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As Pro-European Protests Seize Ukraine, Jewish Oligarch Victor Pinchuk Is a Bridge to the West

The steel magnate—son-in-law of the former president and once a symbol of post-Soviet nepotism—now advocates for the rule of law

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Victor Pinchuk. (Courtesy of the Victor Pinchuk Foundation)
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As a young man, Pinchuk considered going to medical school and becoming a psychiatrist, but instead he chose to continue the family tradition of engineering and enrolled in the Dnipropetrovsk Metallurgical Institute, where his mother, who is now 77, still teaches today. While at university, Pinchuk worked as a night watchman at an auto repairs factory, writing his term papers at night and earning some cash to pay for a stereo system. His mother, initially shocked that her son had become a night watchman, eventually started packing him dinners—his favorite dish of meat patties with mashed potatoes. Over summer break, Pinchuk signed up for construction work—a popular choice with many Soviet students at the time—pouring concrete at a pig farm in Siberia. Soon, another job followed—carving metal at a pipe factory that he would later buy. “As it turned out, I have a commercial frame of mind,” Pinchuk said. “I don’t know who it came from—both my mother and father were intelligentsia.”

Pinchuk earned a doctorate in industrial engineering in 1987, the year after Mikhail Gorbachev launched perestroika. As the government tried to encourage innovation in industry, Pinchuk traveled to a pipe factory in Mogilyov, in then-Soviet Belarus, and offered to introduce a new form of pipe production there. Pinchuk was supposed to get a 7.5 percent royalty on any extra profits if the new design was successful—but after the changes worked, Pinchuk’s research institute kept most of the money to itself, paying him only a token amount.

After that, Pinchuk ventured out on his own. In 1990, he founded Interpipe, an engineering firm that introduced new designs and technologies at pipe factories. Soon Pinchuk was earning about 10,000 rubles per month, a sum unthinkable for a Soviet engineer, whose average monthly salary was about 150 rubles. But Pinchuk deposited a large chunk of his earnings in a savings account—which evaporated amid the hyperinflation that followed the Soviet collapse in 1991.

With the end of the Soviet command economy and the launch of free-market reforms, the state was no longer in charge of economic planning, and the industrial supply chain was crumbling. Pipe factories stood idle without steel, steel plants required coke, coking plants needed coal, and coal miners were in desperate need of pipes—but also wanted the impossible-to-get consumer goods such as refrigerators, microwaves, juicers, and cars that every Soviet man had always dreamed of. Enter Viktor Pinchuk. By procuring the coveted juicers and clunky Tavria cars for coal miners at an exchange in Moscow, he was able to obtain coal for coking plants, which he traded for coke to send to steel factories and then metal for pipe production, eventually walking away with several thousand tons of pipes—which by then had turned into prized hard currency compared to suddenly worthless banknotes. “Juicers turned into pipes,” Pinchuk said of how he became a millionaire.

As his business grew, Pinchuk started buying into steel plants and then teamed up with a woman named Yulia Tymoshenko, a protégée of the feared Dnipropetrovsk governor Pavlo Lazarenko. In the mid-1990s, Pinchuk and Tymoshenko founded Commonwealth, a firm that imported much-needed natural gas from the energy-rich Central Asian states to Ukraine. But the alliance was short-lived: Tymoshenko soon ditched Pinchuk and set up an energy trading firm of her own.

All the while, Pinchuk indulged his passion for the arts. He befriended the renowned Russian conductor Vladimir Spivakov and brought him to perform for his compatriots in Ukraine. In advance of Spivakov’s concert in Dnipropetrovsk, Pinchuk donated a classic Steinway piano to the city so that the orchestra would have a proper instrument.

In 1997, while attending a popular Moscow play in a Kiev theater, Pinchuk met Yelena Franchuk, a delicate blonde—and the daughter of then-President Kuchma. Both were married at the time, but they nevertheless felt the spark of romance. Pinchuk asked Spivakov, who was giving a concert in Kiev that he knew Franchuk was attending the day after her birthday, to perform an encore for “one Kiev birthday girl.” Franchuk realized the surprise was for her, and Spivakov later became a witness at their wedding. (She recently changed her last name to Pinchuk.)

Bill Clinton and Victor Pinchuk

Bill Clinton and Victor Pinchuk at the 7th Yalta Annual Meeting, September 2010. (Courtesy of the Victor Pinchuk Foundation)

When they met, Pinchuk already owned two pipe factories that are now worth billions. He likes to say that the only gift he received from Kuchma was his daughter—but not everybody is convinced. Kuchma, now 75, who served as the second president of independent Ukraine, is credited with launching the crucial reforms to steer his country out of the economic ruin that followed the Soviet collapse, but he is also accused of allowing a group of hand-picked businessmen—including Pinchuk—to acquire the country’s top industrial assets at a discount in exchange for their support of his rule.

While in neighboring Russia, oligarchs like the late Boris Berezovsky spent years working their way into the inner circle of Russian President Boris Yeltsin, Pinchuk, his critics say, was spared the effort—Ukraine’s president sat across from him at the dinner table. As Kuchma was nearing the end of his final term in office in the early 2000s, he put top metallurgical and mining plants up for sale; Pinchuk, who by then was also serving as a member of a party in parliament loyal to Kuchma, took an active part in the tenders.

In 2003, Pinchuk won an auction for the majority stake in the Nikopol Ferroalloy Plant, one of the world’s largest producers of ferroalloy, in a tender his rivals called skewed in Pinchuk’s favor, prompting a protracted and messy ownership dispute. The following year, Pinchuk partnered with another oligarch, Rinat Akhmetov—today Ukraine’s richest man—to snap up the country’s biggest steel plant, Krivorozhstal. A year later, the deal was annulled and the plant was sold to British-Indian steel magnate Lakshmi Mittal for $4.8 billion—six times the price paid by Pinchuk and his partner. The sale of Krivorozhstal became a metaphor for corruption under Kuchma, and the affair dealt a harsh blow to Pinchuk’s reputation, not just at home, but in the United States: In a diplomatic cable to Washington released by WikiLeaks, former U.S. Ambassador to Ukraine William Taylor wrote that the two auctions were “rigged” in favor of Pinchuk and sold “for a cut-rate price.”

Ten years later, Pinchuk says he would have handled some of the privatizations differently, knowing then what he knows today. “Being a member of the president’s family is not an easy test,” Pinchuk said. “Yes, I did make some mistakes in that capacity,” he said of the Krivorozhstal purchase. “From the legal standpoint, it was all honest and right,” he went on. “But I shouldn’t have participated in that from a purely political standpoint.” Nikopol, he went on, is a different story. “In the culture, traditions, and aesthetics of that time, it was one of the best examples of privatization,” Pinchuk said. “Clearly, it was not all smiles and sunshine, it wasn’t kosher, but it was one of the best examples. It was in line with the aesthetics of that time.”

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As Pro-European Protests Seize Ukraine, Jewish Oligarch Victor Pinchuk Is a Bridge to the West

The steel magnate—son-in-law of the former president and once a symbol of post-Soviet nepotism—now advocates for the rule of law