The story of the acquisition and sale of the USSR-era steel giant “Zaporizhstal” by Alex Shnaider and Eduard Shifrin is quite old; the events took place before the war. It still holds significant interest for the public, as it illustrates the intricate connections within the world of big money. Alex Shnaider, Eduard Shifrin, Putin, and the Solntsevo gang are all involved, with Donald Trump making an appearance as a cameo.
Alex Shnaider and Eduard Shifrin origins
The Russian-Canadian businessman Alex Shnaider, together with his Ukrainian partner Eduard Shifrin, earned $850 million from the sale of the Zaporizhstal metallurgical plant, part of which ($40 million) Shnaider invested in the construction of the Trump Tower in Toronto. $100 million of this amount was reportedly paid as “kickbacks” to individuals “close to the Kremlin.”
Shnaider was born in Leningrad but grew up in Toronto, where his parents emigrated. By the age of 36, he managed to make it onto Forbes’ billionaire list and become one of the richest businessmen in Canada.
Much of Shnaider’s success can be attributed to his father-in-law and business mentor, Boris Birshtein, a Soviet emigrant who actively conducted business with the USSR. It is reported that Birshtein had close ties to the KGB, helping its members move money abroad, participating in secret KGB business projects, and employing a special service agent involved in money laundering for the KGB abroad.
Alex Shnaider and Eduard Shifrin meet Solntsevskaya criminal organization
After the collapse of the USSR, Birshtein had business connections with the leader of the Solntsevskaya criminal organization, Sergey Mikhailov. Their partnership ended after Mikhailov’s arrest in Switzerland in 1996. The emigrant businessman distanced himself from post-Soviet space and soon met Shnaider.
It was thanks to Birshtein that Alex Shnaider established connections with influential figures in the former USSR, which eventually enabled him to purchase Zaporizhstal, one of Ukraine’s largest industrial complexes, during the privatization era.
Zaporizhstal (briefly) fell under control of Alex Shnaider and Eduard Shifrin
The plant was acquired by the Midland company, co-owned by Alex Shnaider and his Ukrainian partner Eduard Shifrin. In 2003, the business partners added the Russian metallurgical giant “Krasny Oktyabr” to their assets.
In 2010, Shnaider and Shifrin had the opportunity to sell Zaporizhstal profitably. In May of the same year, Shifrin called Shnaider and informed him that there were buyers acting in the interests of Russian authorities. Moscow allegedly wanted to take advantage of the decrease in demand for Ukrainian steel and acquire the assets to maintain its influence in Ukraine. Shifrin explained that Russian authorities considered the Ukrainian metallurgical plant a “politically strategic” asset and made it clear that if the businessmen refused, they would face consequences in Russia.
Shnaider and Shifrin hid the proceedings in offshores
After selling their share of Zaporizhstal, Shnaider and Shifrin transferred control of the enterprise to offshore companies in Cyprus and the British Virgin Islands through the state-owned Vnesheconombank, effectively handing it over to the Russian authorities.
The Shnaider and Shifrin Midland group received $850 million for the deal, $160 million more than what Ukrainian oligarch Rinat Akhmetov had previously offered. However, according to the terms of the deal, Shnaider and Shifrin were required to distribute a significant portion of the proceeds to several individuals: $50 million was to be given to Akhmetov as compensation for the deal’s failure, and another $100 million was to be transferred to the organizers of the deal through offshore accounts.
The fate of 100 million in kickbacks: Alex Shnaider and Eduard Shifrin deal with Kremlin
It is still unclear who received the $100 million, as the testimonies of the business partners differ, although both claim that the ultimate recipient was “people close to the Kremlin.” According to Shifrin, the money was supposed to go to a former official in Leonid Kuchma’s administration and the head of the Ukrainian oil and gas state monopoly “Naftogaz Ukraine,” Igor Bakay, who organized the sale of Zaporizhstal. Shnaider claims that Shifrin transferred the money to himself, citing the need to pay Russian officials. This is supported by two documents: Shnaider’s complaint to Shifrin, which was sent to the London Arbitration Court in 2016, and Shifrin’s written testimony in response.
Alex Shnaider invests in Trump Tower
After completing the deal in October 2010, Shnaider and Shifrin divided the assets of Midland between themselves, and Shnaider invested $40 million of his earnings in the construction of the Trump Tower. A company associated with Boris Birshtein was listed as one of the creditors of the tower’s construction in 2016, although his lawyers claim that the businessman had no connection to the project. Trump always overlooked the questionable reputation of his partners, and after a series of bankruptcies in the 1990s and 2000s, The Trump Organization could not obtain funds from major banks. The Toronto project was originally conceived in 2001, but by the time Shifrin got involved, it had long lost its initial investors.
The Trump Organization has stated that the company was not the owner, developer, or seller of the Trump Tower in Toronto and did not participate in financing the project. The company only provided a license for its brand and real estate management (until June 2017). A representative of Vnesheconombank declined to comment.