MOSCOW (Mineweb.com) — The two greatest boxing matches ever fought were the two that the slowing, but wily Muhammad Ali won as the 3-to-1 underdog. They were the Rumble in the Jungle (Kinshasa) against George Foreman, and the Thriller in Manila against Joe Frazier. One year separated the bouts, as Ali aged from 32 to 33. By that time, the only fight he had ever lost was to Frazier.
The Thriller in the Chiller is a different sort of bout. In physical terms, Vyacheslav Shtirov is roughly double the weight, girth, and reach of President Vladimir Putin, though the latter, a martial arts adept, is the more agile, and the fitter of the two. In political terms, Putin is the undisputed heavyweight champ. If Shtirov enters the ring, he’s KO’d.
So, to keep his punching power as president of the Sakha republic, and deter Putin from knocking him out, Shtirov is fighting a two-ring strategy — the first to avoid getting on to the mat with Putin; and the second to send substitutes to do his boxing for him. The substitutes, elected politicians from the Sakha region (also known as Yakutia), have their own ambitions too, and their demands pose problems for both the Kremlin and Shtirov.
When Putin and Shtirov met in Yakutsk on January 6 — in a meeting Shtirov’s office denied for weeks was happening, out of wishful thinking – Shtirov promised that by February 2, he and regional officials would sign an agreement returning to federal authority an inventory of valuable mineral resource assets that have been in their hands for more than a decade.
Behind the scenes for two years now, federal government agencies in Moscow have been trying to reassert their control over state property in Sakha. The most important of these is Alrosa, the diamond miner.
The Kremlin wants to see it expand its capital to include non-diamond resource assets, such as coal, oil, and perhaps others as well. Its current capital value is difficult to estimate because as a closed stockholding company, there is no market in its shares. The capital value at the moment is between $4 billion and $7 billion. The federal buildup of assets is intended to achieve 51% control on the basis of the low valuation. Once done, however, the valuation could take off, hitting between $8 and $9 billion. Alrosa’s reach – for new assets like Norilsk Nickel, for example – would grow significantly.
A decade ago, the Sakha assets had been distributed by President Boris Yelstin by means that were not lawful, in order to buy the political loyalty of his allies in the region. As Putin reasserted federal control, he got rid of Yeltsin’s principal ally, Mikhail Nikolaev, the two-term Sakha president, and replaced him with Shtirov. Nikolaev was, by that time, a very wealthy man, but not a powerful one outside his region. He got what he bargained for – a seat on which to hang on to everything. He was appointed a federal senator with immunity from prosecution.
Shtirov had been Nikolaev’s protege as prime minister of the regional government, then CEO of Alrosa. Putin moved him out of Alrosa, and into Nikolaev’s regional seat. This was to enable Alexander Nichiporuk, the new Alrosa CEO, to reorganize the company under federal control, and Kremlin supervision.
Shtirov, however, had other ideas, and he’s been playing on the lack of concentration of his opponent to advance them.
From the Kremlin’s point of view, just $2 billion worth of rough diamond production a year warrants roughly as much attention from the Kremlin as its value, compared to the annual value of production of Russian oil, gas, nickel, copper, iron-ore, coal, gold, and platinum group metals. Accordingly, Putin cannot be expected by his men to focus on the diamond sector for more than once a year.
And so, by the end of Shtirov’s first year in the regional presidency, on December 28, 2004, the federals were able to get Putin to intervene, summoning Shtirov to Moscow, and telling him that, if he continued to stand in the way of the federal asset takeover, he would be ousted. Another year went by, Shtirov was still fighting the federals, and Finance Minister Alexei Kudrin, the minister responsible for the diamond sector and chairman of Alrosa’s board, was too weak to deal with the challenge.
This time, Putin resolved to visit Shtirov in Yakutsk, where the temperature was nearly minus-45 Celsius. Again, Putin told Shtirov that, if he hoped to be reappointed for a second term in Sakha, he must stop sabotaging the federal retrieval of assets at once, and sign them over by February 2. It was made clear to Shtirov that the federals want to end the standoff without delay, and are ready to go to federal court for rulings invalidating the asset transfers of the Yeltsin period, and returning them to federal control The alternative to that process, Shtirov understands, is a negotiating process between locals and federals that never ends.
Shtirov knows how to read the clock, as well as how to count. If the Sakha region currently holds a 32% stake of Alrosa, that is worth only $1.3 billion at today’s sub-market valuation. If the company is expanded, the stake could triple in value. The administrative districts of Sakha, which currently hold 8% of the company, could see their stake jump from $320 million to $720 million. Who should share in these riches is a potent question, but it’s a question Shtirov dare not fight with Putin to decide.
And so, he has recruited some sparring partners to fight for him. The first move was the publication on a Russian website of materials suggesting that Alrosa executives shower Shtirov with vulgar verbal abuse behind his back. But to those who know how the Alrosa executives speak, this appears to have been fabricated. How does Shtirov’s allies gain by making his enemies sound like Mike Tyson?
The answer surfaced in an article published in the Moscow business daily, Kommersant, a few days later. According to the carefully constructed report, not Shtirov, but a group of Sakha region parliamentarians is opposed to Putin’s demands for the transfer of assets to Alrosa. Their conditions are reported to include preservation of the 32% regional government shareholding; the 8% district stake; and written guarantees of compensation for any regional budget shortfall in revenue “in full and on a long-term basis”. Putin, according to an unnamed local parliamentary deputy, should sign a special decree for this.
Shtirov is not cited as favouring the parliamentary move, but it is evident that he is backing it as negotiations open next week between the regional representatives and the federals on the details of the agreement due on February 2. As he marshals the local forces to retrieve the concessions he has already given Putin, a media campaign has been created to suggest that he is the target of an unscrupulous gang of federal conspirators, whose intentions are as foul as their mouths.
In the small world of Russian diamond politics, titrations like these do not change minds. There is no lack of sympathy in the federal government for the Sakha population, who have been more victimized by Nikolaev and Shtirov than rewarded with a share of the wealth Alrosa has generated. The concessions sought to sustain the regional budget, and improve the distribution of its benefits, have already been agreed by the Finance Ministry.
The Speaker of the Sakha parliament, Nyirgun Timofeyev, issued his own statement last Friday, January 27, revealing that, behind the concessions that have been publicly demanded from Moscow – and privately agreed – he wants Putin to write into his decree that Yakut politicians will be able to exercise operational influence over Alrosa in the republic, and enjoy long-term access to the company’s cashflow.
These are unprecedented demands. Even now, the Sakha parliament does not wield this leverage over Alrosa, except insofar as the company pays into the regional budget Rb11 billion ($350 million) in annually agreed leasing fees for use of the region’s resources. This sum amounts to 23% of the entire budget income of Yakut republic.
Beyond assuring this sum, or this percentage, Timofeyev realizes his bargaining power is limited. He publicly acknowledges that, if the Kremlin orders a court hearing, the Sakha fight will be lost. But he also warned that, if the federals move faster than the Yakuts are prepared to concede in negotiations, he will attempt to mobilize an unprecedented parliamentary confrontation.” I do not exclude”, he declared Friday, “that the course of events can force a gathering of the deputies of the State Assembly of the republic for discussion of the situation.”
What remains to be decided is not a choice between the growth of Sakha at Moscow’s expense versus the aggrandizement of Moscow, at the expense of stagnation or impoverishment in Sakha. The choice now is between Shtirov and Putin to control of Alrosa. If Shtirov tries to fight the second, he’s lost. If he believes he can convince anyone in Moscow, let alone the President, that he is fighting the first, he’s lost again. Timofeyev may also be positioning to succeed Shtirov, as the new Putin appointee for republican president, in the event that he can make himself seem more useful to the Kremlin in this contest.