Has the Magomedovs’ Influence Peddling Peaked?

The enigmatic Magomedov brothers have become a hot topic for conversation in the technology and logistics fields.  A series of high-profile investments and government projects have gone awry or stagnated due to curious circumstances. Their primary company, Summa Group, continues to pour funds into major construction and transportation projects such as the Hyperloop and the Rotterdam Terminal project. However, a series of poorly timed investments and questionable contracts have once again raised reservations over the brothers’ government ties and business dealings.

In recent months, the Magomedovs have seen several of their projects falter, while others suffered from ballooning budgets and timelines. How these contracts were acquired has also come into question after concerns were raised regarding their connections to Russian politicians alongside their influence during the bidding process. As the brothers’ sway in the Kremlin and Duma gradually fades, these issues are finding a more prominent place in discussions. The question remains as to whether this is simply a hurdle or a big turning point in their trajectory.

Speedbumps on “The New Silk Road”

Over the last year, Summa Group has heavily invested in Hyperloop One, a major transportation project originally envisioned by maverick billionaire Elon Musk. The project is already controversial over feasibility and safety issues, but the Magomedovs’ involvement raised further concerns about the company’s administration. Accusations of threats and shifty dealings abounded, and several lawsuits were raised surrounding the matter. Summa Group originally envisioned Hyperloop as a transportation solution that could create a faster and more efficient way to move freight between Russia and China. However, those plans have since stalled.

Similarly, Zivayudin’s involvement in the Rotterdam Terminal Project is revealing Summa’s operational shortcomings. The massive undertaking, which would have helped establish Ziyavudin and his brother as de-facto gatekeepers of westward oil flowing to Europe, has hit a wall. The project was initiated in 2011 and hailed by former Russian President Dmitry Medvedev in public appearances. With a 75% stake, Summa Group took a leadership role in the oversight and construction of the project. Nonetheless, Rotterdam terminated the contract with Summa in 2015 even after a $1 billion investment. The Dutch side was apprehensive after discovering the project could be used to launder money while at home there was distress about an emerging monopoly.

Problems in Russia and Dagestan

One of Zivayudin’s purported allies in the Kremlin, Deputy Prime Minister Arkady Dorkovich, has seen his political clout fade. If true, this could cost the Magomedovs one of their primary sources of influence and support. The brothers’ financing sources have dried up both abroad and from Russian state-owned banks as well, complicating their outlook.

Summa Group’s holdings have also drawn scrutiny from the Russian government, including Global ElectroService, which was contracted in the construction of a football stadium for the 2018 World Cup. The company won a bid to prepare the construction site by laying soil and foundations, but was later accused of substandard work and sued. The Department of Economic Security searched the company’s headquarters and even investigated Summa Group in the matter. Investigators suspected the Magomedov brothers of setting up a plan to extract millions of Rubles from the state by overbilling for the work.

In tandem, Summa Group has been blamed for misappropriating state funds in Dagestan after winning a bid for a new ski resort. Originally announced in 2013 with a groundbreaking just a year later, the project is still well-behind schedule. Apart from these developments, the group is currently in arbitration over their planned to be a remodeling and infrastructure upgrade of the Makhachkala Sea Commercial Port. Though the project fit with Zivuyadin’s objective of playing a larger role in seaborne trade from Russia to Europe, after three and a half years, the project remains in limbo.

Outside of their transportation ambitions, several of Summa Group’s subsidiaries are facing their own allegations.  With companies such as Summa Telecom, which won a bid without a single competitor, the Magomedovs might have drawn even further scrutiny to their dealings. The technology that was meant to be developed and implemented remains incomplete all while the company runs the risk of bankruptcy over outstanding debts.

Murky Times Ahead

Regardless of their financial clout within government and transportation circles, it is clear that growing uncertainty will continue to encircle the Magomedov brothers. Despite the appearance of a tech-forward investment group, Summa has engaged in a pattern of irregular bidding and regularly faces claims of financial misbehavior. With many projects started and stalled, and many more facing legal scrutiny, one thing is clear: the Magomedovs may not enjoy the political and public support that once solidified their advantage, making it a particularly precarious juncture to subscribe to their ambitious visions.