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Istil Group rides out Ukrainian turbulence

As geopolitical tussling continues to grip Ukraine, and with diplomatic efforts still failing to resolve the tensions between Ukraine, Russia and the West, one of Ukraine’s richest men, Mohammad Zahoor, believes it is time for business leaders to try to broker peace. He is involved with an ad-hoc group of Russian, Ukrainian and international business leaders, including Sir Richard Branson, who are calling on politicians to sort the mess out and even offering to meet with Russian president Vladimir Putin to try to make the business case for ending the conflict.

In limbo

As a high-profile businessman and investor in Ukraine, Mr Zahoor is as aware as anyone of the cost and consequences of the troubles. His Istil Group “has stopped investing” in new projects for the moment, he says. Existing projects, such as a five-star hotel under construction in the Ukrainian capital of Kiev, are pressing ahead but uncertainty reigns. “We are in limbo right now,” he says. The expected boom in tourists and business travellers will not be happening under current circumstances. One of his hotels in Donetsk and a factory in Luhansk have been seized.

But as a veteran of the wild and woolly Ukrainian business world and one of the pioneers of investing in the country, he is also pragmatic bordering on sanguine. “Ukraine cannot afford a war. There will be an agreement one way or the other,” he says. “I still believe in the potential of Ukraine but we are adopting a ‘wait and see’ attitude.”

It is a potential that has been repeatedly squandered in Ukraine – by corruption and ill governance as much as by today’s security issues. “Ukraine has more than 35% of the most fertile land in the world, it has a lot of minerals, steel and metallurgy, as well as chemicals, and a nearly 100% literacy rate. [Ukrainians are] good in IT also. Ukraine has no reason for failure. But it is still a failed country,” says Mr Zahoor.

Pro-democracy, pro-business

Born in Pakistan, Mr Zahoor came to Ukraine in the 1970s as a student, before starting work in the steel industry. He later took over as chairman and CEO of a trading house in Moscow, MetalsRussia, which listed on the London Stock Exchange in 1997.

He then founded Istil Ukraine, investing $150m in the business between 1997 and 2008 before selling his steel mills for an estimated $1bn. Today, Istil Group operates in development activities, hospitality, real estate, media, satellite television, plastic consumer goods, coal enrichment and trading. Among Istil’s holdings is Kyiv Post , Ukraine’s leading English-language newspaper. The editorial slant of the Kyiv Post is pro-democracy and free-market, but the politics Mr Zahoor espouses are non-partisan; he is open about his perennial disappointment in the political classes. “I have been in opposition all my life,” he says.  

Pro-democracy does not necessarily mean pro-West and anti-Russian, either. “Frankly myself, I’m for the neutral status of Ukraine. I don’t want Ukraine to be in NATO. Why can’t it be a buffer zone between Russia and the EU? EU [membership] is fine, in fact, but NATO – I think what Mr Putin is scared of is NATO, not the EU,” he says.

Mr Zahoor takes a realist view – one that he believes “neutral businessmen” such as Mr Branson and others can help to communicate to the powers that be. “A bad peace is still better than a good war,” he says.

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