How an oligarch runs his corporate empire from exile

Immediately after the start of the war, the DF Group ceased operations in all four fertilizer factories. Management thought the risk of Russian bombs triggering an explosion was too great. Two factories are now back in operation. The Ukrainian agricultural companies also want to sow and reap as much as possible. For this they need fertilizer.

However, agricultural companies are currently using this only reluctantly. Actually, the farmers have harvested the winter wheat, and the silos are full of it. Only the agricultural goods can hardly be exported, which means that the farmers sometimes lack the income to pay the manufacturers. “Fertilizers are expensive,” says Alex Lissitsa, head of agribusiness IMC.

The traditional export route for wheat, corn or iron ore is via the Black Sea ports. But the ships are threatened by sea mines and the access routes are partially destroyed. The Ukrainian government is therefore looking for ways to transport at least some of the goods by rail to EU countries.

But there are also hurdles. A large part of the Ukrainian rail network is broad gauge: agricultural goods have to be transferred from one train to another at the Polish border. The logistics are also otherwise patchy. Transport hubs are missing.

Firtash therefore wants to build two transport terminals on the Ukrainian-Polish border and in the Polish port city of Gdansk. “We talk to landowners,” he says. The negotiations are not easy, however, because there are other business people who want to invest in logistics. “For many, building an alternative logistics chain has become a necessity overnight.”

The risk of extradition to the USA has recently increased again

Firtash cannot take care of such things on site. Since 2014 he has managed his company with video conferences from his office in Vienna. That year, the United States requested Firtash’s extradition. Since then he has not been allowed to leave Austria.

Firtash is said to have conspired to bribe Indian politicians and thus get hold of titanium. This in turn should have been delivered to the aircraft manufacturer Boeing. The deal never materialized.

The risk of extradition has recently increased again. In March, the Vienna Regional Court refused to resume extradition proceedings. Firtash’s lawyers have lodged a complaint with the Higher Regional Court.

For Firtash, the indictment by the USA has political reasons. From his point of view, the procedure is related to the confused history of the Ukraine war. In 2013, the EU and Ukraine planned to conclude an association agreement.

At the same time, Russia was pursuing a carrot-and-stick policy towards Ukraine: the powerful neighbor lured with loans and cheap gas, but also impeded imports in order to make the Ukrainian government compliant.

Under no circumstances should Ukraine move closer to the western side, but form a customs union with Russia. The then Ukrainian President Viktor Yanukovych, whose supporters included Firtash, finally balked at signing the agreement with the EU. This led to the Maidan uprising in 2014 and the fall of the president. Yanukovych fled to Russia.

Since then, many Ukrainians have viewed Firtash as the string puller and “friend of Russia” who thwarted the connection to the west. Unlike the “typical” oligarch, Firtash was never a party leader, but in those years he served as president of the Ukrainian employers’ association and as co-chairman of a social and economic council composed of workers, employers and government officials.

In an interview, Firtash says that at the time he campaigned for Ukraine, like Austria, to become officially neutral. To protect the country, he propagated a strong army based on the Israeli or Swiss model. “Russia has strengthened under Putin after the crisis of the 1990s,” says the businessman. “It was no longer possible for Ukraine to maneuver between the two blocs.” The powerful neighbor wanted to prevent Ukraine from drifting further west.

Politically, Ukraine is very different from its neighboring country: in recent years, the institutionalized transfer of power in free elections has mostly worked. Unlike in Russia, the oligarchs continue to play an independent role. President Volodymyr Zelensky repeatedly attacked the oligarchs Rinat Akhmetov and Petro Poroshenko in the fall, but politicians will not let them down.

In Putin’s Russia, for example, it is unthinkable for oligarchs to run their own media. Some of Ukraine’s rich entrepreneurs, on the other hand, are still active in the media business. Firtash is a co-owner of the Inter Media Group, and the former president and oligarch Petro Poroshenko owned the TV channel “5 Kanal” until recently.

Owning TV channels as a reassurance

Ukraine’s oligarchs say owning TV channels is a kind of reinsurance. You can’t rely on the courts. In order to defend one’s own interests, one needs television stations – which, moreover, were good business until before the war. In the east of the continent, however, TV stations often also serve the purpose of bringing opponents into disrepute.

The rich Ukrainian entrepreneurs sometimes forge alliances, sometimes they are deadly enemies. It is known, for example, that Firtash and former prime minister and businesswoman Yulia Tymoshenko are bitter opponents.

Both originally got rich in the gas business. In 2002, Firtash received the exclusive right to sell gas from Turkmenistan to Ukraine. Two years later he founded the company Rosukrenergo with the Russian energy group Gazprom, based in the small Swiss town of Zug. A number of raw materials companies have settled there in recent years.

The purpose of Rosukrenergo was to distribute gas in Ukraine and EU. The construction was met with criticism at the time, backers on the Ukrainian and Russian sides were suspected to be profiteers. Above all, it was not clear why Gazprom needed another intermediary.

Firtash says he had no choice but to work with a Russian company. At that time there were only two ways to transport the energy source from Central Asia to Europe – via Russia or Iran. However, the USA had imposed sanctions on this, which meant that the country was no longer a transit route.

Ukrainian agrarian entrepreneurs feel taken advantage of

Also around 2002, Firtash began to invest in the production of nitrogen fertilizers. Industrially this is logical because gas is a raw material for this. Nevertheless, it is striking how much entrepreneurs from the former Soviet Union have a penchant for the organizational form of the conglomerate.

Many entrepreneurs justify this with the lack of security in everyday business. You can’t always rely on suppliers, so it’s often best to take them on straight away. However, this often gives the company an all too dominant position in the home market.

Ukrainian agricultural entrepreneurs complain that DF Group is exploiting its position in the fertilizer business. There is also a legal dispute in the country about this. Representatives of DF Group argue that the company has a 30 percent share in the Ukrainian fertilizer business and that the market is open to imports.

At the same time, the conglomerates in Ukraine often have geographic cluster risks. Firtash says he always reinvested profits in Ukraine and did not diversify risks enough. “From a commercial point of view, you can say today that that was a mistake.”

At the moment, however, diversification would not help him much either. Not only is the war weighing on his business, but also the tense relationship with the banks. Although Firtash has not been convicted in the USA and there are no sanctions against him there either, western financial houses do not work with him or with the DF Group. He stopped cooperation with Russian banks when the war began. “Financial arrangements are difficult,” he says.

More: Gaps in the system: Why the sanctions against the oligarchs are not effective enough.