Lev Leviev.30.04.13 30.04.13

Lev Leviev 30.04.13


Howard Adelman

I have been AWOL after visiting my two youngest children in Victoria and Vancouver. (In August, Daniel is getting married on Vancouver Island where he lives; Gabriel is just finishing film school in Vancouver and his film was showing at the student film festival, When we were there, we learned he was flying to Miami Beach this past Sunday to receive a film award.)

One recent piece of news relative to Obama’s use of small tactical moves to advance the peace process has emerged. In a meeting yesterday of Arab League members with US officials, including Vice President Joe Biden and Secretary of State John Kerry, at Blair House yesterday, the Arab League for the first time backed the idea of comparable mutually agreed territorial swaps in a land for peace deal.

This week I will finish my series of profiles on Israeli billionaires, in particular, the ones from Eastern Europe, and offer some summary observations. I will cover:

Lev Leviev (today)
Alexander Mashkevitch
Leonid Nevzlin
Vadim Rabinovich

Lev Leviev, like some other Israeli billionaires, relocated six years ago from Israel (B’nei Brak to London); he now occupies a US$70 million mansion in Hampstead. We already had a glancing acquaintance with Lev Leviev because of his association with Arkadi Gaydamak in Angola. Leviev and Gaydamak had become involved together in a joint venture to purchase a metallurgy plant in Kazakhstan in 1999 and subsequently when Gaydamak bought a 15 percent share of Africa Israel. As with most of Gaydamak’s partnerships, but very rare for Leviev, there was a falling out. In a London court last year (12 July), the High Court in London not only dismissed all legal claims of Gaydamak against Leviev (the suit was for a $1billion), but assessed legal costs against Gaydamak. The deal went back to 2001 when Gaydamak first entered the Angolan diamond market. Leviev brought to the deal his expertise in diamond cutting and conceived the idea of an Angolan controlled marketing of Angolan diamonds, a deal that has been very profitable for the Dos Santos family and his associates as well as for Leviev. There is no evidence that Leviev was involved in the arms for diamond trade, but the monopoly deal was, in part, designed to eliminate the trade in blood diamonds.

Leviev is a self-made billionaire. He arrived in Israel with his Lubavitcher family from Tashkent, Uzbekistan in 1971 at the age of fifteen but dropped out of school to learn diamond cutting. He lacked Dan Gertler’s family connections but his own inner ambition allowed him to master all eleven steps of diamond cutting without serving decades of apprenticeship. He paid his fellow cutters to teach him the requisite skills. By the age of 22, he had set up his own shop. By the age of 32, he had twelve of the most technologically developed diamond cutting and polishing plants. During that period of expansion, he established himself as a de Beers “sightholder” even though he was an outsider, a Bukharan Jew. He became one of the 100 or so individuals authorized by the de Beers cartel allowed to buy diamonds at fixed prices.

Just as he could not stand to be an outsider forced to buy diamonds from middle men rather than directly from de Beers, he soon chafed at having to buy rough diamonds through de Beers. In the upheavals in Eastern Europe, after receiving a blessing from Rabbi Menachem Schneerson, he convinced the Russian Minster of Energy to break the de Beers monopoly and, with his help by using the Lubavitcher network in the former Soviet Union, set up an indigenous cutting and polishing of diamonds operation in Russia so that the higher value polished diamonds could be exported. Leviev broke the de Beers monopoly. It was the same technique he would bring to Angola in 1997. In a joint venture with Alrosa, the Russian state diamond company, Leviev bought into the Catoca diamond mine. It helped that Dos Santos spoke Russian from his days as an engineering student in the Soviet Union so Leviev did not have to master Portugese.

Leviev now is the largest cutter and polisher of diamonds in the world. His company integrates the beginning of the business with the acquisition of rough diamonds to the retail level with high end stores in London, New York, Moscow, Dubai and other centres. His vertically integrated company gets its diamonds not only from Russia (Leviev is a personal friend of Putin) and Angola, but also Namibia, Alaska and the Northwest Territories in Canada where he was a pioneer in mining for diamonds.

Leviev’s diamond business is personally owned but he is also the controlling shareholder of Yehud, which owns Africa-Israeli Investments (AFI) in which he bought a 60% interest in 1996 for $400 million. AFI recently went through a financial restructuring that diluted his holdings from 75% to just under 53%. Like many other property developers, he got caught by the bursting American real estate bubble in 2007-2008 (just after the New York Times building and the Madison Avenue Clock Tower were purchased), the burst bubble in Europe – AFI owns property in Prague and London – and the more recent burst in the Russian bubble, ignoring that he bought his Hampstead home at the peak of the London market. Yehud also owns Gottex, the Israeli swimwear company, 1700 FINA gas stations in the American southwest, and a chain of 173 7-Elevens in New Mexico and Texas. AFI is a one-third owner of the Israel toll road, the Cross Israel Highway. It also owns the Russian language Israeli TV station, Vash Telecanal. Fortunately for him, AFI’s real estate investments in the USA, mainly in New York, have recovered a great deal of their lost value.

Leviev has mixed his political convictions with his investment strategies in assuming the role as the foremost developer in the West Bank with significant building projects in Har Homa, Maale Adumim, Zufim, Adam, Modiin Illit and Ariel. As a consequence, his jewellery stores have been the sites of pickets and protests and the British foreign ministry cancelled a prospective deal to rent space for its Israeli embassy in an AFI building in 2009 after a campaign led by Architects and Planners for Justice in Palestine. Some European Investment funds have also sold off their holdings in AFI, but it is not very clear in some cases whether this was because of perceived negative prospects of AFI or a response to protests. BlackRock, Investeringsforeningen Sydinvest, the Swedish AP1 pension fund and Dutch PFZW were joined by the US Teachers Insurance and Annuity Association College Retirement Equities Fund in selling their shares in AFI. Further, it is also not clear whether this sell off also precipitated the need for AFI to restructure.

Lev Leviev is possibly the most active philanthropist among the Israeli plutocrats and is certainly the foremost promoter of the restoration of Jewish life, culture and especially Jewish education primarily through the Jewish Learning Initiative in the former Soviet Union. He is President of the Federation of Jewish Communities of the CIS (FJC) representing the fifteen organized Jewish communities in the former Soviet Union. Leviev supports over 10,000 Jewish community civil servants, including 300 mostly Chabadnic rabbis as well as the extensive network of schools in which they teach..

Fathers are supposed to circumcise their own sons. Almost all hire a mohel or a certified doctor to perform the task. Not Leviev. One of the more interesting stories about Lev Leviev is that, without any training, at the age of 22 he followed his father’s practice and circumcised his own son, using his skills as a diamond cutter to get through. By now he has performed over a thousand circumcisions. Another is that he is a believer in women’s equality in the workplace. Two of his daughters have very high executive positions in his companies. Zvia, a daughter with four of her own children, runs the international marketing and mall businesses. Tomorrow, when Tamir Kazaz steps down as CEO of AFI, Leviev’s daughter, Hagit Leviev-Sofayev, a former executive of Deloitte in the economics department, is most likely to become CEO.