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Dmitry Konov: I will work here until the day I'm fired

SIBUR CEO in Top Business Officials, a special project by TASS
Andrey Vandenko 
Andrey Vandenko

Andrey Vandenko was born on November 8, 1959 in Lugansk, Ukrainian SSR. In 1982, he graduated from the Taras Shevchenko National University of Kiev with a degree in journalism. Since 1989, he has been living and working in Moscow. For over 20 years, he has built his career as a journalist specializing in interviews. His work is published predominantly in Russia’s leading mass media outlets, and he is the recipient of numerous professional awards.

Part 1
On big shots and average performers, MGIMO University, military service, an MBA, basketball, and an incident in Berlin

- I have a friend who likes to say: “Everyone is different". It's a universal formula that can explain away anything, from pulling a scam to accomplishing a feat. Top officials in business are also different, but perhaps you, Dmitry, can see some commonalities that have helped you and people like yourself to become who you are today?

First, we need to get on the same page regarding the terminology, so we understand exactly who we are talking about.

- Movers and shakers, CEOs of Russian majors, people from the Forbes List.

There are a lot of people there who made a fortune in the 1990s and then managed it as an investment. Today, you will not see these people at the helm of large companies, including state corporations. So the Forbes List is not exactly about business leaders.

The way I see it, the top 30 [list] hasn’t changed much, and over the recent decades these individuals have been the same people, while the spots from No. 50 and downwards are in a state of constant flux. In the middle, there are many people who had amassed capital and then lost it.

There are others who were moving towards their position on the list step by step – slowly and with deliberation. Even among those though, there are only a handful of people whose paths are similar to mine: executives who have become wealthy by managing companies. But still, all of us took different roads to get there.

- So, nothing in common?

Again, me and my kind are not business owners, we are the ones accountable to them for performance. Shareholders keep putting us to the test to see if we can deliver what they expect.    

When Leonid Mikhelson, Chairman of Novatek’s Management Board, acquired the controlling stake in SIBUR ten years ago, he chose not to build from scratch, allowing the company's management team to prove themselves and show their professional skills. As we still work together, I guess we successfully proved our mettle, although they keep testing us, setting new goals and evaluating the way we deliver. I believe this is absolutely the correct and logical approach.

- Is it typical for a new business owner to keep the old team?

I think it’s an exception. However, in my opinion, it’s deeply rooted in the company’s history and derives from the goals established by the shareholders. For a long time, since the moment of its inception in the mid-1990s, SIBUR was not viewed as a promising asset with profit potential. In the early 2000s, it used to be Gazprom's pain in the neck, but once the company came under the control of new shareholders, it started its transformation from a benchwarmer into a successful and sustainable petrochemical player, even by global standards. Since then, everything has changed, and the business has made a fresh start.

- Were you invited to SIBUR by Alexander Dyukov, today’s Chairman of the Management Board and CEO of Gazprom Neft?

Here's how the story goes. I was head of corporate finance at Trust Bank. My client got embroiled in a major conflict over the restructuring of corporate ownership and hired people to help him out of it. I had contact with this team, and with one of them, who was later invited by Alexander Dyukov to SIBUR, we developed a friendly relationship during the course of this cooperation. When they needed an executive with the management experience I had, this person introduced me to Dyukov, and I got a job offer. I did not accept it right away though. I don't like dredging up this story...

The fact is, Trust Bank was part of Bank Menatep’s banking group. It might have looked as if I agreed to move to SIBUR only when Lebedev and Khodorkovsky hit a rough patch.

- Like abandoning a sinking ship?

These events did coincide in time, but in reality things were quite different. I was forced to leave the bank due to a serious disagreement I had with its former major shareholders, who now live in London. I owned a relatively small stake that I sold to these shareholders later. By the way, the proceeds from the sale served as strong financial support for me during my early time at SIBUR, when my earnings were quite modest.

- Did you have any contact with Khodorkovsky at Trust Bank?

He and Lebedev were my clients, but I was not part of their inner circle. I reported to Ilya Yurov.

I thought about leaving at the end of summer 2003, and when I was thinking about where to head to, I looked at the companies I knew, including those on the list of my bank clients. In the end, I chose SIBUR because I saw the holding company’s unique position and potential. Besides, having been aware of the terrible state it was in, I wasn’t afraid to take risks: things couldn’t really have been made worse. It was long past rock bottom.

- And you had quite a vague idea of petrochemistry?

Not the slightest idea, actually. But I was hired to take on challenges that I knew how to handle, such as asset restructuring and realigning the corporate structure. In addition, I was to deal with debt due to Gazprom: figuring out its scope and finding a way to settle it.

- How much money are we talking?

About two and a half billion dollars. Notably, SIBUR’s contingent EBITDA in 2002 was zero. The two years before that were incredibly tough for the entire petrochemical industry. If you look up the difference between the cost of raw materials and finished product prices, you will see that in the next (or even the preceding) 20 years it was never as bad.

SIBUR’s assets required investment to fuel recovery and development. Where do you get the money if you can't borrow anymore? After all, a lot of money had already been borrowed to acquire the said assets. SIBUR was de facto bankrupt.

- Did the fact that you completed an MBA program play a role in your career?

Certainly, 11 months of study in Switzerland weren’t spent in vain. I had a lot of background in various financial areas, and at some point I succumbed to a delusion that I was already well versed in life. The MBA program showed me things I couldn’t see based on merely absorbing information and perspectives a manager needs to possess. Figuratively speaking, a business school shows you the essential ropes, and provides an idea of all the elements that go into the functioning of any particular business. I found that I did not know a lot of things, and that the world is much bigger than what I had imagined. 

In the operator's room of SIBUR Perm enterprise  SIBUR Holding Press Service
In the operator's room of SIBUR Perm enterprise
© SIBUR Holding Press Service

Another useful lesson learned in business school is to respect the opinions of your teammates. Without it, you can’t make progress. You had to reach an agreement in discussions with your colleagues, otherwise you were literally not allowed to go to bed. The organizers deliberately paired together participants who were diametrically opposed to each other: for example, an introverted Chinese guy with a super-active and sociable Portuguese guy. A class of 84 students was divided into groups of seven, and each month we were reshuffled, having to start building relationships and establish common ground from scratch.

- Did you want to study yourself or was it your employer who sent you?

I was preparing for the GMAT, a business school entrance exam, at a difficult time in my life. During the crisis of 1998, the Renaissance investment banking group sacked a significant portion of its employees in just three days. I was in this unfortunate crowd, too. I am now recounting this story with pride, because three months later I received an offer to return, backed by a promise of higher pay. But I firmly declined. I decided that I wanted to have an option of working outside Russia and to go beyond the narrow specialization of a trader, so I continued my preparations for the MBA exam.

- The whole thing must've been quite expensive.

Of course, but I was somewhat lucky. The Swiss franc collapsed during that crisis year, and since I kept my savings in US dollars, the exchange rate difference was to my benefit.

When I came to Moscow again, Trust Bank’s shareholders invited me to join their team. In mid-2000, I could tell that the Russian economy was recovering, so I decided to come back home, as I was offered a more interesting and promising job career-wise. Thus, it was a conscious decision.

That said, I still signed up for a number of interviews, including at McKinsey & Company, a global consulting firm. At the end of the interview, I received a job offer and... refused. It was curiosity that drove me, I wanted to see how those things went.

To be fair, not all the examiners liked me, two of them said: “Everything is fine, but he's so boring."

- Did you take it as an insult or a compliment?

It wasn’t the first time I'd been described as such. The first time I heard a similar assessment of myself was in the 1990s, when I tried to get a job at a London bank. I made it to the last round, survived 16 interviews in just two days. The final round was designed to show how people perceive an applicant and whether they see him/her as a decent business partner. To many of those people, I came off as overly tedious. The consensus was something like this: “The guy is okay, but he’s not for us.”

- Did it hurt your self-esteem?

Yes, I have to admit, it wasn't too flattering. However, after a similar interview at the business school, the score turned out to be 4:2 in my favour, and by that time I couldn't care less about other people’s judgements.

- Do you think this judgement was fair?

At the time of the London interview, I think it was. Imagine a 26-year-old young man with limited experience in Russian banking being recruited by Western financiers with an aggressive, big-picture worldview and equally far-reaching ambitions. On top of that, they were pretty well-off. Back in the mid-1990s, managing partners in major banks could earn millions of dollars per year.

And here I am, a young man from Moscow who speaks English fluently, but has a narrow-minded vision and limited understanding of business language. They were trying to understand if I could become one of them... Obviously, I stood little chance of passing this test.

From the point of view of London’s banking community, the verdict returned by my recruiters was fair enough.

- Did the “poor cousin” complex stand in the way of your ambitions?

 I have never had this kind of complex. In that particular case, I felt more like a narrow-minded backwoodsman rather than a poor cousin. Those people were tackling global challenges, while I was dealing with minor volumes. The scale of our operations was fundamentally different. My transactions added up to five million dollars per day, while theirs were worth billions. I traded in the securities of five issuers barely known outside of Russia, while they dealt with the likes of DaimlerChrysler. My market was very limited, but as I had no standard for comparison, up to a certain point in time I used to think that I was the center of the Universe.

- Until they took you down a peg?

They politely opined that my experience was not strong enough to underpin my aspirations for more and guarantee success in dealing with global challenges.

- They must have been skeptical not only about you, but also about the Russian market in general...

I do not think so, the world loved Russia back in the 1990s. It was seen as a country with a promising democratic future that had retained the grandeur and might of the Soviet Union.

- Our interview is like Back to the Future, we keep going back in time instead of moving forward. Since we're already talking about the past, why not mention your time as a student at MGIMO. Was it an informed choice?

A competitive choice, I would say. I come from a family of geologists and surveyors. My mother worked at the Joint Institute for High Temperatures of the Russian Academy of Sciences, while my father was a surveyor and cartographer. He travelled all over the country. Two years before my admission to MGIMO, he went to Guinea where he spent a total of six years looking for gold and bauxite deposits. His contractor was the state agency Zarubezhgeologia. I can’t say that we were having a hard time making ends meet, but my parents never missed an opportunity to earn more.  

- Geology has a romantic appeal. Tents, a guitar, a campfire and songs until dawn...

My associations are different. I tend to think of theodolites, precision optical instruments mounted on the shoulders of former prisoners in the Murmansk Region. Once during the summer holidays, I went on an expedition to the Kola Peninsula, where I found myself in the company of strange and interesting people I had never met in Moscow. They looked, spoke and thought differently... As a high school student, I was fascinated to get to know them. We would manhandle various pieces of equipment together. When I returned home, I gave the money I had earned to my family.

My time in the army had more new acquaintances and distinct impressions in store for me. During my military service, I realized that my experiences at a Moscow school or the Moscow Region’s pioneer camp were not enough to make a well-informed judgement about a country as big as Russia.

- Was your school a prestigious one?

It was a decent school, I would say. I successfully passed a preliminary exam. Back then, we lived close to the zoo on Bolshaya Gruzinskaya Street, but unlike most other children of my age I studied at a school that was not located in my neighborhood. My school on Kutuzovsky Avenue placed a special emphasis on English language training. Its students were mainly from privileged families, including those working in the Ministry of Foreign Affairs and foreign embassies.

An opportunity to go abroad, especially to capitalist countries, was highly valued in those times. Moreover, fluency in a foreign language was viewed as a full-fledged profession. My classmates were taking complete advantage of their situation in life, while I felt somewhat deprived of these benefits. I started to analyze where the difference lay between them and me and began to think of strategies that would help me catch up with them.

Even for a teenager like me, the link between the knowledge of foreign languages and an opportunity to have an interesting job associated with foreign relations and economics was absolutely clear. That is how in my seventh year at school, MGIMO became an objective that I strove to attain. I developed a passion for economic geography and put more effort into learning English. My parents were supportive of me, but warned that they could not guarantee admission to the university as they did not have the necessary ties and connections. This meant I could only count on myself. From then on, I started to view my preparations for the exams as a competition. As a result of my teenage stubbornness, I rejected any compromises and aimed only for MGIMO.

- When was the first time you went abroad?

In 1980, my mother was given a voucher for a trip to Bulgaria... I hardly remember any details. The only thing that comes to mind is us Soviet kids joining forces against the German children and fighting all the time. Fortunately for us, we returned home safe and sound.

In a couple of years, my family took me to East Germany where my parents’ university friends lived. That’s it for my experience of travelling abroad prior to entering MGIMO.

I was admitted to evening classes as a part-time student. My father had to take extra work and translate technical literature from English. My mother lent a helping hand by typing his handwritten translations. I considered it my duty to contribute to the family budget and do odd jobs in addition to my studies.

Part-time studies were only available for those engaged in foreign trade. That was a mandatory requirement. I landed a job with ExportSamotsvety and asked to specify an important position in my employment record. That is how I ended up being a packaging professional on record, even though in reality my task was to get products from ornamental and semi-precious stones ready for shipment. For example, I would wrap a nephrite vase with cotton wool, put it first into a beautiful box and then into a coffer, and finally nail the coffer shut. 

In 1988, I was enlisted in the army. This happened in the Gorbachev era when conscripts were drawn from all over the place, including full-time students who were sent back home 12 months after enlistment. I, on the contrary, had to do military service for a full period of two years. I was dispatched to Baku and found myself in the midst of the conflict between Armenia and Azerbaijan that had erupted that year in Nagorno-Karabakh. When I arrived at my military post, martial law had already been introduced in Baku, with actual hostilities breaking out in a relatively short period of time...

Armoured vehicles on the streets of Baku during the Armenian-Azerbaijani conflict, 1990 Andrei Solovyev/TASS
Armoured vehicles on the streets of Baku during the Armenian-Azerbaijani conflict, 1990
© Andrei Solovyev/TASS

A few years ago, I visited Azerbaijan and made it a point to go and see the place where I did my military service. The city had changed dramatically, with the road leading from downtown to my military unit now flanked by modern buildings. The unit itself, though, changed very little. It stood by the sea in close proximity to the road, where tanks rolled along into Baku in January 1990... I clearly remember how during morning formation, militants belonging to the People’s Front started shooting from the mountain and seriously wounded two soldiers who were later discharged from military service. Another memory haunting me is how we, armed with assault rifles, drove trucks one by one for several days in a row to evacuate the families of officers from the city torn by ethnic clashes and massacres. A bullet could have hit us from any window, as Azeri nationalists who were cleansing Baku of Armenians were more than happy to get rid of Russians.

On the way to our military unit, we encountered barricades erected by the insurgents to stop the tanks. It didn't help them much, though...

To be honest, those memories are far from pleasant.

The trials and tribulations started getting me down straight from the boot camp, though. As a civilian, I lived by the rule of “first think and then act”. In the army, I had to change that mindset and learn to follow orders without thinking. At a later point, I could analyze my actions and even comment on them, but only if I was asked to do so. The army teaches you to see life differently. But then again, “teaching” is not the best word to describe this system.

- Was there a ‘dedovshchina’ that is hazing or bullying within the ranks?

All in all, everything was civilized. However, discipline there was really strict. There was zero tolerance for disobedience. Collective responsibility for failures turned out to be the most effective way of achieving this objective.

Imagine it is plus 30 degrees Celsius outside, we're sitting in a cool, air-conditioned classroom, a lesson's running. Suddenly, someone starts talking and distracting others. The troublemaker gets a warning. If that falls on deaf ears, everyone's forced to get up, take their chairs, put their textbooks on them and continue with the lesson standing up. But even that didn't work at times. In such cases, all soldiers except for the culprit were taken out to the hot street to run a 3-km cross country course. Uphill and back. After this exercise, the talker was left face to face with the soldiers.

Time showed that this was the most effective method of achieving the best discipline.

- Did you also find yourself in similar situations?

Yes, early on. But I'm a rational person, so it didn't take me long to see what was what. The lesson with the chair was sufficient.

- Do you think that those two years of service were a waste of time?

Not at all, this experience proved helpful. Definitely not less valuable than an MBA degree, it gave me a new perspective and an understanding of self-discipline that taught me to find a way in an unfamiliar environment where you are one among many, and advance forward.

Had I not been able to integrate into army life, I'd probably have considered that period an unfortunate episode. But I occupied a position usually held by a captain and was on a sergeant’s pay. When I was on duty, in charge of ensuring internal order, I was granted access to the telephone switchboard and even had an opportunity to make a call home.

When a new group of conscripts arrived, I was ordered to accompany the draftees from Brest to our military unit. I had to select five conscripts at a local recruitment office and take them to Baku. I was instructed to find the best people. I took the task very seriously – I rejected the proposed candidates and managed to get a replacement.

On my way back, the only thought that was bothering me was: what would be done to me if I lost any of them? But everything went well, and after a while I was given a new task – to accompany a group of as many as 22 people from Brest. It was a hard job, but I worked my way through it.

Yet, things were not always smooth. One day, I had an argument with a senior lieutenant. Later, when he was on duty, I missed the wakeup call, which, in his opinion, was an expression of extreme disrespect. The officer insisted that I be downgraded to junior sergeant and lose a rank badge. After some time, I was promoted back to sergeant, but never managed to rise to the rank of starshina (sergeant first class) because of that incident.

- Did you make a discharge album?

No, I thought it was lowbrow. I didn't like the aesthetics of it.

- Did you return to part-time studies after your service ended?

I set a goal for myself to move to full-time studies. Perhaps, an extra year in the army made me force the events and push for movement. Something changed in me.

Frankly speaking, in 1990, when I returned to Moscow, I didn't realize that the country and the economy were different. I continued on the conventional Soviet path and believed that a successful career was to be underpinned by a strong educational background. However, other skills were required...

On top of that, in MGIMO I put a lot of time into sports, which I was able to do alongside my studies. Maybe this was the reason why I didn’t pay enough attention to certain subjects, French, for example.

- How tall are you?

1 m and 90 cm. No particular gifts for becoming a professional athlete. But I do have a childhood passion for basketball. I was even enrolled in a sports school at the age of ten, though I quit it soon afterwards and focused on general education. I continued playing basketball at MGIMO. We advanced from the third to the first league in the Moscow student games, and I played for the university for another season after graduation.

With participants of camp for young athletes #SIBURCAMP, 2016 SIBUR Holding Press Service
With participants of camp for young athletes #SIBURCAMP, 2016
© SIBUR Holding Press Service

Before the pandemic broke out, I did my best to go to the basketball court two or three times a week. After the lockdown, it is still difficult to get back on track, but I hope to return to training and the games soon. 

- You are a long-time fan of CSKA, aren’t you?

My dad was a big fan of the club in all sports. So, I had no other choice from my very childhood. However, I'm not so passionate about CSKA. I have almost no interest in ice hockey. I used to go to football matches once in a while, but I don't any more. First, I didn’t have enough time, then, after what happened in Berlin, my wife felt offended and refused to attend any games. As a result, now I'm not such a regular spectator at basketball matches.

- Let’s remind our readers. Not all of them know what happened during the EuroLeague Final in 2016...

During a deciding game between CSKA Moscow and Fenerbahçe Istanbul in Berlin (which is of importance as the Turks enjoy particular support in this city) there was an unpleasant incident. My wife Katarina and I had first row seats, very close to the court. At some point, Nikola Kalinic, a Fenerbahçe player, lost his balance and began to fall towards us. It was difficult to predict where he was going to land, but the impression was that the player wanted to crash into a Russian fan. I do not rule out that his target was Katarina, who was wearing a Russian tricolor dress.

I jumped up from my seat, but was able to only make a step forward. To tell the truth, I was overwhelmed with the game and jostled Nikola Kalinic away so that the trajectory of his fall changed and he wouldn’t crash into my wife. He leaped to the stairs, turned, rushed towards me and began pointing with his finger. Later, I learnt that he had a deformed chin, a childhood injury. It looked strange when he started shouting something at me. I briskly pushed his hand away to prevent him from waving in front of my face.

Sergey Kuschenko, VTB United League President, supported me, expressing verbal discontent with Kalinic’s behavior and slightly redirecting him to Fenerbahçe's bench as if to tell him go to the coach and get useful tactics advice.     

The atmosphere was at its tensest, the audience roared, the officials took the teams to the locker rooms, the sector got crowded, and then the police came there.

The fans prepared to erupt.

It is worth noting that Katarina and I had had no plans to attend the Final Four that year. We had a stopover on our way to France and we learnt that CSKA had won the semi-final, so we decided to stay in Germany to watch the game. The lucky tricolor dress that Katarina had worn at one of the previous finals was specifically sent to her from Moscow.

CSKA won. However, later, according to sources close to the club, the team was on the brink of losing the game because of the incident. Those accusations hurt Katarina’s feelings.

The incident sparked a harsh backlash on social media naming Sergey Kuschenko a mobster with a gun, me a tycoon and a thief and Katarina a woman with low social responsibility.

- Did you actually read all of that? Seems like it’d just be self-torture.

Negative comments also have value – they give you insight into public attitudes and opinions.

- What are your takeaways from the whole episode?

Whatever happened, happened. At the request of CSKA, I wrote Kalinic a message that could be interpreted as an apology. “Sorry things got out of hand”, and all that. It could also be read as “it was your own fault”, though.

I did receive overwhelming support from the female community, most of whom appreciated that I had to stand up for my wife. The EuroLeague imposed a season-long ban on Kushchenko and I, with the exception of CSKA’s home turf matches, but later we were for some reason allowed to the Final Four in Istanbul. I guess they were secretly hoping we wouldn’t have the gall to go. Wrong! Once Turkish fans spotted me in the audience, they started throwing plastic bottles, paper, crumpled up posters and even banknotes. There was also an unpleasant incident outside, when a Turkish man stopped his car and started yelling out insults. Fortunately, this altercation did not turn physical. I had security by my side, courtesy of a Turkish businessman I knew. He had given them to me when he learned I was heading to Istanbul...

Part 2
On jackpots, intoxication with success, reappraisal of values, the pandemic, and risks

- Switching off from basketball, let us return to SIBUR. Am I correct in saying that by the time you came to the company you were a mid-level manager?

A bit higher.

- And then all of a sudden from zero to hero.

My pre-SIBUR career was far less successful, just like the story of SIBUR before we met. It seems fair to say that it was a shared evolution. I got a chance to delve into interesting and intense work. SIBUR would always throw me challenges that made me grow rapidly while I was tackling them.

- Did you hit the jackpot?

Last year, my wife and I celebrated 18 years since we first met. We were having dinner with our two long-time friends. One of them said that Katarina was there for me not only providing a pillar of support on the home front, but also making a positive impact on me in every sense. “When people say you hit the jackpot, they usually mean work, however, you got your chance of success when you met this woman.”

Dmitry Konov with his wife Katarina Personal archive of Dmitry Konov
Dmitry Konov with his wife Katarina
© Personal archive of Dmitry Konov

The chain of events that brought me into SIBUR may be called luck. Had I ended up in a well-established company, this sort of rapid managerial growth would hardly have been possible. I joined the company at the right time, you’d say. Nevertheless, I did dedicate myself and succeeded.

The story should be told from two angles. You can’t narrow it down to mere luck. To be a leader, you are required to constantly prove your potential: whether you meet the challenges or fail.

- When did you start having truly a lot of money of your own?

It’s all relative, you know. For someone, a 100,000 rubles is a mint of money; for someone, ten million dollars is next to nothing...

- But if you don’t go to extremes?

They started paying us huge success bonuses in 2006, when Sibur’s shareholder was still Gazprombank. Our financial figures were going up, and the bank developed an incentive plan that allowed a lot of managers, about one hundred people, to receive large amounts of money for each successful year. My finances improved significantly.

With my first big bonus money, I bought an apartment in the center of Moscow. About 200 square meters. However, later on we moved to another place and kept this apartment as plan B. As of now, it is no longer relevant, and we want to sell it.

- Were you intoxicated with success?

My wife believes I was.

- How did it show itself?

Katarina thought I wanted to be the boss at home just like in my office, but I think she exaggerated the situation. My behavior changed indeed, but I never lost my mind.

I know it from both my own experience and others. The greatest personal growth is achieved when you face a challenge and rise to the occasion. The first half of 2009 was extremely difficult. The strain was everywhere: in our relationship with the shareholders who felt uncertain in that market environment, in finance, in having to complete our projects... This fighting on many fronts probably helped me to grow.

A new shareholder came on the scene in 2010. It was Leonid Mikhelson. Due to the different approaches to the business and the views, the first years of our interaction turned out to be hard for both of us. I think it is not extraordinary that Mikhelson, who had built and managed NOVATEK and got to know it inside out, might not accept the management’s judgements at face value. However, at the early stages of our working together, this approach cost us much time and effort to demonstrate to him the unique and complicated nature of our business.

- Is Mikhelson receptive to different opinions?

Speaking largely from my own experience, yes, he is, though he has a habit of raising his voice in discussions. Leonid Mikhelson has many achievements to be proud of, and I think SIBUR is one of them. Our shareholder is happy to have made the company a success by setting goals rather than managing it. This, however, did not always work. We had to explain and defend our point of view.

With chairman of SIBUR's Board of Directors Leonid Mikhelson and Russian President Vladimir Putin during the start-up ceremony for RusVinyl plant, 2014 SIBUR Holding Press Service
With chairman of SIBUR's Board of Directors Leonid Mikhelson and Russian President Vladimir Putin during the start-up ceremony for RusVinyl plant, 2014
© SIBUR Holding Press Service

This used to happen quite often. Big and successful top managers tend to put the squeeze on you unless you oppose them...

I think that now Mikhelson appreciates that I have an opinion of my own and can defend it. If he disagrees with me, he either tries to sway me or, in rarer cases, he steps aside, as if to say, “do what you want”.

- When asking about your intoxication with success, I meant not just the company's high profile but also the feeling of earning big money.

I have already answered this question. A significant portion of the amount I own according to Forbes is invested in SIBUR shares. They started paying dividends only after a stake in the company was sold to Chinese parties. Before that, I owed money for acquiring these shares, which was to be repaid, rather than having any profit. But let me reiterate: I have never seen the five or six hundred million dollars shown in the rating because this money is in SIBUR where I work.

Can I afford a lot? Well, I can. I don’t count every penny, but I still spend my money sparingly. My wife is more lavish. She does it for both of us, though without going too far. More often than not, Katarina spends quite reasonably.

If we talk about being drunk with success and my mind that I could have lost, let’s look back at what happened almost 20 years ago. 2001 became the most challenging year for me since it was completely different from my entire previous life in terms of lifestyles. My earnings skyrocketed to several tens of thousands dollars per month plus shares and annual bonuses – quite good for that time.

Moscow was also far different from the city that I had left to go to Switzerland to get my MBA – it was full of crowded and humming restaurants and nightclubs. Nowadays, you can rarely see a drunk driver, but in the 1990s and 2000s drunk driving was a common thing, which came as no surprise to anyone...

In a word... I will omit the details, but a downright unpleasant event occurred to me on Bolshaya Gruzinskaya Street in 2001. It impelled me to reconsider some of my views and, besides that, change my driving style. I had a road accident in downtown Moscow at four in the morning. I was lucky enough to get off lightly, though my car was totaled. That night and morning taught me a lot...

I met my Katarina at the end of that “happy” year.

- Do you drive now?

Rarely. I work when riding in a car, and I could hardly do that if I drove.

- But do you still have a lust for racing?

It left me in 2001. I must confess that I used to be an extremely aggressive driver. My parents have a country house next to Kashira Highway, about 25 km from the Moscow Ring Road. Every time I went to visit them, I would try to beat my previous result. Finally, I achieved a record-high average speed of 212 kilometres per hour...

After the accident that destroyed my all-singing, all-dancing Mercedes E500, I bought a car, which was supposed to prevent me from driving fast – a Peugeot 607 with a 2.2-liter engine.

- Don’t be too modest. They say you have a fleet of luxurious cars. It will just suffice to mention the white Ferrari that you presented to your wife.

In fact, the “fleet” is an overstatement. Yes, our family has several expensive cars, but we also have a small Smart and a Twizy, a French microcar – something between a little car and a bicycle. This is the car I drive most often.

- When did you acquire real estate in France?

We bought a house in 2013. It's on the Côte d'Azur, but it’s not some kind of a palace. It’s not in Antibes or Saint-Jean-Cap-Ferrat, but in Cannes. You can feel life over there. It is not down on the coast, where it is too lively, but up in the mountains.

Some of my family members live there and look after the house.

- A yacht is the only thing you lack to confirm your status.

Boats are clearly not for me. If I suddenly wanted to sail a yacht, I’d rather lease it than own one. With a fortune of five to six hundred million dollars on paper, it would be a senseless, or, more precisely, wasteful, even impossible purchase.

In our family, the question “why do others have it, and we don’t?” did arise, but it has never gone any further. Buying a house in France was not a matter of prestige. It was intended to end all the fuss about booking a hotel, packing and unpacking our luggage... However, my wife and I don’t go there too often and seldom stay for a long time.

Even before the COVID-19 lockdown drastically changed everybody’s life, we rarely visited anyone when in France. I would spend my three or four days in Cannes reading at home, going out only for a jog. Almost never did I go downtown or eat out.

- But your wife and child self-isolated in Côte d'Azur, right?

Not exactly. My son was born in Moscow. Then we took Yan to France, having decided he would live there for a while with his mother and granny. Before the pandemic, Katarina was dividing time between Russia and France so both Yan and I could spend time with her. When she flew over here in early March, she was required to complete a 14-day observation period, and then the borders closed. Yan remained in Cannes with his granny.

We thought that we shouldn’t take him back to Russia as we had no residence in the countryside and there was no sense in staying confined in an apartment in Moscow while he could get some fresh air elsewhere.

Who would have thought the lockdown would last that long? Until June 1, Katarina and I stayed in Moscow with no chance of going to France... But when that chance arose, Katarina didn't hesitate to jump at it and visit our son. I, too, managed to see him a couple of times.

- By the time she met you, Katarina had long worked as a model and then quit. Was it you who insisted?

During our first years together, I had no issues with her doing her job. And then she just quit. More likely than not, It was her decision. I don’t recall myself asking her to do so. Maybe the expression on my face wasn’t too happy at times, but I did not say anything to make her think that way.

At some point, I realized it would be right if we got married, which we did after many years of knowing each other.

- How many people did you invite to your wedding?

Three hundred.

- You turn 50 on September 2 . A reason for another big party?

I am going to celebrate the jubilee this weekend. The format is going to be quite different due to the restrictions in place, with family and close friends to account for about a half of the guests, including ten school classmates and around 15 people I've known since university. The rest of them are my colleagues, both present and former.

- If it weren’t for the pandemic, would you celebrate your birthday outside Russia?

Almost certainly not. It would’ve been a hassle for those invited, especially people without a Schengen visa or, what's even worse, an international passport. Some of my relatives could well be in that group. And that’s not to mention the travel morass. Imagine asking someone from, say, Siberia to use different means of transportation just to pay a two-day visit to a guy who’s chosen to spend his summer holiday and throw a birthday party in Cannes.

Anyway, the new reality makes it impossible to travel abroad from Russia. Staging a major event is a whole different ball game now. For everyone’s safety, I will probably arrange for all guests and personnel – that is, chauffeurs, waiters and cooks – to be tested for COVID-19.

- Are you in for a PCR swab test, too?

Certainly. I’ve also been vaccinated against the coronavirus as part of the trials.

- So you were among those to try out the Russian-made Sputnik V?

It’s been the only vaccine so far. The one developed at the Gamaleya Institute.

- Are you sure it wasn’t too early to get the vaccination? Perhaps, it would have been better to wait until it’s tested properly on animals.

I don’t think so. At least ten of my acquaintances opted to get vaccinated even earlier. I've been watching how they fare, and all of them have been fine.

I tell you what, it’s important that the vaccine be safe and effective. It has a mechanism that helps it adapt within the human body and an element to produce immunity against this particular virus. I think discussions between Russia’s healthcare industry and the global community will be centered around the fact that this mechanism has been tested with five or six vaccines and it works.

Overall, I’m optimistic about the vaccination story. Every year, I get vaccinated against the relevant form of flu – to a positive effect, I believe. For several years in a row, I’ve been getting through the hard autumn and winter season without major problems – and that despite being generally prone to colds.

- Did someone advise you to get the shot?

No, it was my own decision. But I don't feel like I’m a hero or something. Nor do I feel harmed so far.

This pandemic forced me to dig deep into the subject, so now I have a much greater knowledge of epidemiology, the human body and vaccines.

Now, I’m more convinced than ever that big problems do start with tiny inaccuracies. You can draw up a massive, detailed, comprehensive plan just to see it totally fail during the second step because one of ten small things was overlooked, making the whole structure unreliable.

- Are you talking about something specific?

We were trying to work out a procedure for taking construction workers to the site. As you know, SIBUR has been building new facilities, which requires a lot of people. When the lockdown began, they were restricted to a certain area and had no health issues. After some time, we found ourselves in a situation where we needed to take some people from the site and some to it. Knowing that some of the new workers could have the virus, we had all of them tested for it and then quarantined. However, it turned out that they shared the building used for observation with people who had been working on the site. Although the two groups lived on different floors, smokers from both used to go outside together. Some were friends or acquaintances; others came from the same places. To make the long story short, a number of contracted workers got infected. This is how ignoring, or, to put it more mildly, failing to pay proper attention to details added to the complexity of the problems. That’s just one example. 

But now I have a good grasp of the logic behind the anti-coronavirus protocols.

- Did you share the feeling of doom and gloom at the onset of the pandemic?

Back in April, as you may recall, some were lamenting that the economy was dead for good and would never recover. And while the situation has indeed worsened, the economy is still alive.

Some even said we were not going to return to the offices and were stuck in remote work mode. They felt like we would not need our office desks again. But as early as May, many people found out that remote working was inefficient and difficult to cope with mentally and emotionally. Managing those people was, too, a different experience involving the development of fundamentally different skills.

In one way or another, remote working is here to stay, but it won’t prevail over the traditional approach in any industry.

- Awareness comes with experience.

Exactly. We knew the prices were going to stink, but a much bigger risk was associated with the inability to produce things if people get ill or sell things if markets closed. So our priority was to ensure the safety of employees. Out of more than 20,000 people, only 6,000 began working from home, with the bulk of them being office workers and people from our project and management teams. Those who worked in shifts and were involved in the production processes needed to remain at their workplaces physically. 

Safety measures at SIBUR Holding enterprises during the COVID-19 pandemic SIBUR Holding Press Service
Safety measures at SIBUR Holding enterprises during the COVID-19 pandemic
© SIBUR Holding Press Service

Looking back, I understand that we could have avoided any tough consequences even without switching from the four-shift model to the so-called shift camp one, where each shift was required to work for 12 hours a day during a two-week period at higher pay and getting rest in special areas like isolated lodging facilities.

Ideally, we could have addressed the health and safety issue with COVID-19 testing, but there were not enough test kits, especially at the onset of the pandemic.

Another burning issue was how to keep people going. We did our best to prevent the external circumstances from affecting them psychologically.

In a way, SIBUR was lucky, as the Russian market for our products had not halted until May. Europe got sluggish in March, but we had China, which, despite coming to a halt earlier, had started thawing by April. So we had a rebalancing between the three markets which allowed us to keep production almost at the same level despite the lack of demand. Of course, April was tough in nearly all markets, but then everything bounced back sharply.

- Was there a plunge in prices?

Yes. But not for all chemical products. Take polymers. From January to April, their prices fell by 40%, and it was even worse year-on-year – a 58% decline compared to April 2019.

In early 2020, liquefied petroleum gas was priced at USD 500 per tonne. In 2008, when oil prices dipped to USD 30 per bbl, the lowest price was USD 320 per tonne, while in April 2020 it bottomed at... USD 100 per tonne. An 80% decrease! Since it was first marketed in Europe in the 1950s, LPG had never been that cheap in absolute terms.

- Did you have to revise your capex program?

We keep moving forward with the Amur Gas Chemical Complex. The GCC is our main project for the next five years. We are not slowing down, it is primarily linked to engineering and equipment-related work.

- What risks do you see?

Production-wise? There are many. Even automation has its flip side. The old system was like this: ten people in the operator's room, and 20 people walking around the facility to open or close shut-off and control valves on command. Is there a risk of error? Sure. The so-called human factor. It seems to be eliminated by automation, but there comes another risk: the qualification of the person operating ten valves at a time may not be high enough to understand and adequately assess the processes underway. Our situation is better than the average for the Russian industry, as we have invested quite a lot of money, more than 20 billion dollars, over the past 10–15 years. Thanks to this, our facilities have lots of novelties – equipment, technology, and there is a safety margin.

Central control desk of SIBUR-Kstovo SIBUR Holding Press Service
Central control desk of SIBUR-Kstovo
© SIBUR Holding Press Service

- Twenty billion is a sizeable amount.

Considering the number of fixed assets we operate, it is, no doubt.

- And why do you keep saying that the current situation is not the best for SIBUR's IPO?

The markets are to blame. Margins have decreased across the board. No matter what country you operate in. It doesn't even matter what kind of industry it is or whether your company is good. In fact, the stock market has dropped by 30%. So, at the time of the offering we will be evaluated accordingly. The shareholders do not need to raise funds, and so there is no point in pushing for the IPO.

- Did you miss the right time?

This is not about us having wanted to go public the day before yesterday but having missed the time. We were looking for the best combination of three factors: the company's financial statements, and industrial and financial market conditions. We are keen to seize an opportunity with all the three factors at their best. It hasn't come our way yet. We shall wait.

Part 3
On the anthem, the team, dismissals, empathy, motivation and an old record

- Should a leader get involved in all the details? Dmitry, I hear you rewrote the anthem of SIBUR.

I asked for some changes to be introduced. I'd been extremely annoyed by the lyrics, for quite a long time. They were written in the early 2000s. There was something like ‘and SIBUR tied the plants together’.

- What's wrong with that phrase?

It sounds enslaving. Colonizing. Twenty years ago these words might have sounded differently, implying that scattered assets were merged into a single production chain. But times have changed.

So we copied Sergey Mikhalkov’s approach to the Russian anthem.

- What do you mean?

The music remains the same, but the lyrics have changed.

- Did you personally do the editing?

I prefer not to do anything I know little about. I trust the professionals.

- Is there anyone in the management of SIBUR who's been with the company as long as you have?

Not too many. The average age of our employees is about 35.

- Can you say who is on your team?

I wouldn’t. I oppose the narrow interpretation of this term: if I name someone, others will feel left out. We shouldn’t have ‘us’ and ‘them’. I maintain ongoing contact with a large number of people. I spend an hour and a half each month communicating with each member of the Management Board, which consists of 14 people. I regularly interact with 100–120 employees. My job is to launch the operations to be performed by others, and to build ties, both vertically and horizontally. Not to micromanage, but to steer. It also answers your question about the details.

- Is patience a must for a leader?

It is, but it can be multifaceted as well. For example, something can be annoying emotionally. And it can become a tool for fine-tuning relations within a team.

- How does this work?

Let me give you a specific example.

A candidate was asked to share his impressions of SIBUR at an interview. He said we presented ourselves as a modern company, but the first-floor office smelled like food. So we did not hire him… just kidding. He shouldn’t have gone where he wasn’t invited…

Jokes aside, the jobseeker was a winner of the Leaders of Russia contest. As a mentor, I’ve supervised several groups of contestants and the one including the would-be candidate for SIBUR received harsh criticism from me. As he said, Konov humiliated them intellectually saying they were completely wrong and therefore ended up with a fallacy.

I believe that is how my emotions are shown.

- By humiliating people intellectually?

I didn’t mean it… My goal is to give people the right attitude to solving two tasks: structuring the thought process and ensuring the idea they have chosen is put into practice.

The latter is much more challenging than the former.

It is crucial to explain or demonstrate what is incorrect in their logic. Why somebody made a wrong decision, and what they overlooked or neglected. That is what mentoring is about.

- So, in the end, what didn’t you like about that ‘leader of Russia’?

The other candidates performed better, although they hadn’t won the contest... However, I hope that the word ‘humiliation’, even if it’s intellectual, is too strong for my manner of communication. I respect human dignity, but I truly believe that pointing out an error is the most valuable assistance I can render.

- Are you often criticized for mistakes yourself?

It happens at times. Shareholders can speak out.

- How do you react then?

I dust myself off and get back to work.

- No longer wanting to quit?

You can’t rule out emotions when building relations or establishing a system. Things happen. You are working on something, and your opponents are trying to thwart you. They really are! It comes down to the CEO stepping in and resolving the conflict. Of course, at such moments, I was on the brink of despair, but it’s history now.

Dmitry Konov and Andrey Vandenko Gavriil Grigorov/TASS
Dmitry Konov and Andrey Vandenko
© Gavriil Grigorov/TASS

- Can you fire an employee if your personalities don’t “click”?

I would say no. There are people who aren’t very good in the long run – like, for instance, those glass-half-empty types who take a pessimistic view of the world. “I’m not doing anything lest it gets worse.” They need to be told to pull themselves together and cheer up.

Those coming to the company and trying to show off are a tough case as well. They also need to be straightened out, but in a different way.

- Is dismissing employees easy for you?

It depends... But it’s my job (not the most enjoyable part of it, of course). There is a never-ending rotation process. Say, out of 80 directors, five or seven people are dismissed each year – or quit on their own accord. When a person is let go, I’m often the one who has to hold the “talk”.

- What’s your usual tactic? Do you soften the blow or go for the rip-the-Band-Aid-off approach?

Usually, people already know what I’m going to say. If an employee performs poorly, he/she is informed of the problem and is given time to correct the mistakes. To be fired right off the bat, one has to do something on purpose that is in serious violation of corporate values. There are, however, obstinate people who ignore negative feedback. When we start to discuss things, it turns out they believe there’s absolutely nothing wrong.

- And...?

If a person can’t listen to reasonable arguments and respond properly, I have to make the dismissal call.

- What about empathy?

Empathy is about emotionally understanding what other people feel. In our situation, it shouldn’t be a factor.

- Why not?

I think it doesn’t make anyone feel better. All that rhetoric about the pandemic, or the beleaguered labor market, “we are very sorry, but we have to let you go because you failed”...

Do you really think it’s going to make the pill easier to swallow?

- So what do you say?

I explain what exactly we’re unsatisfied with and why we had to make such a decision... Sometimes, it’s complicated: the employee can be a decent performer, and the effort is appreciated, but we are looking for someone even better. The hardest thing for me to hear is “I’ve tried so hard, I have always been loyal to the company, and rejected all other offers that have come my way. How can you fire me?” It’s not easy to explain that it’s not about loyalty – it’s about competence and qualifications. We didn’t get what we expected, so we have to part ways.

- Do people ever try the sympathy angle? Welling up with tears and telling a sad story about a sick wife or an unpaid mortgage?

Must be my inner demons, but that cuts no ice with me. I won’t let emotions affect my decision.

You see, no one forces you to take out a mortgage: it always comes down to personal choice. All the associated responsibility and risks are on you, not on the company.

- What about help with finding a new job?

We discuss it, too. If it’s a decent employee whose skills just happen to be of no use to SIBUR, why not help a good specialist find a different company that might need them? We can even give such employees time to look for a new job, although we do realize their performance won’t be the same. Nobody will give their 100% just before leaving.

There are also situations when we want to dismiss an employee, but we can’t find a replacement. Then we monitor the market for promising specialists. Any manager will tell you that HR is a global issue.

When we find the employee we need, we make a decision.

- It seems like being an effective and impartial manager comes with some cannibalistic overtones, wouldn’t you say?

 Well, I could give you a vague answer saying we try to nurture each employee's strengths and that everyone has a talent... And we really do approach it like that, but not in the case when it comes to the terminal stage of employment. If a decision has been made, it can’t be changed. I value honesty and do my best to manage the company’s talent most effectively.

- Have you ever been betrayed?

It depends on what you call betrayal. I think the majority of those whom we now see as traitors were doing what they thought had been right at the time. They believed they were changing things for the better, and to them the end justified the means.

- Are you talking about business or in life?

Well, both.

There were unpleasant situations that happened in the company, but they became history a long time ago. I’m still working with some of those colleagues, yet I had to say goodbye to some.

I do not look back at the past, but it’s certainly impossible to forget how some people tried to be the first to run up to the shareholder or other influencers and share their version of the story in order to cover themselves and to direct emotions towards me. I would find out about some of those events immediately, while other episodes would become known to me pretty much post factum…

- Did similar things happen to you and your friends?

I can share an experience. Once upon a time, in my student days, a friend of mine from a good family told me about a difficult situation he was in and asked for money. He said he had no one else to turn to. I didn’t have the required amount, so I had to borrow from my parents and partially from my friends. I gave him the money, but my friend flat-out disappeared. When I tried to find him, his parents told me that I was practically shaking him down for money and if I didn’t get off his back, they would call the militia and I would be charged with extortion.

Then I found out that my friend wasn’t really on a shoestring. He could easily borrow money from his parents, but preferred to take it from me…

- He never returned it, did he?

No, he didn’t. This story isn’t only about deceit, it is also about meanness.

- You come off as a very cautious person.

I think I am cautious. Perhaps, psychologists will relate it to a lack of self-confidence, or maybe it’s because of my intent to make quality decisions. I do not like pushing matters aside without finishing them off. The Soviet Union collapsed as a result of a record number of uncompleted construction projects. Way more than the average in years.

- Is it your version?

No, it was authored by Gaidar. Not Arkady, but Yegor Gaidar. It’s not word-for-word, but more or less what he said.

- Did I get it right that you haven’t fully broken free from self-reflection?

I believe that when a person takes it at face value that they know, that they can do, and do everything better than others, they are making a big mistake.

- When did you last express strong emotions?

Ages ago. Like they say, those days are long gone.

- The birth of your son?

A joyful event.

- We have talked about your jubilee. Is it a good reason to take stock?

I guess it’s too early. I work every day and try not to be distracted by idle speculation, especially since I’m pleased with what I have now – both my pay and the emotional aspect of my job.

- Do you feel like a broken record?

It’s a big record that plays different tunes.

- What is your horizon for planning?

When I joined the company in mid-2000s, we tried to look 10–15 years ahead.

- Is it realistic?

We were doing an interesting exercise in 2004–2005. It was necessary, even though the implementation rate turned to be very low. We shouldn’t have done much of what was planned. And it didn’t happen later on anyway. But we laid down the principles that we are still guided by.

- And for you personally, how far ahead do you look?

There’s no point in planning ahead. 2020 is a good example. Who on Earth could have expected a pandemic? Many plans went up in smoke… That’s why we need to move from one goal to another by bump-jumping.

Our short-term goal is to build the Amur Plant, and then we’ll see.

I’ll keep on working until they kick me out. Or, to be more precise, so that they wouldn’t kick me out.

- Your wife, doesn’t she nag you? Say, telling you, Dima, give it up, you can’t earn all the money in the world anyway.

No, she doesn't. And it's not about money, of course.

I have a friend who, due to the pandemic, got stuck on a tropical island. He spent four months there with his family. I pictured it and realized I’d have gone mad under all those palm trees and the sun. But for him, it was one of the happiest periods in his life. As you rightly pointed out at the beginning of our long conversation, all people are different.

Working, I live for myself. And I’m keen on what I’m doing. Really! This is my main incentive. I still want SIBUR to build new plants, so that we move on doing our work in a fundamentally new way, better than yesterday. It's been a tough year, and it's not over yet, but I really like how we’ve been going through it. Many of my colleagues have significantly increased their level of responsibility. Such hardships are useful because they are an efficient mechanism to develop and train yourself. Anyone who doesn’t fall, doesn’t stand up and thus doesn’t grow. We have definitely grown stronger. Because that’s what hardships do – they make you stronger.

The average salary in our company is more than 100,000 rubles a month. We keep thinking about our employees and their families and making their lives better. And this is, by the way, the reason I’m registered in Tobolsk and pay taxes there. They go to the local budget.

- How long have you been a Siberian?

About five years.

- What has been done with the help of this money?

There is a program dedicated to the region and the city, which was made possible by the company's contribution and, to some extent, through my participation. The program encompasses over 40 different facilities. A new school and a kindergarten have been opened, a number of sports facilities and swimming pools in kindergartens have been refurbished. The program’s budget is several billion rubles.

This is something that I find tangible, and not just me, but so does everyone in the city. Such stories also help keep you motivated for work and make you feel satisfied with it. And you’re calling it ‘a broken record’… Let’s keep it playing!

Andrey Vandenko