OREANDA-NEWS. January 21, 2010. What did Vladimir Potanin do that might have offended the owners of Alfa Group? What is the future of TNK-BP? Why will German Khan never stop dealing with oil? Read the answers to these questions in German Khan’s interview to Vedomosti, reported the press-centre of TNK-BP.

In the late 1990s, Alfa Group was in a battle with an influential oil general Viktor Paly for the control over Nizhnevartovskneftegaz. German Khan, one of the founders of Alfa Group, could then often be seen wearing a gun. Now Mr. Khan says that he had never had to use his gun as the mere sight of a red holster under his turquoise jacket used to make a fairly strong impression on his opponents. German Khan, co-owner of Alfa Group and Executive Director of TNK-BP, visited the editorial office of Vedomosti and spoke about the peculiarities of the oil business in Russia then and now.

— Maksim Barsky, who is slated to head TNK-BP, said recently that your company may become the private oil company with the largest market cap in Russia surpassing Lukoil. Do you agree with this forecast?
— Certainly, our general goal is to increase the value of the company. Looking at the segmentation of the market, we clearly understand what we have to do to be competitive. This does not mean that we are competing with Lukoil and will copy everything that Lukoil does. We have a similar capital structure because Lukoil, too, is a private company with no participation of the state. Currently, Lukoil is larger and has bigger market capitalization than TNK-BP and is a good reference point for us in terms of increasing the company value.

— What is your estimate of the fair value of TNK-BP now?
— We think that the fair value of our company now is US50 to 60 bln.

— How does TNK-BP cope with the crisis?
— We have always been quick to respond, and, in my opinion, this is one of our main
salient features. When the crisis was only beginning and many people were discussing how long it would last, we started to act and cut all unnecessary costs back in Q4 2008.

— What did your anti—crisis program imply?
— First and foremost, we optimized our program of investments as much as possible.
Second, we suspended our charity payments and explained to our colleagues why we are doing so. We stopped recruiting new staff and restructured our head office and our subsidiaries.

— Did you reduce the headcount?
— We did cut down the managerial staff but not the production personnel. The total number of redundancies in all our subsidiaries was approximately five to six hundred people. We tried to locate our management centers in the core regions of our operations. For example, we streamlined the Krasnoyarsk office which mostly engaged in geological exploration, and its functions were delegated to the Nizhnevartovsk office. The employees were offered jobs in the Tyumen Region where we develop the major Uvat project requiring incremental resources.

Apart from that, we switched to a longer period of settlement payments with our contractors with a grace period of 60 days instead of the previous 30 days. We wanted to try a 90—day grace period, but felt that it will put too much strain on our contractors and maintained the 60—day grace period for the whole year. This measure had a cost saving effect to the tune of US 600 to US 700 mln in terms of working capital.

— What was your approach to reducing capital investment?
— Both Upstream and Downstream in our company have a program called Red Barrier. The program mainly relates to labor safety, integrity and maintenance of equipment, and minimization of pipeline ruptures and leaks. In the framework of this program, we managed to halve the costs compared to our expenditure in the previous four years. We focused on the company survival. There were practically no major investments in Downstream, and here we were completing the projects started before the crisis. In Upstream, we developed three priority projects – the Uvat project and the Verkhnechonskoe oil field, while the decision to develop Kamennoe oil field in the Nyagan District was made later in March when we had the resources to increase our investment levels.

— Personally, do you think that TNK-BP must be a public company? De Beers, for example, on the contrary, delisted its shares …
— Ideas are born as the market evolved. The idea of our alliance with BP, for instance, came up as a possible form of bigger publicity, a way of diversifying risks, attracting new technologies, and applying international expertise in managing the company. You should also take into the account here BP’s desire to enter the Russian market. By that time, we already had acquired certain experience of interacting with BP via Sidanko. This experience was, shall we say, ambiguous, but it gave both BP and ourselves certain understanding of each other.
Any Conflict Has a Positive Side About It

— Do you think that you came out the winner in the recent conflict with BP?
— Reporters think in a straightforward way, if there is a conflict, there should be winners and losers in it. Regrettably, they neglect the company which was actually the reason of the conflict. The possibility for the company to move forward should be the main outcome of any discussions between the shareholders. The very fact that our company performed really well during the conflict proves that the conflict had its  beneficial effect.

— Was it an endurance test for the company?
— No, certainly not. I am convinced that any conflict brings benefits. If you want to know my reasons, I will say that a conflict situation makes the management more focused on delivery. There are lots of examples to it. The conflict with BP was not about being a big boss and not about redistributing the powers. There were two key points in this conflict. The first one was development of the company as an independent entity rather than a subsidiary of BP. Unfortunately, our partners were mistaken about it initially. The second one was optimization of the management costs.

— Do you mean spending on the foreign staff?
— Excessive spending on the foreign staff, I would say, as we continue to employ expat staff.

— How many foreigners are left in the company?
— We used to have some 300 to 350 foreign employees, and now their number is about 75.

— Launching an IPO was one of the requirements for the conflict settlement. Why?
— For us, the shareholders of the company, it is vitally important to have an option of going public and a way of getting a fair valuation of the company. We considered IPO as one of possible scenarios to achieve this. Initially, BP was against this option, being reluctant to reduce its stake in the company. Eventually, we came to an agreement that removes this and other main controversies, and so far we have been  satisfied with how the new mechanism operates.

— When are you going to issue an IPO?
— At this stage, the possibility of an IPO is more important to us than its actual implementation. IPO is an instrument for raising funds rather than a thing that should be done in any case. For this reason, our attitude is very rational, and we do not have it as a target at the moment. There will be no IPO in 2010. I think we will concentrate our efforts on raising the efficiency of the company’s operations in the coming years. We also have a number of strategic objectives to reach.

— What are these objectives?
— Public companies have millions of shareholders and qualified experts on their boards, who nevertheless do not have a possibility to go into details. Our situation is different – my colleague Mr. Vekselberg and I are inside the company and have a better understanding of it. We can explain these details to our colleagues. At the same time, BP undoubtedly has the expertise and instruments for an in-depth analysis of the business plan. For this reason, we came to a mutual understanding and agreement that the role of the Board of Directors should not be reduced to just approving business plans. We need to have a clear idea of what we want the company to achieve in the mid-term perspective of three to five years and work out a number of indicators expressed in numbers and related to production, refining, marketing, gas business development, EBITDA and international projects. These target indicators will form the groundbase of the company’s development strategy.

— What do you want the company to be in, say, three years?
— It is too early to speak about this now, because we have to come to a consensus between the company management and all groups of its shareholders. On the one hand, the target indicators must be attainable. On the other hand, all plans must be rather stretched.
Wisdom of Hindsight

— Do you have regrets about not selling the company when the oil price was US 150 per barrel?
— No. Selling a company like this even at the current oil prices will bring big money together with the necessity of choosing where to invest it.

— Shares of other companies, for example.
— Right, but I think that buying shares of other companies for that amount of money would be also problematic. You could, of course, take on the risks of managing companies, but this is a different business. We did not even analyze the possibilities of investing the money potentially received from selling a company like TNK-BP.

— They say that you were always against selling the company. Of all the Russian shareholders, you, as an oilman, are the one that wants to be in the oil business and run the company.
— You are mistaken, I am not an oilman per se, but I have been in the oil business for quite a while.

— So it is not true that the possibility of selling TNK-BP was discussed, especially during the conflict with BP?
— There were no discussions or negotiations whatsoever on selling the company.

— And no negotiations with Gazprom as well?
— We had no meetings with Gazprom to that effect, and, as far as I know, Gazprom did not make any concrete steps in this direction.

— Were there any negotiations between BP and Gazprom?
— We do not know that for sure. In any case, BP did not inform us on such negotiations. I think that Gazprom managers could have had certain ideas on merging Gazprom Neft, Slavneft, and TNK-BP with some participation of BP. Anyway, nobody sent us any proposals or conducted any negotiations with us.

— Do the shareholders of TNK-BP have any restrictions on selling their shares?
— The Russian shareholders of the company (the AAR consortium – Vedomosti) have the preemptive right of buying shares of the company if some of their partners are selling them. I simply do not remember and cannot say for sure whether or not there is such preemptive right in the agreement between the Russian shareholders of the company and BP.

— Are any of the Russian shareholders of TNK-BP considering reduction of their stake in the company?
— Not that I have heard of.

— Did the oil price rally at the beginning of 2008 make you apprehensive?
— There was a pre-crisis bustle and fuss around with contradicting forecasts. Some predicted that the oil price would rise up to US 200 per barrel, and others said that it would plummet down to US 20. When the circumstances are too good, I and perhaps many of my colleagues, too, always have apprehensions that something may be wrong or fishy. Now, looking back, we can say that the forecasts of oil prices at the level of US 200 per barrel and the rate of price growth was somewhat unnatural and inflated. This is just the wisdom of hindsight, but at that time oil prices galloped ahead and alternative energy and fuels looked more and more attractive financially. My colleagues and I were concerned with this problem and often discussed when the oil era would come to an end in such circumstances.

— What is your own forecast?
— I think that the current level of oil prices significantly extends the life of the oil business. All alternative ways of energy generation have been known for a long time, but the question is how well can they compete with hydrocarbons, which are so entrenched in the world economy today.

— BP and Shell have been developing alternative energy sources for a long time now. Do the shareholders and management of TNK-BP have intentions to tackle this direction?
— Programs for development of alternative energy sources come about when the traditional business of a company reaches its peak and there is no place for fundamental changes, which is not the case with TNK-BP. Our company is only six years old, and TNK is 13 years old. The three largest oil companies in the world are more than 100 years old. It does not make sense for us now to go on investing into alternative energy sources. There are plenty of more viable projects for us to tackle in our time. Also, a number of various factors will substantially limit the development of alternative energy sources in the next 50 years, especially in our country.

— Unlike Lukoil and Gazprom Neft, TNK-BP is not too active in buying new assets. Last year you made an attempt to purchase Sibir Energy but let Gazprom’s subsidiary have it without a fight. Why?
— As to Sibir Energy, everything was pretty obvious. Gazprom Neft had the advantage of owning a part of the Moscow Oil Refinery (incorporated into Sibir Energy – Vedomosti). Initially, Gazprom Neft managed to buy this asset at a fairly low price and could afford to overpay for its share in Sibir Energy. Apart from that, Gazprom Neft has many refining facilities while its production base is not that significant, so it is naturally interested in increasing its production. We look at acquisition opportunities from the viewpoint of bringing more efficiency to our existing business. We have many assets in our portfolio which can contribute to production growth though organic investment. And for us, such investments will be less risky and more predictable and controllable.

— Did you know that Gazprom Neft was going to overbid your price for Sibir Energy the next day?
— No, we did not.

— What are your refining plans?
— We understand that our EBITDA indicators are worse than those of our rivals because of the fact that our refining cover is much lower. So, this area will be the focus of our attention. In production, we have to maintain a reasonable growth rate. In view of the new technical regulations going to be enforced in 2012, our investments in refining will be organic. Today, it is difficult to speak about buying someone’s oil refinery, and small assets do not interest us. We will follow the situation on the market. At the moment Russian refining remains attractive thanks to preferential export duties, but this is an artificial advantage. The legislation may change, and then all the benefits of refining will turn into drawbacks.

— May you be in the need of refineries abroad?
— There are no straightforward solutions here, although there is room for options. For example, we are increasing our presence in Ukraine. Investments into refining must be combined with investments in marketing. For this reason, we are now working on a deal to increase our retail presence in Ukraine.

— Do you mean the retail network which belongs to Vik-Oil?
— You know, we have a rule of not disclosing the names of our partners before closing transactions with them, and I am not going to break that rule.
There Is a Certain Counter Lobby

— The Federal Antimonopoly Service has imposed huge fines on oil companies for raising prices for oil products and is threatening with new sanctions. Did you manage to come to terms with the authorities?
— So far, we did not manage to come to any reasonable terms with the Antimonopoly Service, but some time ago we did start a more or less constructive dialog with it in order to come to a certain mutually coordinated and acceptable position. There is a lot of talk about developing a price formula and finding an indicator that would tell us if the price is right or wrong. In my opinion, the entire approach is wrong, because no price formula can embrace and reconcile the whole variety of market parameters and the rates of their variation. We think that the only way of understanding fair market price formation is exchange trade. Six years ago and five years ago we spoke in favor of developing exchange mechanisms, but neither oil companies nor the state were interested in our initiatives. The current crisis is spurring the development of many stagnated processes. Exchange trade began to unfold, and we are taking a very active part in it. We hold that this is the only way of market regulation. The state immediately set its limits by decreeing that 15% or 30% of oil products shall be sold in exchange trade. In our opinion, we have to strive to sell as much oil products on exchange floors as possible rather than introduce new restrictions and limits. A simple way of increasing the volume of exchanges sales is creation of economic incentives.

— For example?
— Cutting the excise tax. Today, tax optimization is reduced to a minimum. Creation of minimal economic incentives, such as moving all state purchases to exchange floors, could lead to a quite unique situation when suppliers and consumers would meet on the same floor and create an indicator in compliance with generally accepted commercial practice. Any formula based on the notion of the so-called “fair price” will not work and will only lead to an endless series of lawsuits. We have a feeling that, having started this process, we forgot why we had decided to do so. In my understanding, the Federal Antimonopoly Service started talks on the price formula to ensure that prices change more smoothly, their growth does not cause social problems, and consumers feel more comfortable. It is the exchange trade that can ensure this smooth transition. For example, exchange trade makes it possible to buy oil products with delivery in six months and to bring more sense in one’s economic activity.

— Are you sure that the exchange trade will work properly?
— It will. We were the first to start trading at the exchange, even by different company marketing subsidiaries. Why do we do this? The Downstream business of our company includes refining, sales and marketing which all report to the same top manager. This makes the price formation process somewhat artificial, and prices are set according to quotes of the Kortes agency, some other factors, indicators, etc., which is not a real market. To make our marketing enterprises more efficient and help them optimize their activities, we have to put them into the real market and let the market apply its pressures on them. Wholesale departments should try to sell their oil products with a maximum efficiency. Marketing departments, too, should try to buy oil products with a maximum efficiency, but they can buy the products both within the company and outside the company. Exchange trade opens up broad opportunities for such market activities, provided, of course, that exchange floors are working properly.

— What about transfer prices?
— Transfer prices cannot optimize all taxes and may be helpful only within a certain region. We are now paying only a certain part of the income tax and personal income tax to regional budgets, and the rest of the taxes are paid into the federal budget. For this reason, it would be more appropriate to switch to a unified taxpayer system, in which case the mechanism of transfer prices would die off by itself.

— TNK-BP was the first oil company to promise the Ministry of Finance to switch to this system when the required law is adopted and was one of the companies that lobbied this law. However, this law has not been adopted yet. What is the problem?
— I do not know what exactly the problem is. I think there might be a certain counter lobby, but this is only a guessing game.

— How often does Alfa have to use its lobbying resources for the solution of business problems?
— As usual, there is an illusion that there are some resources of this kind. I think that our main resource is that we are trying to discuss and to offer only what strikes a rational balance between out interests and the interests of the state. This is the cornerstone of … Why are you smiling?

— They say that high-ranking government officials came to TNK-BP’s office during the conflict with BP. People think that Alfa Group has a very strong lobbying resource …
— I would not say so. We have achieved not bad results in various lines of business which encourages people to put it down to our lobbying powers. Personally, though, I am convinced that healthy lobbying is necessary.

— What is the difference between healthy and unhealthy lobbying?
— Healthy lobbying is when any proposal is based on the balance of interests. Exchange trade is a good example of that. When a proposal meets state interests, it gives us certain opportunities for a dialog, including a dialog with the authorities. For instance, the latest meeting which was chaired by the Deputy Prime minister in charge of the oil industry (Igor Sechin – Vedomosti) took place in our company’s headquarters. The Deputy Prime minister said that we were leaders in the exchange trade of oil products and proposed to hold a meeting on our territory. He also said it would give him an opportunity to see how we work.
We Understood That We Lost Money

— In his interview with Vedomosti in 2007, Vladimir Potanin admitted that he was sorry about the conflict with Mikhail Fridman. Apparently, he was talking about the privatization of Sidanko. Could you tell us what happened then and why Vladimir Olegovich is sorry about it?
— It was a common situation for the early 1990s. By that time, Alfa Group had a company actively engaged in trading on the oil market. I ran that business and for the time we were a major player. We used to refine approximately one million tons of oil a month, which was processed at five or six refineries. It was a pretty interesting and profitable business. We understood that the next step was asset acquisition. The concept of loans-for-shares auctions was developed, in particular, by businesses and, as far as I know, Mr. Potanin was one of the authors of this idea. When this mechanism started to work, we wanted to take part in the process and the only real opportunity was the sale of Sidanko. Mr. Potanin offered a compromise to Mikhail Fridman: you do not compete with us for Sidanko and we will sell to you a stake of approximately 30% in it.

— Was it a verbal agreement?
— We prepared an agreement, which I am still keeping … I am very careful about keeping all documents, especially documents of this kind. The document was signed by Mr. Fridman and me on our side and Mr. Prokhorov and Mr. Potanin on their side. This document contained the gist of our agreement and steps for its implementation. However, the sale of Sidanko happened so quickly that we did not have enough time to formalize our relations with the partners. In addition, the experience we had at that time was apparently not sufficient …

— So the agreement was not legally binding?
— No, it was some form of a partnership agreement, and we were friends at the time. Eventually, we paid the agreed amount of money, and the stake was bought in the name of the company where subsequently we were to have an interest. We even had some rights and two seats on the Board of Directors. However, further steps were somehow stalled …

— Did you eventually get your money back?
— First, as it usually happens, we discussed the management change. We proposed that I should head the company and were ready to transfer there our oil business and our team. However, our partners seemed to have an opinion of their own. As they were in the majority, they appointed president of their choice and started to run the company in their own right. Ultimately, in some time, Mr. Potanin said to us: let us give you your money back as we do not want your partnership. And we had no legal means to change the situation.

— Is it true that after this case one of you said that from now on Alfa would have only the best and highest-paid lawyers?
— At that stage we got our money back. We followed the principle that business is a long road, and in any situation you need to play by the rules, be decent and consistent, and then everything will work out well.

— They say that you were especially enraged by the fact that soon after that Mr. Potanin sold 10% of Sidanko to BP for US 600 mln. At that time this was a major oil deal …
— This is all fairy tales. In reality, we were not enraged but had a clear understanding that we had made a tactical mistake and lost money. We definitely were not happy about this and did not entertain any friendly feelings towards Mr. Potanin or Mr. Prokhorov.

— And you decided to bankrupt Sidanko?
— We decided to take part in bankruptcy proceedings against several production units of Sidanko which was the situation at the time. We might not have been involved had it not been for our previous experience. However, this experience gave us a certain moral right to be consistent. By that time, we had already acquired TNK. The whole oil industry had problems with timely payment of taxes and wages. Regional authorities were pressing, and the government was trying to limit exports of debtor companies. There were endless meetings in the Ministry of Fuel and Energy about payment discipline among oil companies. I noticed then that Sidanko failed to provide a clear answer to any question. At that time, the company was headed Bob Sheppard, who was quickly replaced by [Boris] Volkov, former General Director of Chernogorka (Chernogorneft – Vedomosti), a company which was already insolvent.

— People say that, after this war with Sidanko, BP would not agree to have anything to do with TNK managers. And then, a large donation was made to the synagogue in a way related to the mother of Lord Brown, the head of BP at the time. And this donation facilitated reopening of the dialog between Alfa Group and BP. Is that true?
— I was not directly involved in establishment of contacts with BP and for this reason will refrain from comments.

— Apart from Mr. Potanin, you had another powerful rival – Viktor Paly, General Director of Nizhnevartovskneftegaz, who resolutely opposed the privatization of TNK and was vehemently against you. Why did you decide that you could win the battle?
— By that time, we had clearly come to a realization that this was a big business and a big game. Privatization of 40% of TNK was the last big chunk of property put on auction. We understood that there could be a lot of problems and difficulties, but were not aware of any agreements between Mr. Paly and other stakeholders (Mikhail Cherny, Iskander Makhmudov, etc. – Vedomosti). We made one tactical mistake. There was a certain fund which owned an 11% stake which we were offered to buy. By then we had already purchased 40% of TNK shares, paid a lot of money into the budget, and undertook a lot of obligations to redeem debts to the Pension Fund. Initially, the price of this 11% stake seemed too high. In a day I decided that we have to buy them, but the seller told us that the stake had been already sold. It was bought by the company that was linked to Mr. Paly. As a result, we then held parallel meetings of TNK shareholders, and we started to buy the shares on the market. In the beginning, we conducted negotiations with Mr. Paly and tried to find a compromise, but the dialog failed.

— Eventually, Mr. Paly was convicted upon the claim filed by one of your enterprises. Why did you decide to do that? Mr. Paly’s behavior was typical for oil generals of the late 1990s, wasn’t it?
— I think that Mr. Paly inflicted a serious financial damage to our company and to its shareholders, which slowed down our development for many years ahead. The claim was indeed intentionally filed by Nizhnevartovskneftegaz, one of our subsidiaries. I disagree with the statement that if everybody was misbehaving at the time, let’s turn a blind eye to it.

— Is it true that Mr. Paly called you “tank men”?
— I do not know, but this word somehow appeared. By the way, I have a kind of tank or probably a truck model on my desk, which was made by Sasha Chernov, who worked in public relations in our company. It is very creative – halves of the tank caterpillar with a little plate saying “Tanks are not deterred by the mud” and the individual’s name and position in the company.

— I have an impression that that time was more interesting for you …
— I think that this is common for all people. The older people grow, the warmer are their memories of the past days. This is the way the human mind works: everything bad is forgotten, and everything bright and heroic remains in mind. People with war experience tend to recall the war years in spite of the fact that they were full of dread and pain. The same is here … I cannot say that that time was better then now. It was interesting in a way – different methods, different horizons, and different tasks, but the tasks of these days are even more ambitious.

— What methods do you mean?
— The law on bankruptcy became less efficient in terms of speed. The legal framework now leaves less space for aggressive takeovers.

— In the late 1990s, you were seen at the meeting of shareholders of Nizhnevartovskneftegaz in the Ministry of Fuel and Energy wearing a holster with a gun. Was it so necessary to wear it?
— No. I think that this case was probably an aftereffect of my adolescent perceptions. I just used the opportunity to feel more confident and protected when it became possible. At that time I did not think about the image or things like that. Speaking about real dangers and possibilities of personal protection, I have to say that there were many potential dangers at that time.

— Did you have to defend yourself?
— No, I did not, fortunately.
I Keep Finding New Challenges

— A new generation of managers is coming to the company. Maksim Barsky is slated to become the CEO of TNK-BP but not before 2011. Is there any risk that this appointment may fail?
— I think that the probability of this appointment is 100% if nothing extraordinary takes place. Our world is full of risks and temptations. This year he will be trained and, if everything goes to plan, he will become the president of the company.

— They say that you are a tough manager and can toss an ashtray into your subordinate when in anger …
— Do not trust to what they say, in fact I am tender and fluffy. (Smiles)

— In the company, Mr. Barsky is often compared to you. Do you have anything in common?
— Maksim, in my opinion, is a very active and promising young man. The difference in our ages is more than 10 years … so it is difficult to me to decide what we have in common. By and large, I think that we are quite different, have different outlooks, and different hobbies. Probably, we have a similar temper. He thinks fast and is capable of making quick decisions and ensuring stresses. I think that he will hold in any extreme situation that might take place in his career in our company.

— Did you check his resilience to stress?
— There was certainly no stress at his first interviews with us, but it has been half a year since he joined the company to head M&A and strategy, which is a fairly difficult field …

— In Alfa Group, you are responsible for TNK-BP. What are your other functions in Alfa Group?
— Nothing else.

— Unlike other shareholders of TNK-BP, you and Viktor Vekselberg actually work in the company. Why?
— Because I am interested. I keep finding new challenges. My partners, people who report to me, colleagues and I always have some new tasks and challenges that must be faced.

— Did you think of what you would do if you retired from TNK-BP?
— I think that it is meaningless to think about it, because the market situation is changing so fast. Apart from that, I am sure that as long as I am a shareholder of this company I will continue to have an impact. This may be some form of external management rather than direct participation in everyday operations. Hardly any other man among my colleagues knows this asset better than I do today. In any case, I will always spend some of my time for the company.

— Who are your friends?
— Friends… I am very close with [Mikhail] Fridman, I am on friendly terms with [Pyotr] Aven and [Viktor] Vekselberg… We have a lot of mutual common interests. We hunt, we go to the baths together. For eight year now we have participated in Camel Trophy with Viktor Vekselberg taking together this endurance test in different countries and surroundings.

— Do you have friends of your youth?
— I have long-standing acquaintances from my youth but you would not call that friendship. There is actually this gap in time, financial standing and mentality. When you meet childhood friends, you realize very soon that there are no longer common interests. Then there is this shortage of time, and spending it on recalling childhood or teenage memories is merely inefficient.

— Did you find any friends in the business?
— Mr. [Viktor] Pinchuk.

— Do you have any joint projects with Pinchuk in Ukraine?
— No.

— Are you, as Pinchuk, fascinated by the modern art?
— No, I am quite far from the art.

— What about music?
— Music… I like it when Fridman is playing.

— Does it happen that he plays for you to listen?
— Of course.

— What are your hobbies?
— Sports, hunting. Not everyone is gifted to be a musician, after all.

— What about risky hobbies such as airplanes or sport cars…
— No. I think the riskiest instants in my life were connected with my business.
We go to the baths together

German Khan says he is very close with Mikhail Fridman and on friendly terms with Pyotr Aven and Viktor Vekselberg: “We have a lot in common. Hunting, we go to the baths together. We have participated in Camel Trophy with Viktor Vekselberg for eight years now taking this endurance test together in different countries and surroundings”. He does have acquaintances from his youth but, as Khan says, his relationships with them “are not what you would call friendship”: “There is actually this gap in time, financial standing and mentality. When you meet childhood friends, you realize very soon there are no longer common interests. Then there is this shortage of time, and spending it on going into childhood or teenage memories is merely inefficient”.

Hobbies
“I am quite far from the art, — German Khan says. — I like [listening] when Fridman plays [the piano]. Not everyone is gifted to be a musician, after all”. Khan says that Fridman sometimes plays just for him to listen.

About the partners
Khan and Fridman were students of the same institute, “we knew each other by sight, and nothing more”, mentioned Khan in his interview to Profil in 2004. Upon graduation, he engaged in a sewing business with Alexander Furman, and his partner decided to sell their firm by 1989. Khan was thinking about what to do next, and it was just then that he ran across Fridman in the street.

Concentrating on the main things
Khan has three children, two daughters and a son: “My son is four years old, my younger daughter is eight, and my elder one is fourteen. All of them study in Russia. My wife is the key person in their parenting and education, and I only take part in this process every once in a while. I do not spend as much time with my kids as I would like to, so I am trying to concentrate on the main things and important things, on the positive attitude to life, when I talk to them. I spend my vacations with my family. But, frankly speaking, I am not quite good at having rest. It is difficult for me to spend more than three to five days in a relaxed state in the same place, and I am absolutely incapable of sprawling on beaches…”

CV
Born on October 24, 1961 in Kyiv. Graduated from the Moscow Institute of Steel and Alloys in 1988
1990 Section Head, Alfa-Eko (trading company), from 1996 – Company President.
1996 Member of the Board of Directors, Sidanko (oil company) and then Tyumen Oil Company (TNK)
1998 First Vice President, Deputy Chairman of the Management Board, TNK
2003 Executive Director, TNK-ÂÐ; Member of the Supervisory Board, Alfa-Group, Member of the Board of Directors, Alfa Finance Holdings S.A. (group oil and financial assets) and ABH Holdings Corp. (owner of Alfa-Bank)