Part of Palms & Company's Commercial Intelligence Assistance as Purchasing Agent for Buyers of Russian Aluminum billets and ingots

Where to go to buy Russian Non-Ferrous Metals

In the period 1989-200 Palms & Company has learned that to do business in Russia it is necessary to understand who the players are and what rules to play by. Our experience In The former Soviet Union Since 1989 as "Purchasing Agents" Is valuable to extruders and billet processors world-wide, who seek a reliable source of supply of billets and ingots from Russian smelters.

History of the  Transfer and Division of Ownership of Russian Non-Ferrous sector 1991-2000

The history of the Russian aluminum sector and the political history of

post-Soviet Russia are closely intertwined. Privatizations or major deals

in the aluminum sector coincide with serious political battles and crises

in the government. Only the banking-financial sector has more influence on

political events. It is well-known that since politics is a dirty game,

you do not go into it wearing white gloves. Given its close ties to

politics, the same can be said of the non-ferrous-metals sector.

1991

Trading began on the Moscow non-ferrous-metals exchange on Sept. 16. The

exchange planned to have 45 percent of the worlds non-ferrous-metals

turnover within a year, and 20 percent of the worlds aluminum turnover. In

the end, it survived only three years.

The Yuzhuralnickel company, which worked exclusively with Cuban nickel

concentrate, came to a halt because of disruptions in supplies from Cuba.

Nickel concentrate supplies to the factory resumed only in 1993, organized

by Zarubezhtsvetmet and Nafta-Moskva in exchange for oil.

Swiss company Marc Rich & Co. began tolling operations at the Krasnoyarsk

aluminum plant (KrAZ). Later, people would say that Oleg Deripaska,

Mikhail Chernoi and Yury Shlyafstein were responsible for "inventing"

tolling but, in reality, it was Marc Rich who brought the practice to

Russia. A year later, internal conflict forced him to leave KrAZ, leaving

the road open for the AYUS company.

1992

MIKOM held its founding meeting in February, choosing Mikhail Zhivilo as

president. Zhivilo tried to establish his hold over the Bratsk aluminum

plant (BrAZ), one of the country's biggest aluminum producers, but had the

plant under his sway for just six months. After this, MIKOM counted only

Novokuznetsk aluminum plant (NkAZ) among its non-ferrous-metals assets,

and soon lost that as well.

President Boris Yeltsin signed a decree on March 7, 1992, allowing foreign

tolling at BrAZ. This was about the time I met with him and President Clinton in Vancouver

B.C. The plant, headed by Boris Gromov, came under the control

of the Trans World Group (TWG), which was still in the process of forming.

In August, Igor Prokopov, the director of the Aluminy aluminum company,

tried to get the government to introduce lower electricity rates for

aluminum plants. The Soviet Union had abolished preferential rates for

aluminum plants back in 1968. Prokopovs attempts failed in December, and

soon after, the State Property Committee began taking the business apart,

turning it from a holding company into a "management and consulting

superstructure."

In October, aluminum plants joined efforts to raise aluminum prices 1.5

times. Over the next year, prices rose to world levels. The sudden

increase in Russian aluminum on the world market sent prices tumbling to a

historic low of $1,300 per ton.

Shares in the Sayansk and Bratsk aluminum plants were put open to bidding

at voucher-privatization auctions.

1993

In February, a large-scale privatization of the aluminum sector took

place. All the aluminum plants got new owners over the course of the year.

The Volgograd and Kandalaksha plants went to RIAL (Raznoimport-Aluminum).

Alinvest, a subsidiary of Aluminum-Produkt, bought the SaAZ plant and

Mikhail Zhivilos MIKOM got its hands on NkAZ. A Russian-American joint

venture, at that time headed by Vladimir Balayescul, got control of IrkAZ.

In February, the European Commission called together a special committee

to look into introducing quotas on aluminum imports from Russia. The

initiative was lobbied by French aluminum producer Pechiney, which was

experiencing losses because of dumping by Russian plants. Aluminum prices

in London fell to $1,150 a ton.

At a meeting of the Sovaluminum company (the former Aluminum company) in

April, Oleg Soskovets introduced Lev Chernoi, one of the TWG groups

managers, to Russian aluminum-plant directors as a "potential Western

partner." Six months later, Mikhail Turushev, the general director of

KrAZ, signed a contract with TWG to refine 300,000 tons of aluminum a year

until 2003.

Prokopov accompanied Yeltsin on a visit to Greece, where an agreement was

reached on a project to build an alumina ore plant near Athens for $350

million. The project never went through.

In the summer of 1993, the management of NkAZ demanded explanations from

its partner Vadim Yafyasov as to why his company had paid for a large

aluminum delivery from the plant with a false payment order and then

dissolved the contract. Yafyasov went to work for the Russian Metallurgy

Commission and later for Yugorsky bank.

On July 6, Yeltsin signed the decree "On Particularities of the

Privatization of State-Owned Non-Ferrous- and Precious-Metals

Production-Enterprise Norilsk Nickel." The decree gave 51 percent of

shares in the plant to the state.

On Nov. 4, Turushev fired KrAZ Commercial Director Yury Kolpakov for

"abuses during tolling operations with French company Trans Commodities."

At the same time, a number of employees left Trans Commodities, including

Mikhail and Lev Chernoi. This led to the setting up of Trans-C.I.S.

Commodities, which later became part of TWG. A few months later, Turushev

retired after being beaten nearly to death in the entrance to his

apartment block. He was replaced by Kolpakov.

The Alkur company was registered in Yekaterinburg on Nov. 22, bringing

together the Sevuralboxitruda company and the Urals Aluminum plant, among

others. But the new company could not handle the competition; it took

until 2000 the year Viktor Vekselberg and Vasily Anisimov established the

Siberian-Urals Aluminum Company (SUAL) to create an effective holding,

bringing together the different aluminum companies in the region.

At a meeting in Bratsk, the Russian Metallurgical Commission unveiled plans for

cross-shareholding in aluminum plants and electrical-power stations belonging to RAO UES

(Unified Energy Systems). But the plan did not have the support of UES head Anatoly Dyakov. It

was revived in 1999 by new UES head Anatoly Chubais ( with whom I met for breakfast in 1992 in

the Board Room of the New York Stock Exchange together with the U.S. Ambassador to Russia, the

CEO of the NYSE, and the presidents of the 50 largest U.S. corporations) and Oleg Deripaska.

In December, Mikhail Khodorkovsky became chairman of the board of

directors of rolled-titanium producer Avisma. He sold the plant in 1997

through the Kreditanstalt Grant company to corporate blackmailer Kenneth

Dart.

1994

The State Property Committee stopped an investment tender for 9% of the

shares of BrAZ. Vasily Boiko, the head of the "Your Financial Custodian"

company, said the tender was stopped on his initiative because his bid was

not accepted. Boiko continued fighting to have a hand in the management of

BrAZ until 1999.

In February, an Interior Ministry commission investigated increasing

occurrences of false payment orders used by partner companies of TWG and

Trans-C.I.S. Commodities and filed criminal charges.

In April, aluminum plants withdrew from an agreement on coordinated price

changes. "The Aluminum Company" quit the game because it did not have any

more levers of influence over aluminum plants. This was followed by rumors

that aluminum-export quotas would be abolished. The quotas were abolished

on July 1.

An investment tender for 19 percent of shares in BrAZ was won by Malakhit,

which, according to some sources, was backed by Menatep Bank, and

according to others, by TWG, which ended up controlling the stake. Viktor

Vekselberg's Renova company and Boiko's "Your Financial Custodian" company

protested the result, but their complaints went unexamined.

In July 1994, shares in Norilsk Nickel were put up for sale at a voucher

auction. Chubais called the lot "the jewel of privatization".

In July, Marc Rich & Co, which had not developed its presence on the

Russian market, got a new owner and changed its name to Glencore

International. Glencore gradually began making a return to the Russian

non-ferrous-metals market.

In August, the Gaisky mining and enrichment plant (Gaisky GOK), the

Mednogorsky copper and sulfur plant (MMSK) and Yuzhuralnickel bought

controlling stakes in each other at a tender in order to keep out outside

shareholders. But the union did not succeed, and Menatep ended up getting

all the shares. A year later, Gaisky GOK director Nikolai Ivanov, who

initiated the deal, was forced to leave the company, which was reorganized

into the UGMK company.

On Aug. 30, a government commission on operative issues discussed for the

first time whether tolling is useful or harmful to the aluminum industry.

The Federal Currency and Export Control Service and the Environment

Ministry spoke out against the practice, but Soskovets, who lobbied in

favor of tolling, won the round.

In September, an investment tender was announced for the state stake in

Sayansk Aluminum plant. Two companies, Aluminprodukt and Russky Kapital,

became the main shareholders in SaAZ. In November, the plants general

director, Gennady Sirazutdinov, handed in his resignation. His place was

taken by 26-year-old Oleg Deripaska, while Trans-C.I.S. Commodities Deputy

President Vladimir Lisin became chairman of the board of directors.

On Sept. 17, Vladimir Sementsov, an Interior Ministry investigator, gave

his bosses a plan with which to interrogate Soskovets on major fraud

during aluminum-tolling operations. Sementsov was arrested a few days

later and the case he was working on mysteriously disappeared from his

office. Sementsov spent a year and a half in Lefortovo prison on charges

of smuggling rare metals before being cleared by the Supreme Court.

On Oct. 28, Kolpakov, now the head of KrAZ, crossed off Zalog-Bank and

Russky Kapital from its list of shareholders. TWG controlled 17 percent of

yhe shares in KrAZ through these two companies. This launched a war on KrAZ by

various shareholders, which is not over to this day.

1995

In mid-January, Vladimir Polevanov, the new head of the State Property

Committee, announced plans to nationalize the aluminum industry. Chubais

had him dismissed by spring.

In February, Prime Minister Viktor Chernomyrdin signed a resolution

bringing all the aluminum companies in Krasnoyarsk Krai into a single

integrated holding, Tanako. The scheme involved 20 percent of shares in

KrAZ. On the initiative of Kolpakov and KaAZ's commercial director, Kornei

Gibert, the Tanako project brought Anatoly Bykov to the plant. Kolpakov's

team needed Bykov to protect it from TWG's attempts to get KrAZ under its

control.

On April 6, SaAZ commercial director Valery Tokarev was victim of a murder

attempt.

On April 10, Vadim Yafyasov, Kolpakov's deputy and a former

Vice-President of Yugorsky Bank, was murdered. Yafyasov had arrived at KrAZ in

March and was supposed to resolve the conflict between KrAZ's management

and TWG.

On May 9, the board of directors of Norilsk Nickel set conditions for

transferring state shares in the company to trustee management by

Oneximbank. But, under pressure from other banks, Vladimir Potanin agreed

to put the shares up for auction. This was the emergence of the

loans-for-shares idea. A few weeks later, a "consortium of banks"

published the idea in a letter to the government.

On July 19, Oleg Kantor, the head of Yugorsky Bank and Yafyasov's former

boss, was killed near Moscow. Rumors went around Moscow that Yafyasov and

Kantor were killed on the orders of the Chernoi brothers, who owned TWG.

Six years later, Mikhail Zhivilo made the same accusation in a New York

court.

On June 25, Lev Chernoi sent an open letter from the Venezuelan capital

Caracas to the Interior Ministry investigating committee that suspected

him of being involved in the murders of Kantor and Yafyasov. Chernoi

declared his innocence and said that business in Russia is a fatally

dangerous affair.

In August, AYUS, the Mikrodin group and TWG began a battle to gain control

of the Novosibirsk electrode plant (NovEZ), the main supplier of

electrodes to the country's major aluminum plants. All three contenders

ended up pulling out of the battle, which is still going on today.

On Sept. 7, Felix Lvov, the manager of AYUS Russian activities, was found

dead. A week earlier, the news came out that AYUS would take part in

bidding for the state stake (36.6 percent) in KrAZ. Earlier, Yugorsky Bank

had also tried to acquire this stake.

On Oct. 6, the shareholders in Gaisky GOK agreed with the plant's

management to work together. This was the starting point for building what

has become Russia's largest copper holding. It was also the first example

of cooperation between Iskander Makhmudov, at that time a member of the

Sayana Bank's Board of Directors and Oleg Deripaska, the general director of

SaAZ.

On Nov. 19, Oneximbank won a loans-for-shares auction for Norilsk Nickel.

Rossiisky Kredit bank, whose bid to participate in the auction was

withdrawn, said it would challenge the result in court. Oneximbank paid

$170 million for 28 percent of shares in Norilsk Nickel, while Kont, a

subsidiary of Rossiisky Kredit, had offered $355 million.

At the end of 1995, Tanako and KrAZ got control of the Achinsky

aluminum-ore plant (AGK).

A this point I was delivering KrAZ aluminium to ALCOA in the United States.

from my warehouse in Rotterdam, which arrived there via truck from Krasnoyarsk.

In December, Inkombank got control of Sameko, one of Europe's largest

rolled-aluminum producers. Deripaska held negotiations with Sameko, but

found the price too high.

1996

On Jan. 30, a criminal case was opened against the managers of Norilsk

Nickel. The Norilsk prosecutors accused them of misappropriating money

from loans.

On March 28, a presentation was organized in London for Krazpa Metals,

KrAZ's sales partner. Glencore held 50 percent of Krazpas shares. Krazpa

took over KrAZ from AYUS, whose joint venture with KrAZ, Sibalko, fell

apart after Lvov's murder the year before. The "big five" in Russia's

aluminum-trading companies were TWG, Renova, RIAL, Trust-consult and

Glencore.

On April 13, Oneximbank scored a victory over Norilsk Nickels management.

A government order dismissed Norilsk Nickel president Anatoly Filatov.

Vsevolod Generalov, the deputy chairman of the Russian Metallurgical

Commission, was appointed to replace him. Norilsk Nickels board of

directors was replaced soon after.

On April 23, Generalov took two weeks off. From there, he went into

politics and the energy sector and did not return to Norilsk Nickel. In

May, he was replaced by Alexander Khloponin, who stayed at the company

until 2001.

In July 1996, MDM-Bank, created from virtually nothing by Andrei

Melnichenko, increased its charter capital four-fold. Its shareholders

included Gaisky GOK and the Uralelektromed company, which owned 35 percent

of the banks charter capital. Previously, the biggest shareholders in

Gaisky GOK were Sayanal and SaAZ. This again brought together the

interests of Oleg Deripaska, Mikhail Chernoi and Iskander Makhmudov.

On July 19, the directors of the Sayan and Bratsk aluminum plants,

Zalog-Bank, the Kazakhstan-based Pavlodar Aluminum plant and TWG signed a

protocol in Moscow on setting up a transnational financial-industrial

group Siberian Aluminum (Sibal).

On Aug. 13, Deputy Director of Norilskgazprom Alexander Sherstnyev was

murdered. Just before Sherstnyev's death, Norilskgazprom had announced, on

the initiative of Krasnoyarsk Krai governor Valery Zubov, that it would

bankrupt Norilsk Nickel. The people who ordered Sherstnyev's murder were

never found.

At the beginning of December, Swiss police arrested Mikhail Chernoi,

suspecting him of his being in contact with Alimzhan Tokhtakhunov, better

known in the criminal world as Taiwanchik. The Swiss turned to the Russian

Interior Ministry for information. They knew that Russian

investigators wanted to question Chernoi about the false payment order

affairs. But the Russian investigators unexpectedly said they had no question

to ask Chernoi, who was subsequently released by the Swiss three days later.

In December, Yevgeny Kiselyov launched what became known as TV aluminum

wars in his "Itogi" program on NTV. He revealed how the TWG Group, with

Soskovets help, got control of 70 percent of all aluminum production in

Russia. According to the unofficial version of events, the initiator of

these revelations (that meant little to the average viewer) was Boris

Berezovsky, who at that time was friends with Kolpakov, the head of KrAZ.

The moment was well-chosen Lev and Mikhail Chernoi had begun to quarrel

and TWG was starting to fall apart.

1997

On Feb. 19, the Duma passed a law that in effect re-nationalized Norilsk

Nickel. Oneximbank was asked to return the state shares it had in its

possession.

In February, a big chunk of influence carve-up got under way at KrAZ.

Gennady Druzhinin, chairman of the KrAZ board of directors, sent out

statements that KrAZ general director Kolpakov and Oleg Kim, one of the

shareholders, had stolen $20 million from the company. Kolpakov was

certain that Druzhinin had entered an agreement with TWG to "surrender"

KrAZ, and appeared on Kiselyov's "Itogi," where he accused TWG of having

connections with the criminal world. On April 21, Druzhinin was dismissed.

On June 3, a murder attempt was made on Deputy Governor of Kemerovo Oblast

Dmitry Chirakadze, an ally of Zhivilo and former general director of NkAZ.

On July 10, Druzhinin and Kolpakov began an open showdown at KrAZ. KrAZ's

security men blocked off the Yakhont hotel, where Druzhinin had his

office. On July 11, Druzhinin, who had already been dismissed, tried to

get a shareholders meeting to remove Kolpakov. The balance of force ended

up in Druzhinin's favor and Kolpakov handed in his resignation. But

Druzhinin did not succeed in "surrendering" KrAZ. Instead, it was Igor

Vishnevsky, the general director of Krazpa the joint venture between KrAZ

and Glencore who became general director of KrAZ.

On July 18, Novy Holding, a subsidiary of Alfa-Eko and Vekselbergs Renova,

won an investment bid for 40 percent of shares in Tyumen oil company

(TNK). Renova became one of Russia's most powerful industrial groups, and

SUAL got valuable political support from Mikhail Fridman, an oligarch and

co-owner of Alfa Group.

On July 28, Rossiisky Kredit unexpectedly announced that it had acquired

47 percent of shares in KrAZ. It turned out that Kolpakov sold the shares

to the bank. Kolpakov was still a trustee of the shares given to him by

four private shareholders, including Bykov (10 percent) and Druzhinin (10

percent). Dmitry Bosov, TWG's representative at the plant, said that

Kolpakov had gone mad.

On July 29, the KrAZ board of directors dismissed interim general director

Vishnevsky and appointed Druzhinin. Kolpakov forced his way into the KrAZ

management offices and occupied the general director's office. Meanwhile,

the prosecutors began questioning representatives of Rossiisky Kredit.

On July 29, Norilskgazprom went to court to demand the bankruptcy of

Norilsk Nickel, which owed the gas company almost 3 trillion rubles.

Norilskgazprom also got changes made to conditions for organizing the sale

of shares in Norilsk Nickel.

On Aug. 1, the Prosecutor General's Office asked Prime Minister Viktor

Chernomyrdin to stop bidding for shares in Norilsk Nickel. But

Chernomyrdin ordered that the auction go ahead on Aug. 5. It was won by

Swift, a subsidiary of Potanin's Interros Group.

On Aug. 7, Rossiisky Kredit agreed to return the shares in KrAZ sold by

Kolpakov to Druzhinin and Bykov.

On Aug. 30, Druzhinin did not get the KrAZ general director's job he had

expected at the shareholders meeting. The post went instead to Gibert, the

head of Tanako. TWG did not get any seats on the board of directors.

On Sept. 8, Interros called an urgent shareholders meeting and proposed a

100 percent additional share issue for Norilsk Nickel in order to

consolidate itself at the plant, once and for all. The share issue gave

Interros a controlling stake at Norilsk Nickel.

On Oct. 2, Bykov was appointed deputy president of Rossiisky Kredit. At

the same time, it turned out that one of the main shareholders in

Rossiisky Kredit was Vasily Ansisimov's Trustconsult group how the group

managed to buy 27 percent shares in KrAZ, and from whom, is still not

clear. Anisimov was loyal to Bykov and Rossiisky Kredit, and between the

three, they held a controlling stake in KrAZ. Gibert, who supported an

alliance with TWG, was replaced as general director by Yury Ushenin, the

deputy director of Krasnoyaskenergo.

In November, production at BrAZ came to a halt because TWG stopped

supplying alumina ore. Deripaska told Kommersant that SaAZ did not need

loans from TWG. NkAZ ended its sales contracts with TWG, which began to

see its empire crumble.

Dec. 18 marked the end of TWG in Russia. Oleg Deripaska and Vladimir Lisin

announced the creation of the Soyuz-Metal-Resource company. The new

company brought together Siberian Aluminum, SaAZ (Deripaska), KrAZ (Bykov,

Druzhinin and Rossiisky Kredit), Magnitigorsk Steelworks (Viktor

Rashnikov), Novolipetsk Steelworks (Vladimir Lisin), Rostar, Aluminprodukt

and Promresursy (Deripaska), Gaisky GOK, Kirovograd copper smelting plant

and Uralelektromed (Iskander Makhmudov).

1998

At the end of February, Inkombank transferred a controlling stake in

Sameko to Siberian Aluminum. Deripaska was appointed as the head of

Sameko.

In March, within the framework of the Gore-Chernomyrdin Commission, Boeing

signed a five-year contract with the Verkhny-Saldinsk metals company.

In April, TWG was chased out of NovEZ and was replaced by SUAL. The battle

for the electrode plant is still raging today.

On June 22, the first quarrel began between the members of

Soyuz-Metal-Resource. Representatives of BrAZ, KrAZ, NkAZ and Volgograd

Aluminum plant met in London to discuss setting up a consortium for the

privatization of Nikolayevsky alumina-ore plant (NGZ). Siberian Aluminum,

which had signed a strategic partnership agreement with NGZ, said that the

consortium might "never be created." That is exactly what happened.

On June 26, Uralelectromed announced that by the end of the year, it would

unite all the regions copper companies into a holding. The Urals Mining

and Metal company was set up then, though it got its name only a year

later.

In July, a court decision handed control of the Achinsk alumina-ore plant

to Nail Nasyrov, a KrAZ ally. Alfa Group fought a battle for control of

Achinsk until 2000.

On Sept. 11, TWG made another attempt to get hold of KrAZ. The board of

directors removed Dmitry Ushenin and appointed former BrAZ manager Alexei

Barantsev in his place. According to unofficial information, Rossiisky

Kredit transferred its 27 percent of shares in KrAZ to TWG.

In September, Interros had to decide how to pay Oneximbank's creditors

committee following the financial crisis. It sacrificed the Sidanko oil

company and kept Norilsk Nickel, which is still in Interros hands today.

1999

On March 24, the Krasnoyarsk Krai Prosecutors Office opened a criminal

case against the directors of Krasnoyarskenergo and KrAZ. An Interior

Ministry investigating commission headed by deputy minister Vladimir

Kolesnikov did not hide that it was digging for evidence against Bykov,

who had become chairman of the board of directors of KrAZ. Bykov left the

country after criminal charges were brought against him in April.

In June, Deripaska found himself a new partner Anatoly Chubais, the head

of UES. This friendship resulted in the creation of a new energy and

metals group Sayany bringing together the Sayano-Shushensky power

station and SaAZ.

In autumn, Moscow streets were invaded by billboards, some saying, "Stop

tolling! Enough of robbing Russia!" while the others said, "To ban tolling

is to bankrupt Russia." This was Deripaska's attempt to abolish internal

tolling (he did not need it because he had a reliable alumina-ore supplier

in NGZ) in order to make SaAZ more competitive with BrAZ and KrAZ. As a

result, the average Russian learned what tolling was all about.

In October, Bykov was arrested in Hungary on suspicion of being involved

in murders connected with KrAZ. He was deported and is still in a

pre-trial detention center. But he still owns all of his shares in KrAZ.

On Nov. 16, Anatoly Shevtsov, the director of the Economy Ministry's

metallurgy department, made public a plan for gradual abolition of tolling

in Russia.

The Urals Mining and Metals company was registered at the end of 1999.

2000

In January, a court, acting on a suit from Kuzbassenergo, replaced the

external manager at NkAZ. The new manager was Sergei Chernyshev, a

representative of Sibal. It was said that UES, the parent company of

Kuzbassenergo, helped Sibal grab NkAZ from Mikom, which had quarreled with

Kemerovo Gov. Aman Tuleyev.

In early February, Deripaska, president of Sibal, and Zhivilo, the head of

MIKOM, met in one of Sibal's Moscow offices to talk about a possible sale

of shares in NkAZ to Sibal. Zhivilo refused, giving rise to suspicions

that he had another buyer in mind for the plant. Later, it became known

that he was holding negotiations with LogoVAZ.

Also in early February, TWG and the managers of KrAZ and BrAZ held tough

negotiations with unknown buyers. Only a minimum of information was

available, namely that large stakes in BrAZ and KrAZ had been sold, but no

one knew to whom.

On Feb. 11, the news came out: BrAZ and KrAZ were bought by Sibnefts

shareholders, who also planned to buy NkAZ. Duma deputy Roman Abramovich

became the country's biggest aluminum magnate. The sale was made by TWG in

the names of Lev Chernoi and Gennady Druzhinin, and by Transconsult's Yury

Shlyafshtein. No one knew what Sibneft planned to do with the shares.

Siberian Aluminum was so taken aback. It said there had not been any deal

at all.

On Feb. 16, the Ukrainian State Property Foundation announced official

conditions for the sale of state shares in NGZ. The conditions were very

favorable for Sibal.

It is a guess that, on Feb. 17-20, a meeting took place between

Oleg Deripaska and Lev Chernoi on one side and Roman Abramovich and

Iskander Makhmudov on the other. The only issue they could have discussed

was whether the amorphous association of BrAZ and KrAZ and Sibal would be

partners or rivals. I do not know whether this meeting actually

happened, the results are known

It was officially announced in March that NkAZ, SaAZ, BrAZ and KrAZ would

unite to form the world's third-largest, and Russia's largest, aluminum

holding Russian Aluminum (Rusal), with Oleg Deripaska at its head. This

picked up from where TWG had left off in 1995 when it united the country's

largest aluminum plants into an "informal" holding. But the details of

this mega-deal were never made public.

On March 22, Ukrainian Aluminum, which had close ties to Sibal, bought 30

percent of shares in NGZ. NGZ became part of Rusal at the end of the

summer.

On April 11, in an interview with Kommersant, Vekselberg announced SUAL's

plans to merge with Vasily Anisimov's Trustconsult. The merger created

Russia's second-biggest and the worlds eighth-biggest aluminum holding.

On April 14, Vasily Anisimov's daughter and her husband were murdered in

St. Petersburg.

In May, Iskander Makhmudov introduced restrictions on raw-materials

supplies to Kyshtym Medelektrolitny plant (KMEZ). This way, the Urals

Mining and Metals company prevented a second copper holding from being set

up at the plant. This led to a battle between Urals Mining and Metals and

KMEZ for Karabashmed.

On June 1, Chubais broke off relations with Deripaska. The

Sayano-Shushensk power station filed a suit against SaAZ to recover loans

of 200 million rubles. This put an effective end to the idea of creating

Sayany, which would have united SaAZ and the power station. Two weeks

later, Chubais admitted as much, calling the project "not a wise move."

On June 16, Norilsk Nickel began creating its own sales network abroad,

and began buying sales companies, including British company Norimet and

Almaz U.S.A. in the United States. Nobody guessed that Interros was in the

process of changing Norilsk Nickels legal status. It stopped being an RAO

company a status that carried the theoretical risk of re-nationalization

and became Mining and Metals Company (GMK) Norilsk Nickel in 2001.

On June 28, power changed hands at KrAZ. Viktor Belyayev, the new chairman

of the board of directors, said that "Russian Aluminum" already controlled

KrAZ, KraMZ and AGK, and indirectly controlled a major stake in the

Krasnoyarsk power station.

On July 10, Potanin received a letter from First Deputy Prosecutor General

Yury Biryukov, who asked Potanin to pay the state $140 million as

compensation for having allegedly paid too little for the controlling

stake in Norilsk Nickel.

On July 19, Norilsk Nickel unveiled a restructuring plan. Everything was

already decided. The Federal Securities Commission tried to oppose the

plan in November, but without success.

At the beginning of September, the Prosecutor Generals Office issued an

arrest warrant for Zhivilo in connection with an attempt to poison

Tuleyev. Zhivilo fled abroad.

In November, Anisimov left the SUAL project and emigrated to the United

States. Renova remained SUAL's owner.

At the beginning of November, Norilsk Nickels Khloponin announced his

intention to run for governor of the Taimyr Autonomous District. He won

the election and was replaced as general director by Dzhonson Khagadzheyev

and then by Mikhail Prokhorov.

At the end of December, Mikhail Zhivilo filed suit in a New York district

court to get $2.7 billion from the founders of Rusal, who, he said,

"ruined him with criminal methods." Zhivilo, who himself had been at the

origins of the aluminum business in Russia, said the history of the

Russian metals sector was a history of crimes. Zhivilo was later arrested

in France and the Russian Prosecutor General's Office demanded his

extradition but, in 2001, a local French court refused on the grounds of

political persecution.

Purchasing aluminum in Russia is a complicated but feasible undertaking

requiring only a thorough understanding of the nature of the

decision making process and the identity of the current decision makers.

and the pricing mechanisms which are external to the factory invoices.

Courtesy of Palms & Company, Inc.

First, Wholly American Owned, Washington State Corporation

Licensed by Ministry of Foreign Economic Relations of the Soviet Union

in 1989

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