Russian oligarch share many things in common: ostentatious behavior, lavish lifestyles, and questionable pasts are some of the ones that come to mind. Few, however, can be found in a Moscow gym, dressed in a tracksuit, training with professional fighters.
Ziyavudin Magomedov is not your average Russian billionaire.
Born and raised in Dagestan, Ziyavudin emerged from a troubled childhood on the streets of Makhachkala to become one of the republic’s most prosperous businessmen. According to Forbes, he is the chairman of Summa Group, a “conglomerate invested in port logistics, engineering, construction, telecommunications, and oil and gas.” His estimated wealth fluctuates regularly but was recently estimated at 1.2bn.
However, a surprising asset in Magomedov’s portfolio is mixed martial arts promotion Fight Nights Global. Magomedov purchased a significant share of the promotion, as well as all associated fight clubs and merchandizing properties. Given that Fight Nights was not a profitable purchase based on its net loss – 18.7 million rubles in 2013 and 2014 according to RBC.ru – Magomedov’s decision to invest in the promotion was a surprise to many within the industry.
While Magomedov has remained secretive about the exact details of the investment, sources informed BloodyElbow that it entails financial assistance with the expenses involved in organizing and marketing the Fight Nights promotion. He is also entirely responsible for Fedor Emelianenko’s purse for his match-up against Fabio Maldonado on June 17. According to promoter Kamil Gadzhiev, Magomedov invested “tens of millions of dollars,” a statement that was later confirmed by RBC.ru.
So why is this particular oligarch interested in a Russian MMA promotion?
Magomedov’s Summa Group primarily prospered during Dmitry Medvedev’s reign as president of the Russian Federation. Between 2009-13, Magomedov’s fortune rose sharply to $2.1 billion, which coincided with the start of Medvedev’s first year as president. This was also partially due to Medvedev’s strategic approach to development in the North Caucasus, as he wanted to develop the tourism industry in the region.
In a matter of years, Magomedov was elevated from a local Dagestani merchant to Russia’s oligarch class.
However, upon Putin’s return for a third term as president in 2012, Magomedov’s Summa Group began to experience political weakening over the following few years. Putin began by removing three of Medvedev’s ministers, including chief of staff Vladislav Surkov, from their positions in a move that was believed to be an attempt to weaken Medvedev’s political resources should he seek re-election once Putin’s third term as president is complete in 2018. Once the ministers were removed, Putin focused on the businessmen who flourished during Medvedev’s reign.
According to Forbes magazine (h/t Institute of Modern Russia), “the Federal Service for Supervision of Natural Resources Usage carried out an unscheduled inspection of Primorsk trade port, which is controlled by the Summa Group, and decided that the port did not comply with Russia’s environmental legislation.” They then pressured Magomedov to nationalize it by changing the management to that of Russia’s state pipeline company.
Putin’s rationale was that he didn’t appreciate Medvedev’s Yeltsin-esque approach of “privatizing for pennies” and then selling off companies for outrageous sums. His frustration was released on those that profited greatly during that reign.
Magomedov’s fortune dropped back down to $800 million by 2013.
It was here that the Dagestan-native decided to rethink his strategy. In order to regain influence in a Putin-run Russia, he had to contemplate sports diplomacy. He started with a failed attempt to purchase a portion of the UFC.
According to sources who spoke to BloodyElbow on the condition of anonymity, the reason Fight Nights Global decided to host their Fedor vs. Maldonado show on June 17 was to coincide with the International Economic Forum in St. Petersburg. The 20th edition of the annual event is hosted by Putin and is an opportunity for ambitious businessmen to rub elbows with the Federation’s president. Some believed Magomedov hoped that Putin would decide to make an appearance at Fedor’s fight, as he had done in the past with M-1 Global.
Putin has no plans to attend the EFN 50 show at this time.
Magomedov, who recently established a venture capital firm (CVC) through which he plans to invest $ 300 million in high-tech start-ups, as well as transportation, agricultural, industrial and consumer projects, as well as in robotics. His selection of investments coincide directly with Putin’s interests at the Economic Forum, according to a statement the president released ahead of the event.
“The theme of this year’s Forum is “Capitalizing on the New Global Economic Reality”, the relevance of which is clearly evident. The global economy is increasingly impacted by political and social factors. The challenges facing the global community demand concerted action aimed at achieving sustainable and balanced growth. It is vital that we work together in our search for additional drivers of development. We must more fully make use of the industrial, scientific, technological, and innovative potential of our nations, and also the potential of international integration structures. We must react more swiftly to the shifting demands of the market and to the looming transformation of the global technological landscape.”
Given that Magomedov’s recent investment strategy is tailored to the interests of the Economic Forum, Putin’s decision to not attend the Fight Nights show is a significant blow to his plans. If he had any hope of joining Putin’s inner circle of politicians and businessmen, this could be considered a setback, or even a conclusive sign that Magomedov’s elite status came and went with Medvedev’s four-year presidency.
It is important to note that it is nearly impossible to produce consistently profitable MMA events in Russia. M-1 president Vadim Finkelchtein regularly admit that profit margins increase greatly when events are hosted outside of Russia. They also rely greatly on investors and sponsors to help alleviate the cost burden. Magomedov’s return on investment with Fight Nights will unlikely be monetary. According to RBC.ru, out of the top 50 highest-grossing cultural events in Russia, only ice shows and the Formula 1 ever reap significant profits. Soccer, hockey and MMA are not included in the list, despite significant investment from businessmen.
It is clear that the main reason for investment in professional sports is to gain influence in other spheres in Russia. In Putin’s Russia, sports diplomacy can change your life. Just ask Arkady and Boris Rotenberg, Putin’s former judo teammates who now own the SKA hockey club, Finland’s Jokerit hockey team, and Hartwall arena. Boris, head of the national judo federation, is also the co-owner of the Storygazmantazh group, the largest construction company for gas pipelines and electrical power supply lines in the Russian Federation.
Magomedov attempted to apply the same formula and earn Putin’s favor by promoting Fedor in Russia and investing in an MMA promotion.
Article originally featured on BloodyElbow.com by the same author.