. One must be careful with politics.
VD: Nevertheless, recently you have been actively investing into the media business, which has always been politicized in Ukraine. Have you forgotten about caution?
MZ: At this point my media business is too small for me to feel any political pressure. I understand that with time we will become interesting for the parties who will want to use this resource. But when it happens, it will not be my business anymore. I will sell it. First of all, my media needs to grow. If politicians try to tell us what to do or apply pressure, I will simply offer them to buy it. I don’t see anything wrong with that. Many media groups in the United Kingdom and the United States are owned by parties as well.
VD: You could use your media to support a certain political force simply because you like it and you agree with its ideology.
MZ: I guess this is possible. But now there is no reason to do that, and simply taking money and praising somebody is not our style.
VD: Will you invest in political media projects in future?
MZ: Yes. Practically all the superstars in Ukraine are politicians. Everybody is trying to attract them.
VD: During your collaboration with Savik Shuster, did you feel political pressure?
MZ: I would not call it ‘pressure.’ It was that, once in a while, I would get contacted by politicians who didn’t get invited to the show. I answered that they were probably not interesting to him and there was nothing I could do to help. Shuster and I made an agreement right from the start that I would stay away from the editor’s policies.
VD: Right now you are negotiating potential investment from Russian Gazprom-Media. Don’t you think that this type of company is likely to use media as a political weapon?
MZ: Right now we are negotiating potential investment from Gazprom-Media in Poverkhnost TV company which manages sports channels and satellite TV. It is possible to use [Russian channel] NTV as a political weapon with the help of Gazprom-Media’s satellite. NTV-Ukraine project has already been created. If they completely take over Poverkhnost, buy it out, then they will probably want to change the format of the TV channels and use it for political purposes. But then I will no longer be their partner in this business. I don’t foresee any risks if they get involved with Poverkhnost as minority stakeholders. The negotiations with Gazprom-Media are at the initial stage. Currently we are working on developing Poverkhnost and getting it ready for sale. We will conduct an open tender and it may happen that some other investor will win.
From metal to real estate and media
“Ukrainian businessman with a British passport and Pakistani soul” is how Zahoor describes himself. The son of a Pakistani government employee, he received higher education in Donetsk Polytechnic Institute. But he says it’s a coincidence that he started to do business in Ukraine.
In 1987, he and a Thai businessman started Metalsrussia, a Hong-Kong registered trading company based in Moscow. It soon became the main trader of Cherepovetsky Metallurgic Complex. The business was going well and Zahoor didn’t even think of moving to Ukraine until 1993, when Thailand imposed an anti-dumping duty on Russian rolled metal. Zahoor’s business was endangered. At that point he made a decision to move to Ukraine and start a new company, Metalukraine. He had already established business contacts with Ukraine’s Zaporizhstal, Azovstal, and Odesa Port from Moscow. And after the privatization of Donetsk Electrometallurgical Complex he firmly settled down in Ukraine.
Now, the former Donetsk Electrometallurgical Complex has turned into three independent businesses, but Zahoor has nothing to do with any of them. There are Donetsk Metallurgical Plant and Donetskstal owned by Victor Nusenkis (Energo Concern) as well as Mikhail Friedman’s Donetsk Electrometallurgical Plant (Alfa Group).
Selling the company in parts proved to be a successful strategy. In January 2008, as if foreseeing the world economic crisis, Zahoor offered the buyer to purchase together with Donetsk Ellectrometallurgical Complex two of his loading berths in the Odessa port, his shares in two foreign metallurgical plants and distribution warehouses. The Russian State Duma deputy, Vadim Varshavsky, bought all that property for $1 billion and one year later was on the verge of bankruptcy due to the drop in prices and dip in demand for metals. The business was taken over by Alfa Group as collateral for a non-performing loan.
Meanwhile, lucky Zahoor is eagerly spending his billion. He started to actively invest into commercial real estate and media, which were proclaimed as priority sectors. But occasionally he makes unexpected purchases, such as the Plastic Furniture Manufacturing Plant in Kyiv Oblast or a coal mine in Donbass.
Zahoor has never dealt with any other field but metallurgy, so he does not yet feel comfortable working in the new sectors. But while his failure with Shuster is often attributed to the impulsive temper of the TV star, the problems with the newly purchased Kinopanorama Kyiv cinema can’t be considered anything but a beginner’s miscalculation.
The property which Zahoor’s ISTIL Group bought from Vagif Aliev (the owner of Mandarin Plaza Group) for [an estimated $ 7 million] is in trouble today. It suddenly occurred to the Jewish community that there used to be a merchant’s synagogue located in the Kinopanorama building and now they are trying to cancel the privatization with the help of a court. Zahoor hints that behind the lawsuit are the interests of multimillionaire Vadim Rabinovich. Nevertheless, it is obvious that the risk assessment of the property failed. Zahoor is paying a high price for the lessons on dealing with new markets.
VD: Aren’t you afraid to invest so much money into areas you don’t know very well?
MZ: We’ve chosen two sectors so far and are trying to get a feel of them. We have purchased a number of properties on the real estate market and have stopped for now. As far as the media sector is concerned, this is where I rely on the advisers who suggest that this is a very promising market. Right now we are negotiating cooperation with many TV channels. It was them, by the way, that made us rename Savik Shuster Studios. At that point, Savik Shuster still worked with us, but some TV channels refused to deal with a studio which such a name. While we have no channel of our own, we will continue offering our products to the leading TV channels.
VD: You trust your consultants when you enter new markets. Isn’t it too risky?
MZ: Unfortunately, we have made mistakes because of it. One of such cases was the purchase of Kinopanorama movie theater. We were buying a clean object, all the sides were satisfied and then it turned out the Jewish community had a claim on it, too. This conflict is still unresolved. We were confident we had double checked every aspect before concluding the deal. We spent two or three months on this checkup. After the experience with Kinopanorma, we are going to be spending from six to eight months on risk assessment. If people come and offer a very interesting object on the condition that you pay them tomorrow, it is very hard for me to make a deal with them. All kinds of surprises can await you in Ukraine. Sometimes those surprises are unpleasant. It is exactly this kind of unexpected troubles prevent investments from coming to Ukraine.
VD: At the moment, neither the media market, nor the real estate market are profitable. The impression is that at the moment you invest in your business much more than you earn.
MZ: Right now we practically do not make any money. It is the buyer’s time right now, so we are looking for interesting objects, hoping that their prices will go up in a year or two. That’s when we expect to make money by selling them.
VD: You easily part with businesses you invested much time and energy in. Don’t you get attached?
MZ: A real businessman shouldn’t have businesses he is not willing to part with for a decent price. Long ago, I decided for myself that every business I start, I create for somebody else. One day a business shark will come up to me to take it away. For a good price, of course. The main business in my life had been metallurgy but I still parted with it and even signed a paper with an obligation to stay away from this field for a year. So today I have an opportunity to diversify my business interests.
VD: A year of prohibition to work in metallurgy is over now. Do you plan to come back to it?
MZ: This not a good time to buy assets in metallurgy. It is too early. Managing it would be interesting for me, though. If someone is having trouble, I could help.
VD: But do you have an urge to return to the field that you know so well?
MZ: When a good time has come, and a good asset for buying emerges, I don’t rule out that I will get back to metallurgy.
VD: You mentioned that it was too early to buy metallurgy assets. Are you waiting for the situation within the field to get worse so the prices drop even more?
MZ: The owners in this field are holding on to their assets. Obviously the prices have dropped, and will go down even further. Some of them are already under immediate threat to have their properties taken over by banks, but they’re still unwilling to part with their factories voluntarily. For example, ISD (the Industrial Union of Donbass) is heavily in debt now. They invested a great deal in their plant in Alchevsk. But they’re still unwilling to sell.
Mysterious gunshots
In late spring, Zahoor became seriously concerned about the safety of his relatives and his own life. On the night of May 25, unidentified people fired gunshots at the Subaru Forester that belonged to Inna Shmarenkova, his mother-in-law. The criminals purposely aimed at the driver’s side. All the windows were blasted apart. The criminal investigation is still ongoing, and so is the search for the criminals. But it’s clear that the target of the threat wasn’t the businessman’s relative, who lives at Teremki, but Zahoor himself, whose house is carefully guarded.
Zahoor’s comments on the issue are concise. He prefers to consider the incident a misunderstanding. He said that his mother-in-law’s car was mistook for somebody else’s. Zahoor denies the possibility of any connection between this event and his business activities.
VD: It has been half a year since the incident with shooting of your mother-in-law’s car took place. Is it any clearer who and why could do it?
MZ: No, we still don’t know who did it. I do not rule out a possibility that it was a simple hooligan act and it happened because she left her car in someone else’s parking spot.
VD: But the media interpreted the story as a hint addressed to you. Have you thought about this possibility?
MZ: I don’t think this incident has anything to do with me.
VD: Did you move your family out of Ukraine after the incident?
MZ: No, there was no need for that. The only thing we did was to get a guard for my mother-in-law. My wife and I always have guards with us.
VD: The shooting took place two months before the deal regarding the purchase of Kinopanorama. Maybe that was the warning sign for you not to enter somebody else’s territory?
MZ: I don’t think so.
VD: How often do you have to deal with aggression and threats in business?
MZ: I try to find a peaceful way to resolve conflicts. For instance, in 2000 in Donetsk we … were facing a forceful takeover. But it turned out someone was making an offer to sell our plant. I got out of the situation by offering the other side to familiarize themselves with the structure of our enterprise and gave them a 40 page privacy agreement. Puzzled, they took it and went away. Everybody has their own way of dealing with conflicts; as for me I always try to understand the motives of an opposing side.
VD: At that time, you were attacked by ISD. Do you still have a complicated relationship with them?
MZ: I have a wonderful relationship with Serhiy Taruta. He wasn’t in the country at the time the incident took place. We resolved the conflict successfully upon his return.
VD: What are the peculiarities of conducting business in Donetsk?
MZ: Strangers are met with caution there. We were allowed access to the plant only because it was dying. Many laughed at us. The business had $150 million in debts, and in addition it also required at least $50 million of investment to start getting any sort of profit. At that time it crossed someone’s mind that the plant was located right in the middle of Donetsk, and that it can be replaced with a business which would pay back faster, for example, production of vodka. But we started a long investment process and became the target of endless inspections. We stopped counting them after we reached 300. When the plant started churning in profits, it became interesting for many.
Kamaliya’s husband
Besides working, Zahoor leads an active social life. But while in the business world he is a famous and self-sufficient businessman, in society he is primarily the husband of pop singer Kamaliya. She is not very well known despite having a four-octave voice, a rare coloratura soprano, according to her website.
But at any rate, she is using all portunities that her status presents, having an active involvement in charity, acting in movies, and becoming a winner of Mrs. World 2008 pageant. Kamaliya is planning to start recording new songs, is acting in another film and is active in organizing receptions, which is another name for the parties at home. In this high society life, Zahoor is in the shadow of his lively wife. It’s quite obvious that he is not bothered by this role. By the way, Kamaliya’s husband is not even mentioned on her website.
But outside the social spotlight, not everything is well in Zahoor’s home. Last winter, his wife’s pregnancy ended abruptly. For the whole time before and during the surgery he was by the side of his beloved, having dropped all his work. In the end, doctors were able to solve the problem that prevented a successful pregnancy, and now Kyiv’s high society and the singer’s fans are expecting good news from the couple.
VD: What is your favorite way to spend your free time?
MZ: I have done my best to have everything that’s needed for rest in our home. We have a sauna, a swimming pool, a barbeque so that friends can feel at home. My wife and I used to go to the discos; but we haven’t danced for a long time now.
VD: When you invite friends over you refer to it as “a reception.” Is it really so fancy?
MZ: It’s often referred to as a reception, but in fact it’s more like a meeting of old friends. I invite people I conduct business with and good acquaintances of mine. Sometimes we discuss politics and work, sing karaoke, eat, drink good wine and swim. In short, we have a stress-free day.
VD: Do you invite famous politicians?
MZ: I don’t have politicians in my circle … I consider friendship with a politician to be potential corruption. I am used to conducting business in a transparent manner. I meet politicians at various gatherings but not at home.
VD: Who do you invite to your receptions most often?
MZ: Those are people who are the closest to me. The most frequent visitor is probably Mikhail Morozov [chief executive officer of ISTIL Group]. I think I won’t bring up other names.
VD: Many people have noticed you have a taste for luxury. Is this a result of your upbringing?
MZ: I think this is something that comes up in me intuitively. I don’t purposefully seek luxury. If I happen to come across a beautiful piano, for example, I buy it. But it’s not that I specifically look for it.
VD: So has your collection of Scythian gold also happened by an accident?
MZ: Yes, in a way. Together with Sergey Bubka [president of the National Olympic Committee], Igor Didkovsky [Director of Mystetsky Arsenal state art complex] and Bogdan Sevchuk [Deputy Director of Mystetsky Arsenal] we created a unique collection. This way the ancient Scythian artifacts remained in Ukraine and will soon be displayed to the whole world.
VD: Where can one see it?
MZ: It is being prepared for display in Mystetsky Arsenal. When the 21st piece of jewelry had appeared in a collection we officially registered it with the Ministry of Culture. We had invited specialists from Ermitazh, Louvre and Sotheby’s and they confirmed that these art works are unique. All those who are interested will be able to see them soon.
