Chemistry of success: how Alekszej Fedoricsev helped lift Ukraine’s chemical industry

Lately, the name of Alekszej Fedoricsev has been trending. The man is one of the most reputable players of logistics and agricultural sector. His Fedcominvest trades grain and fertilizers internationally, investing in the port infrastructure in the meantime. Fedoricsev is also a passionate sports supporter, known in Monaco as the president of the basketball Roca Team and sponsor of AS Monaco FC.

The reason behind this recent limelight that Mr. Fedoricsev unfortunately found himself in is the arrest of his assets in Italy, initiated by the anti-corruption agencies of Ukraine that allege Mr. Fedoricsev have previously attempted to bribe the State Food and Grain Corporation of Ukraine (SFGCU) officials, causing damages in the vicinity of $60m.

Fedoricsev’s legal team, however, persists that the reason why Ukrainian lawmen target the defendant is they are engaged in a possible raider attack on his assets in Ukraine. The lawyers make a point that the said attacks are disguised as the fight against the Russian influence, yet the entrepreneur never held Russian citizenship. Alekszej Fedoricsev himself is not surprised, too: some corrupt Ukrainian officials have previously tried to ‘persuade’ the businessman to forward his enterprise to new owners.

We were lucky to have a word with Alekszej Fedoricsev, so we could understand the environment in which he made his initial business steps, and who he is to Ukraine at the moment. The talk turned out to be rather gripping, with retrospective insights into the early 1990s, the dawn of the post-soviet era, when Ukrainian economy was finding its way after the collapse of the Soviet Union.

It all starts with chemistry

The 69-year-old investor embarked on his entrepreneurial journey in the late 1980s, as soon as the liberalization winds blew across the dying USSR, and the Soviet authorities eased up on the commercial regulations. Back in 1987, the entrepreneur left the Soviet Union and dove headfirst in trading. Fedoricsev registered his Fedcom company in Monaco in 1994, specializing in sulfur and other natural fertilizers trade from the former USSR countries, including Ukraine.

“Once Ukraine went independent, the economy of the country was, to put it mildly, in shambles: production facilities and entire industries were deteriorating at harrowing pace. A number of factories were on the verge of closing down for good, with its workforce leaving en masse as the wages were never paid”, remembers Mr. Fedoricsev.

Still, the investor was not discouraged to develop his business in the young republic, struggling in its early years of independence. Alekszej Fedoricsev went with tolling operations, a format in which one party, a toller, offers raw materials, supplies or semi-finished products to another party, a processor, for the further processing, refining or finishing. Once the works are completed, the finished products return to the toller, which usually covers the processing costs or part of the products is retained by the processor as payment.

The businessman says this format is frequently used to optimize the production costs or when the toller’s production capacity is limited; therefore, Mr. Fedoricsev went along with this sort of arrangement. Thanks to this approach, Ukraine succeeded in saving some strategically important facilities, vital to its economy. Among the revitalized locations were the Prydniprovskyi Chemical Plant (Kamianske), JSC Sumykhimprom, Crimean TITAN, Vinnytsia Khimprom, PJSC Rivneazot; it also helped initiate the sales of organic fertilizers to Europe, and bring in a steady flow of foreign currency.

Alekszej Fedoricsev makes it abundantly clear that Ukrainian chemical industry and agricultural sector of the 1990s were in a basically catatonic state, requiring significant loans and investments. Keep in mind that all of this took place against the backdrop of the blooming barter system: agricultural producers of the highest order paid for heavy machinery, fuel and fertilizers with, quite literally, chicken eggs and livestock.

Apart from investing, the entrepreneur was also engaged in the rejuvenation of the raw material imports to Ukrainian facilities, which struggled with declining deliveries from the CIS (Commonwealth of Independent States) suppliers in the 90s.

“In 1994, the Russians seized all imports of apatite concentrate from the Kirov Plant to Ukraine. We commissioned a scientific study on the use of the North African phosphates by Ukrainian chemical industry. We had the valid certificate a year later. After that, the phosphates from Morocco, Tunisia, Egypt and Syria made their way to Ukraine for the first time, which enabled the restart of the production in Sumy and salvation of the facility from imminent bankruptcy”, says Mr. Fedoricsev.

The investor also assisted the Port of Mariupol in raising its sulfur export numbers to 2 million tons per year. Thus, Ukraine got a hold of another source of currency and steady flow of cash into its crisis-ridden economy.

To avoid any disruptions in overseas deliveries, Fedcominvest shelled out solid numbers to develop its own transportation fleet, specifically the marine cargo carriers. This meant the manageable control over the raw materials and fertilizers delivery to the end consumer abroad, along with cutting the logistics expenses. As a result, turnover funds of Fedcominvest increased, some of it channeled back into investments and loans for Ukrainian contractors.

“In the 1994-2008 period alone, over 32m tons of sulfur were sold, with 2/3 of it passing through Ukrainian ports. In other words, the country received over $50m for just letting the ships dock in Ukrainian ports. Fedcominvest paid over $80m for transporting sulfur by Ukrainian rail, and another $60m for the stevedoring works”, recalls Alekszej Fedoricsev.

Billion invested in ports

In 1994, Mr. Fedoricsev became the investor (50% stake) in TransInvestServis (TIS) in Odesa Oblast. The company built six of its own piers of total 1300 meters in length and 15 meters in depth, deepened the water area by 6.5m cubic meters across 50 hectares, and excavated over 7m tons of soil on land. The total number of the invested funds exceeded $1 billion.

TIS of today is a group of five terminals: TIS Grain, TIS Fertilizers, TIS Ore, TIS Coal, Container Terminal (DPWTP), including TIS infrastructure company. In all its operation time, over 360m tons of cargo has been transshipped through the terminals. This makes TIS Group the absolute leader in terms of cargo transshipment among both state and private ports of Ukraine. TIS connects Ukraine with 1,500 ports of the world”, elaborates Alekszej Fedoricsev.

He points out that enterprise’s expenses – electricity, railway transportation, taxes of all sorts on all levels – come in billions of hryvnias. The company spent over $400m on port fees alone over the years. Meanwhile, the labor payroll reached $200m in almost 30 years that TIS has been in the game.

Alekszej Fedoricsev says that, from the very start, the top priority of TIS was building from the ground up and investing in from-scratch infrastructure, instead of the privatization of the state assets. This strategy paid off big time: the holding’s state-of-the-art logistics facilities secured the upper hand in terms of competition and enabled the increased transshipment volumes from day one.

We asked the investor about the influence of war on TIS, since Odesa Oblast has been a top-priority target for the Russian missiles and drones in the last three years. Mr. Fedoricsev says that TIS managed to stand strong from February 24 onwards, but only due to extraordinary efforts.

“Today, the holding remains the key taxpayer and one of the major employers in the industry in the region. During the years, TIS paid over $360m in fees and taxes, keeps creating new jobs and employs over 5,000 people at the moment. Moreover, TIS Group is a strategic enterprise that secures Ukrainian exports, including the grain corridor”, expands Alekszej Fedoricsev.

The entrepreneur points out that because of its extensive logistics capabilities, TIS actively facilitates Ukraine’s business accessing global markets, thus ensuring effective integration into international supply chains. In Mr. Fedoricsev’s opinion, not only this helps certain industries, like agricultural, chemical and others, but stimulates the export possibilities for other economy sectors as well. Consequently, Ukraine benefits from additional currency influx, the undisputed value of which is immeasurable for the country at war.

Alekszej Fedoricsev says that, despite the fact it’s been over 25 years since the times he’s reminiscing about, the challenges remain the same, although amplified by the war. He is a strong believer in the rule of law, which will most certainly help him defend his name and assets that took so much time and effort to develop.

“To be victorious in business, same as in sports, you have to fight”, smiles Alekszej Fedoricsev, “so the game goes on.”

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