Richard Spinks: Prospering on the lawless Russian frontier

Richard Spinks saw the potential for profits in developing land in Ukraine, says Matthew Partridge. But it's not been without its hazards.


Corruption remains a problem, says Richard Spinks

After helping guide e-commerce network Lycos Europe to a $5bn valuation in the first wave of the tech boom, Richard Spinks had an epiphany. "I had just worked extremely hard to make other people a lot of money," he realised. So the former RAF officer quit his job to create, a website aimed at the over-45s, to make it for himself instead.

Vavo didn't work out: despite support from General Electric and Prudential and gaining a large online customer base, it became one of the casualties of the dotcom bust. But Spinks' new direction as an entrepreneur was under way.

Shortly afterwards, he was approached by a friend who needed help getting a shipment of fish from Poland, Russia and Ukraine. Spinks proposed an alternative deal: he would set up his own company, Polish Food Processing, buying the fish directly from the suppliers and then selling it on to his friend.

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This new venture proved lucrative, but at the time Russia was still a largely lawless place, where death threats were a normal part of business. Tired of the stress, Spinks eventually decided that it was "too dangerous", and "retired" to western Ukraine with his wife in 2004, with the idea of becoming a day trader.

But at his house-warming party for his new house, one of Spinks' friends suggested that the soil and climate in the area was ideal for growing oilseed rape. Subsequent research showed that this wasn't feasible, but Spinks was intrigued by the potential of all the land left underused. So he bought up leases on over 128,000 hectares of land.

Trying to raise the money to develop it was another matter. "Everyone was extremely enthusiastic, until they heard one word Ukraine," he says. Eventually, a friend of a friend put him in touch with a fund manager at Credit Suisse, who invested $10m in Spinks' firm, Landkom.

Landkom then raised $111m in an initial public offering in 2007, but Spinks left in 2009 following a dispute with some of the directors. After his departure, the firm struggled financially and in 2012 was bought by Alpcot Agro (now Agrokultura) for only $13m. But as a result of the publicity generated by the flotation, several Native Americans in Canada invited Spinks to meet with their leaders to discuss ways of developing their land.

Initially, the tribal elders seemed suspicious, reeling off a list of offers they had received from outsiders. But after long negotiations, three tribes agreed to set up the KAQUO Forestry & Natural Resources Development Corporation, a joint venture with Spinks' firm, Aim-listed Active Energy. This aims to manage the rights to 250,000 hectares of forest.

Spinks still lives in Ukraine and has large business interests there. He says the country is not an easy place for many people to do business. "In the early days of Landkom, I spent half my time dealing with people who came to me claiming that their equipment, money and crops had been stolen."

Prospective entrepreneurs also need to deal with large currency fluctuations and sudden political changes. However, these barriers can also mean large profits for those who get it right. Ukrainians also respect people with substantial track records, provided they don't just rely on throwing their money around.

This isn't simply due to corruption (which he admits remains a huge problem), but also to frustration at the fact that many outsiders "promise the world and then fail to deliver".

What are the prospects for peace in Ukraine?

One of the most encouraging signs is the discipline of the government troops, who have forced the rebels and Russians to fight for every inch of ground. As an example, he points to the battle over Donetsk airport.

Until a partial retreat in late January, Ukrainian troops had managed to hold out against constant bombardment and attacks from Russian special forces for over 240 days. In comparison, the Battle of Stalingrad, one of the major battles of World War II, lasted for 200 days.

However, Spinks is still pessimistic about the potential for peace in the immediate future (this interview took place before the ceasefire was supposed to come into effect on 14 February). He thinks that Russia has always considered Ukraine a region rather than a country, and treated it like "an experiment that could be undone at any time".

Hence he is worried that Putin will attempt to prolong the chaos in order to prevent Ukraine from joining the EU. He also points out that both the east and Crimea contain large amounts of coal and oil, increasing their significance to Russia.

Finally, he is concerned that some of the media coverage has failed to recognise the scale of the devastation being inflicted on the people of Ukraine. Many outlets are still putting the death toll at 4,800 people, even though this estimate was first used last summer.

During some of the worst spells of subsequent fighting, hundreds of people have died in a day, meaning that such figures almost certainly underestimate the death toll so far by a considerable margin.

Dr Matthew Partridge

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

Follow Matthew on Twitter: @DrMatthewPartri