Ziyavudin Magomedov

Ziyavudin Gadzhievich Magomedov (Russian: Зиявудин Гаджиевич Магомедов, born 1968) is a former Russian oligarch.^[1][2] In March 2018, he was arrested in Russia under politically motivated circumstances and issued with unfounded charges of "racketeering and embezzlement of state funds". Despite a lack of evidence, in December 2022 he was sentenced to an unprecedented term of 19 years in prison.^[3][4]

Prior to his arrest Magomedov was the owner of Summa Group,^[5] a large Russian diversified private holding that primarily operated in sectors requiring government licenses and approvals.^[6][2][4][7] Some have accused him of using his political ties to acquire assets in port logistics, transport and infrastructure, engineering, construction, telecommunications and technology, as well as oil and gas. Companies of the Summa Group were present in almost 40 regions of Russia, as well as abroad, and employed more than ten thousand people. Some analysts have associated the Summa Group's success with Arkady Dvorkovich, an economic advisor to Dmitry Medvedev, and close friend of Magomedov.^{[4][8][9][10][11][6]}

Kremlin representatives claimed that Magomedov's arrest was ‘part of the Russian government's efforts to fight corruption’.^[12][13] Magomedov's defenders led by his cousin Ahmed Bilalov insisted that he was persecuted "under politically motivated circumstances".^[14][15] Independent political analysts acknowledged that the specific charges of 'embezzlement of state funds' during the construction of a soccer World Cup venue in the Russian exclave of Kaliningrad against Magomedov were largely unfounded. However, they also suggested that Magomedov fell out of favor and gained several enemies among Vladimir Putin's closest and most powerful allies.^[10][16] Some reports have associated Magomedov's arrest with a wider move against several oligarchs and officials generally linked to Dmitry Medvedev who were either arrested, removed from office, or fled the country between 2013 and 2019.^{[11][17][18][19][20][21]} In December 2022 Ziyavudin was sentenced to an unprecedented term of 19 years in prison.^[22] A year later in December 2023 the court of appeal reduced his sentence by six months – from 19 years to 18 years and 6 months.^[23][24][25]

In July 2023, Magomedov filed a $13.8bn legal claim in London's High Court alleging a Kremlin-led conspiracy to seize his assets.^{[26][27][28][29]} Defendants include private equity firm TPG, Dubai-based ports operator DP World, Transneft, and former executives at Magomedov's company. The claim is one of the largest ever brought before the English High Court.^[30]

Early life

Ziyavudin Magomedov was born in 1968 in Makhachkala, Dagestan.^[31] His ethnicity is Avar.^[32]

Magomedov's father was a surgeon, his mother worked as a teacher. Ziyavudin was one of four children in the family. His elder brother and business partner, Magomed Magomedov, also gained fame; from 2002 to 2009, he served as a member of the Federation Council of the Russian Federation representing the Smolensk region.^[33]

Education

In 1993 Magomedov earned a bachelor's degree in international economics from Moscow State University.^[34]

While studying at the university, Ziyavudin made acquaintances that became decisive in his future career. He became a close friend of Arkady Dvorkovich, who from 2008 to 2012 served as President Medvedev's right-hand man and was responsible for economic regulation. In 2012, Dvorkovich became Deputy Prime Minister of the Russian government, overseeing the industries in which Magomedov's company acquired assets.

According to Novaya Gazeta, a media outlet headed at the time by 2021 Nobel Prize winner Dmitry Muratov, Magomedov and Dvorkovich briefly shared a room on a university campus. The piece suggests that whilst the two were very different personalities, they remained close well into adult life.^[35]

Another of Ziyavudin’s neighbors in the university dormitory was Ruben Vardanyan (future founder of Troika Dialogue).^[36]

Ziyavudin Magomedov earned a PhD in international economics in 2000 from Moscow State University.

Career

Early stages

While a student during Perestroika in the late 1980s, Magomedov sold imported computers with his brother out of their university dormitory.^[37] In the early 1990s he founded the company Interfinance, specialising in investments and financial activities.

2000s

Magomedov expanded his business interests in the early 2000s, acquiring land in Primorsk, Leningrad Oblast on which the Primorsk Trade Port was built, with a significant stake owned by Magomedov.  

From 2004 to 2005 he was chairman of the board of directors of Trans-Oil and the chairman of the board of directors of First Mining Company.

In 2006, Magomedov acquired over 80% of the PJSC Yakutsk Fuel and Energy Company (YATEC), a gas and fuel production company and the main gas producer in the Republic of Sakha (Yakutia).

In 2006, Magomedov's Summa, which had no prior experience in the telecommunications market obtained a federal license to offer wireless Internet access services using the WiMAX standard.^[38] However, the company was unable to build this business and the State Commission on Radio Frequencies (SCRF) refused to grant new frequencies in 2013.^[39][40]

2008–2012: Rapid rise during Medvedev's presidency

In 2009, the magazine Finance valued his wealth at $70 million. A year later, Magomedov's worth had jumped to $800 million.^[3][35] The Financial Times, quoting an international banker wrote at the time that “Summa really only became an economic power in the last two years. They are essentially a Medvedev project."^[4]

Some analysts have associated Magomedov’s success with the role of Arkady Dvorkovich, who, as an assistant and then deputy to Medvedev, oversaw the fuel and energy complex, industry, agriculture and transport — the main sectors in which Summa was one way or another present.^[41] Forbes' Russia magazine has suggested that one potential explanation for the Summa Group's success is the expansion of the Ministry of Transport's contracts during this period - these "exceeded 120 billion rubles (approx. $4 billion by average exchange rate)" for 2012-2015.^[42]

In 2010, he became Russia's representative in APEC and by 2012 he held the position of Chairman of ABAC, the APEC Business Advisory Council.^[43]

NCSP deal

In January 2011, Magomedov together with "Transneft" acquired a majority (50.1%) of the Novorossiysk Commercial Sea Port (NCSP), the largest Russian port operator and the 3rd largest operator in Europe in terms of cargo turnover. In 2012 Mr. Magomedov was made chairman of the board of directors of PJSC NCSP.

Summa was accused of purchasing NCSP using port's own funds. The Financial Times has suggested that the deal did not technically cost Summa anything but cost the London-traded Novorossiysk port group $2.1bn but Magomedov was quoted in the Financial Times at the time saying "everything we made we built with our own hands".^[4]

Prominent anticorruption activist, Russian opposition leader, and political prisoner Alexey Navalny was also critical of the sequence of transactions involving the Primorsk Trade Port and NCSP.^[44]

Medvedev’s government’s privatisation plan

In 2012, Summa took advantage of the privatisation policies of the Dmitry Medvedev-led government. According to Financial Times this “put Summa at the centre of the controversy over the proposed sell-off, meaning the stakes it buys and the amount it pays are becoming a crucial test of Moscow’s ability to distance itself from earlier, tainted privatisations and thus bolster the market economy”.

The group secured a stake of 50 percent minus one share in the United Grain Company, the state trader, for $186 million in the new government's first sell-off in May 2012.^[4][45] During that year, Forbes' Russia ranked Summa Group fourth as part of its 'Kings of government contracts’ special report, which was based on official government data analyzing the winners of state tenders.^[46]

In July 2012 Summa bought a stake in the Fesco Transport Group from Sergei Generalov,^[47][48] a former Minister of Fuel and Energy of Russia. The Fesco Transport Group owned the Commercial Port of Vladivostok, the largest universal port in the Russian Far East.

In July 2012 in a commentary to the Financial Times, Mr. Magomedov claimed that Summa's annual revenue had reached $10 billion.^[49]

According to Forbes, in 2011 the company garnered 226 billion rubles (approx. $7.5 billion by the annual average exchange rate) from state contracts in railroad, electricity, and pipeline construction. Summa's major clients were state-owned entities like RZD, Transneft, and FSK Rosseti. Forbes excluded the company's revenue from the Bolshoi Theatre renovation, which cost 35.4 billion rubles (or $1.13 billion by the annual average exchange rate), as Summa was not the sole subcontractor.^[36]

2013–2018: Downfall following Putin's return

In 2012, Putin and Medvedev executed the famous "rokirovka",^[50] leading to a job swap between them. Putin returned to the seat of the Russian President, while Medvedev downgraded to the position of prime minister. This political move marked the beginning of the downfall of several oligarchs and high-ranking government officials as Putin sought to re-assert full control.^[10] Some observers have associated this with the downfall of the so-called "Medvedev clan". By 2016, Magomedov was no longer in the Forbes 'Kings of State Contracts' ranking.^[51][52]

Some pro Kremlin sources have also insinuated that Magomedov's downfall was due to his involvement in failed infrastructure projects.^[10][11] Meanwhile, according to Novaya Gazeta, Ziyavudin Magomedov's situation was exacerbated by his combative negotiation style, particularly with state representatives, which was highly unusual in the Russian business environment. This approach even resulted in a conflict between Ziyavudin and his elder brother Magomed, who believed that being too harsh with state actors could jeopardize their business and lives.^[41]

Conflict with Transneft

According to Novaya Gazeta, the first conflict between the co-owners of NCSP, namely Summa and the state monopoly Transneft, emerged right after the purchase of the port. State-controlled Transneft accused Magomedov’s company of siphoning money from NCSP.^[35]

Technology investments that could anger Putin

In 2015, Magomedov began investing in technology companies. By September 2016, he had invested $300 million in technology stocks such as Uber and Virgin Hyperloop One.^[37] He was co-executive chairman of Virgin Hyperloop One prior to his arrest.^[53]

According to several sources, Ziyavudin's act of diverting money earned from government contracts to a country that imposed sanctions on the Russian economy and was considered hostile by Putin could potentially anger the Russian President and could have been an "aggravating circumstance" that lead to his arrest.^[54]

Net worth

Prior to his arrest in 2018, Magomedov's net worth was estimated to be $1.2 billion. At its peak in 2017, it was estimated to be $1.4 billion.^[55]

Corruption allegations

Putin's superyacht

In September 2022 Dossier Center, which "tracks the criminal activity of various people associated with the Kremlin", said a group of Russian business figures led by Gennady Timchenko collected the €583 million needed to construct the 459 ft superyacht Scheherazade. The Dossier Center report didn't fully identify the other oligarchs involved, but it said that one of the offshore companies was High Definition – which donated $60 million. The report said that a company of the same name was registered to Ziyavudin Magomedov.^{[56][57][58][59]} Magomedov has strongly denied any involvement.^[60]

The funds were collected in 2014, and the yacht was constructed in a German shipyard, launching in July 2019 after Magomedov's imprisonment. Multiple sources, including the Anti-corruption Foundation, claimed that it was subseqeuently presented as a Christmas gift to Russian President Vladimir Putin. These allegations were supported by evidence indicating that most of the yacht's crew members were affiliated with the Russian secret service.^[56][61][62]

Another superyacht for Putin’s press secretary Dmitry Peskov

In 2015, Anti-corruption activist Alexey Navalny's group, Anti-Corruption Foundation, accused Dmitry Peskov, Vladimir Putin's longtime spokesman, of accepting a bribe to fund the rental of an expensive yacht during his honeymoon in the Mediterranean.^[63][64][65] According to ACF, Peskov rented the famous 'Maltese Falcon,' a 260-foot yacht that at the time cost 385,000 euros ($426,000) per week. Navalny claimed that the money to pay for this fee came from Ziyavudin Magomedov.^{[66][67][68][69][70][71]}

Mr. Magomedov later admitted to the Financial Times that he "liked talking to [Mr Peskov]", but denied paying for the yacht.^[71] When covering the story independent news site Meduza also added, "the FBK (ACF) bases its claim on an anonymous source, and lacks direct proof that Magomedov covered Peskov's supposed yachting costs".^[72][60][63]

Magomedov subsequently won a highly controversial court judgment which declared the story false on a technicality, after he claimed that the blog was published anonymously. Under Russia law, a court can rule anonymous comments are untrue without the plaintiff having to provide evidence. Alexei Navalny was critical of the decision, telling the Financial Times in 2016, "half the country knows it [the blog] is mine".^[7]

MMA and Khabib Nurmagomedov

In 2016 Ziyavudin bought MMA promotion Fight Nights Global and created the commercial company Eagles MMA for sponsoring MMA fighters.^[73]

Ziyavudin also provided financial support to Khabib Nurmagomedov during the early stages of his career.^[74] After winning the UFC lightweight title, Khabib, in a post-fight interview with Joe Rogan, switched to Russian and publicly asked Putin to release Ziyavudin. However, Putin, who usually favoured Nurmagomedov, ignored this appeal.^[75][76][77]

Civic activities

Magomedov's Summa Group financed the renovation of the Bolshoi Theatre, a project which had been pending since 2005. In 2007, Magomedov joined the Board of Trustees of the Bolshoi Theatre, with the Theatre reopening in autumn 2011.^[78][47]

Magomedov also founded and financed the PERI Foundation which supports conservation and cultural heritage projects inside and outside of Russia. Projects PERI has worked on include the repair of the oldest mosque in Russia, the protection of ancient gravestones in Dagestan and the digitalisation of ancient Jewish manuscripts, in conjunction with the National Library of Israel.^[79]

Mr Magomedov's Foundation has also funded a programme to develop IT and computing skills among young people in Dagestan and donated to dozens of orphanages and schools in the region.^[80]

For his charitable activities, Magomedov had been awarded the Order of Friendship (2010),^[81] Medal of Honour (2012) and Presidential Certificate of Merit (2012).^{[citation needed]} He was stripped of these awards following his arrest.^[82][83]

Arrest and imprisonment

On 31 March 2018, while preparing to flee to the United States,^[84] Magomedov was arrested and charged with "racketeering and embezzlement of state funds" by Russia's Ministry of Internal Affairs.

Magomedov denies the charges, but a Moscow court ruled on 31 March 2018 that he would remain in pre-trial custody, without bail, until 30 May 2018.^[85][86][87] Magomedov remained in pre-trial custody until December 2022, when he and his brother were sentenced to 19 and 18 years in prison respectively.^[88][89] During their trial, Russian oligarch Gennady Timchenko, testified in court in support of the Magomedov brothers, and in particular for Magomed Magomedov, but despite this the pair remained behind bars.^[90][91][92]

Ziyavudin Magomedov was initially incarcerated in Lefortovo Prison, which the Federal Security Service uses as a maximum-security prison for political prisoners and other important detainees.^[26] In February 2024, reports suggested that Magomedov had been "transferred to a remote penal colony in Kirov".^[93]

While awaiting trial, the Russian courts froze numerous assets with a total value of several billion dollars, despite alleging $180 million in damages. These assets were subsequently confiscated by the Russian state, including a 32.5% stake in logistics group FESCO and $750 million held in an account at Sberbank.^[94]

In March 2023, a ruling by the London Court of International Arbitration was revealed to have found that Magomedov's joint venture partner, Texas Pacific Group, exploited his incarceration and struck a secret deal to sell its interest in FESCO to Kremlin-linked businessman Mikhail Rabinovich.^[95]

While in prison in Russia, Magomedov filed a $13.8bn legal claim in London's High Court alleging a Kremlin-led conspiracy to seize his assets.^{[26][27][28][29]} The claim alleges that the Russian stated used his arrest to bring transportation group FESCO under the control of Rosatom, and that Transneft conspired to take his interest in NCSP. He alleges that US private equity firm TPG and Dubai-based ports operator DP World also participated in the conspiracy. The claim is one of the largest ever brought before the English High Court.^[30]

Magomedov's imprisonment is believed to be part of an attempt by the Russian state to seize assets under his control, handing them to state entities such as Rosatom or Kremlin-affiliated businessmen^[96][94] such as Mikhail Rabinovich.^[95] It has been described as one of the highest-profile prosecutions of a Russian tycoon in years.^[53]

Personal life

Magomedov is married, with three children, and lived in Moscow prior to his arrest.^[34]

References

This page was last edited on 11 April 2024, at 17:15