Oleg Deripaska is a very brave man, in all likelihood.

When Ernest Hemingway wrote “Death in the Afternoon,” his study of Spanish bullfighting almost 75 years ago, he made a point of appreciating the quality of bravery in both bullfighters and bulls. So does the audience at corridas today. The most common degree of bravery, Hemingway wrote about the men, is “the ability temporarily to ignore possible consequences.” An even greater degree of bravery, Hemingway added about the matadors he knew, “is the ability not to give a damn for the possible consequences; not only to ignore them, but to despise them.”

In the fifteen months since President Vladimir Putin began his campaign against the Yukos oil company and the oligarch who controlled it, Mikhail Khodorkovsky, Kremlin and other government officials have speculated about whether it would prove to be a one-off affair, or whether Putin would move against other oligarchs, whose record of capital accumulation is similar to Khodorkovsky’s. As time has elapsed,the Kremlin factions have increasingly believed that their boss would be unrelenting. They have therefore begun to speculate about which oligarch would be next. The Russian media have joined the guessing-game, while those newspapers which are controlled by the oligarchs themselves have been Advertising the reasons they can think of why their proprietor should be safe. Not a single oligarch has shown such bravery as Hemingway described as verging on contempt for the consequences! Unlike Khodorkovsky, most of them have prepared their exits from Russia, in the event they face a charge they cannot deflect.

Depending on which source you listen to, Deripaska — the controlling shareholder of Rusian Aluminium (Rusal), world’s third largest producer of aluminium, and Basic Element, a holding that includes auto, paper and pulp, insurance, electricity and other assets – is more vulnerable to Kremlin attack than his fellow oligarchs. But until very recently, this was) self-serving speculation, cheap talk. On September 6, however, a government document appeared that challenges the president to act in a new fashion.

Rusal, Deripaska’s principal source of cash, is revealed in the document to be under official investigation for tax optimization practices which, according to a source redding from the document, cut the group’s tax payments in 2003 to jlnst 2 percent of its declared sales revenues. By contrast, Rusjsian oil company Yukos, whose principal shareholders are in prisofii facing trial on charges of fraud, forgery and tax evasion, paid 38 percent of its annual sales revenues on tax in 2002, and again in 2003. LUKoil, another major Russian oil producer, claims its tax payments for 2003 amounted to 24 percent of sales revenues.

Rusal, which does not disclose detailed financial data, claims its sales revenues for 2002 and 2003 amounted to $4 billion and $4.5 billion, respectively. Rusal executives did not reveal the tax problem at an investor briefing in New York last week, when they predicted imminent agreement from a group of international banks to lend $800 million. If Putin were to decide to seek repayment of past-due taxes at the Yukos level, Rusal could face a potential tax liability of $3 billion for the two years, before interest and penalties.

Here is what has happened already. A report on tax payments by major Russian metal companies, including Rusal, was compiled by the federal Tax Ministry, and delivered early this month to the prime ministry. According to Sergei Kazakov, a spokesman for Prime Minister Mikhail Fradkov, “the report was created at the request of Prime Minister Fradkov’s staff), and was sent there for study. After the staff will carefully study it, they will decide what governmental structures could be interested, and what to do next.” The report has not yet been distributed. A spokesman for the Federal Security Service said: “Our economic crime department did not confirm receiving such a report from the Tax Ministry.” At the General Prosecutor’s office in Moscow, a source said the report may have been read by one of the prosecutors, “but officially we didn’t receive it.”

According to the Tax Ministry, the rate of tax payments in 2003 by Rusal appears to be a fraction of that paid by comparable metals producers. The rate paid by Norilsk Nickel, for example, Russia’s leading producer of nickel, copper and platinum group metals, amounted to 19 percent of sales revenues. A Norilsk Nickel spokesman told me: “”We’ve heard about the report passed to the prime ministry, but I can confirm that no governmental structures made any official claims to the company.”

Severstal, one of Russia’s largest steelmakers, is identified in the report as having paid taxes at between 12 and 14 percent of revenues. Two other steelmakers, Magnitogorsk and Novolipetsk, were reported as having paid taxes at rates of 12 percent and 13 percent, respectively. The report’s authors have identified metal trading companies, acting for the Russian firms, in the Isle of Man, Gibraltar, British Virgin Islands, Cyprus, and other locations.

According to the text of the report, Rusal was able to minimize its tax payments through the use of tolling schemes — contracts for supply and processing of raw materials between Rusal smelters and offshore companies — and through a regional tax relief scheme operated through companies registered in the fareastern region of Chukotka. The region’s governor, Roman Abramovich, was a 50-percent shareholding partner of Deripaska in Rusal until he sold the latter a 25-percent bloc of stock a year ago. Rusal executives claim that Dertpaska is close to negotiating a deal with Abramovich and his holding company, Millhouse, for the purchase of the remaining 25 percent stake.

Abramovich’s administration of Chukotka’ public finances was investigated by the independent state auditor Chamber, earlier this year. A summary of the report by the Chamber, issued in May, revealed companies, linked to Rusal, among 22 corporate beneficiaries of several hundred million dollars in estimated tax benefits. A search of Russian corporate registration files turned up confirmation that Trading House Aluminium and Trading House Russian Foil were registered in Anadyr, in Chukotka. On October 19, 2001, the two companies are recorded as having founded a Moscow company, Russian Aluminium Finance LLC. All three companies are part of the Rusal group. The Chamber spokesman, Andrei Belayev, told me this week: “It’s now clear that Rusal was using tax optimization schemes in the Chukotka region, but it’s difficult to give the exact number of the tax underpayments.”

The legality of the Chukotka tax scheme, according to the regional law in effect at the time, depends on whether those who used it to offset taxes spent half of their tax savings in the Chukotka region. The legality of Rusal’s tolling and the tax relief it provided, depends on interpretation of the relationships between the on-shore production units of the metal, and the offshore trading units, and of the intentions conveyed by the trading records.

Although Rusal spokesmen brief industry analysts, they have declined to respond to press questions about the Chukotka scheme, or the latest Tax Ministry investigation. Rusal also does not publicly disclose detailed trade data, except to say that just over 80 percent of annual sales revenues are earned by “sales outside the Russian Federation”.

Western industry investigations of Rusal’s aluminium trade have been focusing on several unexplained anomalies in the data for Rusal’s exports. According to one investigation, conducted in London, there appears to have been a change in the first quarter of 2004 in the volumes of primary aluminium traded by Rual, a trader associated with the group, and Wainfleet Consultadores, a company reported to be doing business in Madeira, Portugal. Litigation involving Rusal in the US uncovered a large number of trading companies, registered in several tax-haven locations from the Caribbean to Gibraltar, and elsewhere, through which Rusal’s aluminium passes on its way to final destination. During this transit, lawyers claim, legal title to the aluminium changes.

There are also large, unexplained anomalies in Russian customs data for exports of primary aluminium (commodity code 7601) to the US, and the corresponding data for US imports of Russian aluminium. Rusal and a second Russian producer of aluminium, Siberian Ural Aluminum (SUAL), export to the US. Data provided by SUAL indicate that its sales to the US comprise roughly 20 percent of the aggregate Russian sales, with the balance accounted for by Rusal.

According to the Russian customs data, aluminium exports in 2003 totaled $1,408 billion; the corresponding tonnage figure is unavailable. Data released by the US International Trade Commission for the same year show imports of Russian primary aluminium totaled 657,000 metric tons for a value of $950 million. Russia was second only to Canada as the supplier of aluminium to the US. But the US value is $458 million below the declared Russian value. Industry experts in London believe this may reflect changes of origin in the metal, once it leaves Russia according to tolling contracts and the registration of fading companies.

The picture is dramatically different for this year’s trade. In the first seven months of 2004, US imports of primary aluminium from Russia totaled 524,455 metric tons, and were valued at $883 million. The average price was $1,685 per ton, which is close to the international marker, the LME average for the period. Official Russian data obtained for the same period do not reveal the tonnage, but the declared value was $36 3.2 million. The discrepancy in value is almost half a billion dollars.

Russia customs sources provide volume data for the six-month period to June 30, 2004. In that interval Russian exports to the US were 180,163 tons, for a declared value of $228 million. The average price is $1,262 per ton; this is $423 below the international market price. Calculating volume by the month, the US appears to have imported 150 percent more Russian aluminium than the Russian data disclose. The average US value per ton is 34 percent higher than the figure declared to Russian Customs.

According to a source at the State Customs Committee, part of the distortion in US import data has been caused by the use of tolling contracts, which changed the apparent [dace of origin of Russian entering the US. However, he noted that tolling for Russian exports of aluminium ended by January 1 of this year.

If the customs documents which Rusal files when it exports aluminium are under-valuing the price at which the product is sold – and Russian Customs sources do not say that it is – then investigation is the responsibility of the Tax Ministry and the General Prosecutor, according to the State Customs Committee. There, officials are waiting on orders from the prime ministry, which in turn waits on word from the President. Asked whether his staff is reviewing the Tax Ministry report, the presidential spokesmen have yet to reply.


If anyone should know how to rig a constitution, it’s me and George Bush, Jr. You might say it runs in the family.

Take my uncle, for example.As the British Empire began to break apart in the aftermath of World War II, he was one of many former military intelligence officers assigned by the imperial administrators in London to exercise their Oxbridge educations for the benefit of the constitution drafters in the colonies. On one of his stints, my uncle helped install a British constitution in Ghana. Much later, he helped provide advice during the course of the only constitutional putsch to have occurred in Australian history. The outcome was the removal of the elected Labor prime minister, and his replacement by a conservative. For his legal skills and loyalties, my uncle was handed the unpopular reward of becoming Australia’s governor-general. It was one of those jobs that someone has to do in Australia, if not in Ghana, which got rid of its Colonial Office constitution as quickly as it could manage.

I was working for U.S. President Jimmy Carter when the call for help came in from Prime Minister Jayewardene of Sri Lanka. He had just been elected, and he was thinking of changing his constitution. It was another of those Colonial Office jobs that had my uncle’s fingerprints all over it. The prime minister was thinking of turning himself into a president, and needed someone who knew how to handle the English and American rue-book. We worked hard over the next few months, and for a going-away present, Jayewardene’s Cabinet colleagues presented me with a leather-bound version of their mint-new Sri Lankan Constitution. I was touched, and in my acceptance speech, I invited the 20 or so ministers and advisors at dinner to sign the document, if they didn’t mind. Constitutions can be short-lived, and the good a man does to rig one for today, can be quickly forgotten tomorrow, I said to knowing nods. Within a decade, many of the signatories were unnaturally dead, blown up or shot down in the civil war that has afflicted that unhappy land. I still have my leather-bound keepsake, though.

A decade of good works later, and I happened to be in Athens the year US President Ronald Reagan thought it was time to rig a Greek election, and dispose of socialist Prime Minister Andreas Papandreou. He was much too popular at the time to lose a constitutional election, and as Reagan’s advisors warned, they had already toyed far too often with the Greek constitution for another attempt to be worth the try. And so the idea was hatched to encourage a little war between Turkey and Greece over oil exploration rights on the seabed of the Aegean Sea. The plan was to humiliate Papandreou in front of the voters. The Greeks started preparing for war about six months before Washington told the Turkish prime minister to give the order to set sail into Greek waters.

It was a fateful order. In a flash, Papandreou turned off the electricity at the American intelligence bases, cutting their ability to listen into Greek military communications. He moved the Air Force to front-line bases, fully armed and ready to take off on three minutes’ warning. And he called Todor Zhivkov, president of Bulgaria in those days. Zhivkov ordered his tanks to start rolling towards the Turkish border. It was the first – and last – display of coordinated military action by a NATO state and a member of the Warsaw Pact. It was also the shortest war that Greece has ever won over Turkey. The Turks and the Reaganites suddenly got cold feet. Their geological survey vessel was ordered back to harbor, and the Turkish prime minister checked intci a Houston clinic for a cardiological checkup. Greece and its Const tution were safe, until Reagan’s next trick – a scandal hatched with a Greek fraudster, who owned a local football team. But that’s another story.

The experiment of the Soviet Union constitutionally re-jigging itself under Mikhail Gorbachev was hard for the outside powers to resist manipulating, and as we all know, they didn’t. Russia under Boris Yeltsin turned out to be a familiar story. Only memories are short, especially when prompted by those who receive stipends to forget.

When the Moscow Times reported this week that President Vladimir Putin is proposing to change the Russian Constitution “which was drafted by Yeltsin advisers amid political fights in a Communist-controlled Duma”, the audacity of the misrepresentation, or the forgetfulness, takes one’s breath away. The 1993 constitution that Yeltsin drafted followed his order to shell and machine-gun to death the popularly elected Supreme Soviet. About 140 lives were lost in that attack. The opposition to Yeltsin in parliament included a Communist Party majority because the voters put them there, under the constitution that aimed at maintaining a balance of power, or so it was called at the time. But support for reform of the constitution, then being drafted by non-Communist deputies like Oleg Rumyantsev, Sergei Baburin, and Ruslan Khasbulatov, was in no way controlled by the communists. Quite the reverse – the constitutional reformers were far ahead of the Communist Party.

The Moscow Times compounds its forgetfulness of what really happened with more distortion. The Yeltsin Constitution of 1993, claims the newspaper, “placed a lot of power in the president’s hands but introduced direct elections for governors, and reserved half of the seats in the Duma to directly elected deputies.” What is omitted is that Yeltsin eliminated direct election of senators to the Federation Council, substituting the governors and the regional parliament chairmen in their place. This was done because direct election of the upper house had created an anti-Yeltsin majority during the constitutional battle with the Supreme Soviet. Yeltsin used the formula of direct gubernatorial election to make sure he never faced a hostile senate again. That was an irreversible shift in the balance of power. The Constitutional Court, which had also been showing independent opposition to Yeltsin, was locked out, and its membership then swamped with presidential trusties. These measures were promoted, then roundly applauded in Washington at the time. When Yeltsin rigged the vote for ratification, there was no complaint from foreign democrats, or the local ones besides.

That sordid story does not justify the attack on Putin’s proposals from the same forgetful gang that backed Yeltsin’s destruction of parliament, court, and constitution 11 years ago. Eleven years for a rigged constitution has proved long enough to forget the democratic options that Yeltsin destroyed. He himself can claim today “we will not allow ourselves to deviate from the letter, and most importantly, the spirit of the Constitution that our country adopted by popular referendum in 1993.” But the old crocodile is weeping phoney tears. The spirit of the 1993 constitution was rigged; the letter was a fraud; the outcome was a rotten borough parliament in which seats (as well as parties) have been bought and sold. Eleven years isn’t so long that Putin should be under obligation to preserve that.

Gubernatorial seats are so expensive, they have required oligarch-sized fortunes to acquire. Thus, for exampe, Sibneft owns Chukotka; Norilsk, Krasnoyarsk; Alrosa, Sakha; Russian Aluminium, Samara and Khakassia; and Tyumen Oil Company, Tyumen. It has been cheaper to buy seats in the Federation Council, and the State Duma. It’s difficult to say whether single-mandate seats in the lower chamber are are costly, more tradable than places on the party lists. Both together represent a concentration of corporate wealth that has been the real character of Russia’s parliamentary evolution since 1993.

The big question today is whether Putin will prove strong enough to continue his campaign against the oligarchs, and clean parliament of their corruption at the same time. Remember that, at the start of last year’s parliamentary election campaign, not a single political party or candidate told the voters whether he was for or against Mikhail Khodorkovsky’s massive tax evasion and fraud. That did not become a campaign issue until Putin’s initiative demonstrated that it was both official and popular at the same time. Reviving ideologically distinct political parties through a simple proportional representation system is a worthy aim. But if the United States hasn’t managed to achieve this yet, Putin may be biting off more than he can chew. And if he succeeds, the political outcome may be too democratic to be digestible. For proportional representation will sharpen the ideology of Russia’s political opposition. It will almost inevitably produce a revival of leftwing, even communist opposition. This is hardly what the so-called democratic critics of Putin want to see. The outside powers have spent billions of dollars rigging the Russian Constitution so that would be impossible.

Of course, that was mostly the doing of George Bush Sr. and Bill Clinton. Bush Jr. arrived too late to rig the Russian Constitution. He almost didn’t arrive at all. If he hadn’t rigged the constitutions that regulate the state of Florida and the Supreme Court in Washington, everyone knows that Bush Jr. wouldn’t be president today.


MOSCOW ( — In Robert Louis Stevenson’s “Treasure Island”, the adventure begins with the approach of Blind Pew, emissary of Captain Flint’s pirate crew, to deliver the Black Spot, the verdict of death, to Billy Bones, the crewman who held Flint’s precious treasure map. In fear of his life, Bones was always on the alert for the tap-tapping of the blindman’s cane.

Russia’s new Minister for Natural Resources Yury Trutnev also holds the map of the national treasure, lying in the sub-soil for which the ministry has issued some 16,000 licences to dig. Trutnev, who was appointed minister in March, has used a handful of press oppoprtunities to express his keenness to release the map to the powerful Russian and foreign companies who called him for it. That was until this week, when Trutnev appears to have heard Blind Pew’s cane.

In a speech on July 12, for example, Trutnev – who built a business fortune importing Swiss foodstuffs to his home region of Perm, before becoming governor — announced that he wanted to cut the six-month time period currently required by Russian mining law for the tendering of major mineral deposits. Specifically referring to the long-delayed Sukhoi Log gold deposit in Irkutsk region, and the Udokan deposit in Chita, Trutnev announced that he was preparing an amendment to the law, shortening the tender period to 45 days.

“We cannot commission a lot of large deposits for the simple reason, that, under the current law, from the date of the announcement of tender conditions to the award, it is necessary to wait about one half-year,” Trutnev said, according to the text of his speech provided by the Ministry spokesman. “This is a very long time, and costly. We want to reduce this term to 45 days.” He went on to hint that the Sukhoi Log tender could be issued and awarded by the end of this year.

With 33 million ounces of gold in estimated reserves, Sukhoi Log is one of the largest unmined gold deposits in the world; for more than a decade it has been attracting worldwide interest among miners. In Russia, Norilsk Nickel has been keen to accelerate this tender, as principal shareholder, Vladimir Potanin, has been in a hurry to include Sukhoi Log in his plan to spin off his gold assets, and swap them in a transaction with an international miner to give him a protected foreign shareholding worth several billion dollars. Gold Fields was the target of this scheme until recently.

Norilsk Nickel denies lobbying Trutnev for fast-track enactment of the 45-day rule. Trutnev has said through a spokesman that he will not respond to questions. Almost exactly a year ago, Norilsk Nickel successfully lobbied another minister, Finance Minister Alexei Kudrin, to push through parliament an amendment of the state secrets law to allow Norilsk Nickel to disclose its metal reserves publicly, as well as sales and production figures for platinum group metals. The State Duma approved the measure in a highly unusual three-reading vote in a single day. Although President Vladimir Putin followed by signing it into law in November, the Kremlin blocked implementation twelve weeks’ later, embarrassing Potanin’s plans to issue foreign bonds and raise other debt that required the disclosures he was no longer legally allowed to make. The measure is still suspended.

If Norilsk Nickel is shy about admitting to lobbying on the Sukhoi Log tender, its rivals in the race privately concede that they are tlying to persuade the government, including President Putin’s advisor on natural resources Vladimir Litvinenko, not to make the award to Norilsk Nicke. The Irkutsk regional administration, headed by Governor Boris Govorin, appeared to be backing Norilsk Nickel for a time, but it too has conceded that the final decision is out of its hands. In his July speech, Trutnev also claimed that he was opposed to excluding foreign miners from the bidding for Sukhoi Log. “We do not see the necessity to create a distinct ban on foreigners. Although there are situations when the state should protect the national interest in the sphere of natural resources usage, such situations should not be resolved by administrative methods, and should be required to be registered in the law.”

Trutnev’s remarks hinted at a significant difference on strategy with Litvinenko, whose official position is Rector of the St Petersburg State Mining Institute, the premier geology training academy of Russia. Before Trutnev’s appointment, Litvineko told Mineweb he favoured radical changes in current mining legislation and policy towards licensing. Calling for the adoption of a mineral and mining code “on the model of developed countries with a market economy”, Litvinenko said he also favoured limiting foreign investment to the processing segment of the resource sector. As for mining, he said he favoured “a system of privileges and preferences for the domestic companies.”

He also said that he is opposed to allowing foreign investors to take shareholding control of Russian mining enterprises. Sale of shares outside Russia can be allowed, Litvinenko said, but control should be vested in a “golden share” held by the Russian government. Applying this limit on divestment by the Russian oligarchs was urgent, he said, in the cases of “Gazprom, United Energy Systems, important petroleum companies, Norilsk Nickel, and many other companies.”

Since saying that, Litvineko has fallen silent. But all the indications are that a debate over strategy has been under way between him, Trutnev, and the leading natural resource companies. Anonymous leaks from Trutnev’s ministry have claimed that the new draft of the Sub-Soil legislation, with all the amendments Trutnev was promising in July, has been signed and approved by the government for despatch to parliament. But when asked to confirm this, Trutnev’s spokesman and staff at the Committee on Natural Resources at the Duma have said they cannot. Then Trutnev appears to have heard Blind Pew’s cane tap-tapping. It was a signal from the Kremlin that he could not ignore.

The first indication was an anonymous leak last week from the ministry claiming that the oilfield operating licences of Yuganskneftegas, the principal unit of the beleaguered Yukos oil company, could be revoked within two weeks on account of non-payment of taxes. This threat was clearly part of the Kremlin-led campaign against Yukos and its imprisoned shareholders, Mikhail Khodorkovsky and Platon Lebedev, who are on trial for fraud. The company has already been convicted of tax evasion.

The legal requirements for licence revocation are much more complicated and time-consuming than the leak suggested; that was one reason the minister wanted to do what he was bidden, without having to explain himself.

Another anonymous leak from the ministry last week claimed that there would be no accelerated award of the Sukhoi Log tender; and that the earliest this could happen would be the second quarter of 2005.

Whether Trutnev himself was behind the leaks, or the Kremlin, the minister went public himself in Irkutsk on Wednesday. This time, he repeated the threat to yank the Yuganskneftegas licence, and added a new one, indicating that the TNK-BP group – which links oligarchs Mikhail Fridman and Victor Vekselberg with British Petroleum – might lose its licence to develop the Kovykta gas field.

Then Trutnev announced that the government intends postponing the Sukhoi Log tender until next year, and may bar foreigners from bidding. “The new natural resources law,” he is quoted as saying, “will include an option to limit foreign participation in tenders for unique deposits – such as Sukhoi Log and Udokan [copper deposit].” Clarifying that the backstage fight is not yet over, Trutnev went on to explain that the proposed changes to the legislation would be discussed by the cabinet of ministers next month thus confirming there is no official consensus yet on what should be sent to parliament.

Russians who have been dealing with Trutnev say he is much more commercially minded than his predecessors, and more energetic. Russian miners say they do not know who was behind his appointment. One believes he was the candidate of German Gref, Minister of Economic Development and Trade, whose ministry has often clashed with the Natural Resources Ministry in the past. Whether it was Gref, or a Kremlin official, or Litvinenko, who promoted Trutnev to his portfolio, it is now clear that Trutnev’s auditory facility has been under constant training since he took over.


MOSCOW ( – Cash cows need careful herding, just like the lactating and the beef species. As every cowboy knows, if you don’t fence them in properly, on cloudy nights you run the risk losing then to rustlers or wolves.

Gazprom, Russia’s leading resource company and the world’s largest gas producer and exporter, has been inadequately protected from the beginning, ) when it was created by rustlers with well-known names like Victor Chernomyrdin, Rem Vyakhirev, and his family. Alexei Miller, the ranch hand engaged by President Vladimir Putin to get the company safely back into the corral, has been too slow, too weak and too ineffective, by most accounts; although it is too early to say that he is allowed the big cash cows in the Gazprom herd to escape, or run wild.

His inventory recovery efforts have made some former Vyakhirev associates nervous. Alisher Usmanov, for example, had been in charge of converting Gazprom receivables and debt into assets and revenue streams managed through a company called Gazprominvestholding, which did exactly what its name suggests, but off the Gazprom books. These assets have now grown into the prize bulls of the Usmanov herd – the Oskol steel plant, Urals Steel (formerly the Nosta steel plant), and the Lebedinbsky iron-ore mine. Leveraging these assets, Usmanov has been trying to borrow or trade his way into a safe-haven fortune offshore, in the Anglo-Dutch steelmaker, Corus. The Corns shareholders have appreciated the share value Usmarov’s raid has generated, but they have kept the keys to the ranch-gate to themselves.

The announcement by the Russian government, and by President Putin, that Gazprom’s shareholding is to be reorganized, so that: the state stake will be increased from 38.4% to 50%+1 control, Gazprom shares swapped with Rosneft, and the latter turned into a fully-owned Gazprom subsidiary, creates the perfect corral for the combined enterprise.

Incidentally, but demonstrating much foresight, the move allows the government to create enough capitalization to acquire the distressed Yukos oilfield assets – in settlement of its tax and fraud bills – and at the same time, allow the beef-hungry share markets of Moscow, London, and New York to buy into the upside value of the new Russian energy giant. Sharebuyers in those markets have been hobbled by the so-called ring fence, the state rule limiting direct purchase of Gazprom shares.

In a trice, the dream Mikhail Khodorkovsky, principal shareholder of the Yukos group, once had of doing the same thing with Yukos, creating a Russian energy conglomerate bigger than Gazprom and selling half of it to the United States, has been replaced by an idea foreign share-buyers and speculators will now consider much safer. By dismantling the old ring fence, and erecting the corral, the stock markets can swap speculative Yukos, Sibneft, or other commercial Russian oil risk for sovereign risk in the new Gazprom-Rosneft combination. To the stock-broking trade, this is pure filet mignon.

It is a move that required careful analysis over many months, blanket secrecy, and a deft public relations touch at the end. For all the abuse that has been heaped by the Khodorkovsky-fed media on those in charge – Putin himself, his advisor Igor Sechin, and the specialist advisors in the natural resource sector -it is a model of the post-oligarch Russian resource company that meets both the state interests Putin has spelled out, and also the foreign investment conditions.

As the grass-fed Moscow brokerage analysts have already begun pointing out,the new company is compatible with the state-controlled energy corporations of all the great oil-producing states in the world. Yukos shareholders and directors were uncertain of the outcome of their gunfight with the Kremlin, this is their tombstone.

Just in case anyone remembers the lurid conspiracy theories of the Financial Times, Vagit Alekperov, CEO of LUKoil, has announced, simultaneously with the Gazprom disclosure, that when the state shortly sells off its 7.6% stake in his company, most likely to ConocoPhillips, the American oil company will not (not, editors of the FT be advised) be permitted to raise that shareholding to anything approaching a blocking stake.

If anyone in Washington needs further reminding that the fight over Yukos has been to stop US takeover of Russian resource assets, the next steps Putin will take in the corral strategy should suffice. The roundup of the cash cows will continue.

Putin is now on track to apply the corral approach to all of the Russian resource extraction industries that were prematurely rustled, a decade ago, by the so-called oligarchs. These include the minerals, inducing precious metals, owned by Vladimir Potanin; aluminium and bauxite owned by Oleg Deripaska and Victor Vekselberg; and oil by Roman Abramovich and Mikhail Fridman.

A Kremlin investigation on whether to approve or veto Potanin’s $1.16 billion purchase of a 20% stake in South African miner, Gold Fields, is now in its sixth month. But already the South African shareholders of Gold Fields have decided to pre-empt Potanin’s takeover ambition by merging with the Canadian miner lAMGold, thereby doing to Potanin what he has often done to others – diluting his share value, paralyzing his manoeuvre.

The Kremlin might therefore do Norilsk Nickel a favour by ordering a reversal of the Gold Fields deal, forcing Potanin to liquidate his stake, and repatriate the funds to Russia. Two years ago, on a flying visit to Norilsk, Putin warned Potanin that the company was paying too little tax;. A fresh attack on this front might be the route Putin’s advisors will select or restructuring the Norilsk Nickel shareholding and corraling Russia’s largest mining company, according to the new model.

Deripaska’s attempt to sell Russia’s largest aluminium rolling mill at Samara, plus the smaller Belaya Kalitva plant in Rostov, will be another good test, since Deripaska requires Kremlin permission – nominally, the authority of the federal anti-monopoly service of the Ministry of Economic Development and Trade – to sell the assets for about $220 million to Alcoa, the: US-owned global aluminium leader. Alcoa had expected approval to be granted by June, and here we are almost in October, with no approval – and no veto – in sight yet, according to the federal and regional officials involved.

Kremlin concerns about Deripaska’s political ambitions, his sweetheart deals with regional governors to supply cut-price electricity, and his tax minimization schemes have been under investigation for weeks now. Had the Kremlin reached a consensus on what to do, it could have brought Deripaska to his knees by the simple expedient of having Sberbank call in repayment of several hundred million dollars’ worth of loans to Deripaska’s cash cow, Russian Aluminium (Rusal).

To anticipate that, Deripaska has been seeking an equivalent loan from a syndicate of European banks. Their reluctance to lend has lasted a year now. At the same time, Deripaska’s cash cow is urgently required for milking, in order to fund acquisition of the remaining 25% stake in Rusal, which Deripaska doesn’t own. The sellers in this case include Abramovich, Eugene Shvidler, and others in the Millhouse holding company. Their selling price will be at least $1.2 billion more than Rusal can afford to give Deripaska right now.

Other Rusal schemes to buy or build expensive new mines, refineries and smelters in Australia, Venezuela, Jamaica, India, Nigeria, and the Congo have been proposed, but most are still up in the air, awaiting Kremlin judgement of how to corral the aluminium cashflow in the national interest.

No-one has paid quite as much money as Victor Vekselberg recently promised to Brian Gilbertson, former CEO of BHP Billiton, to drive his cash cows to market outside Russia. If he succeeds, Gilbertson stands to set the world record for cow-punching compensation; for Vekselberg, the price would be worth paying to swap his vulnerable stake in Siberian Ural Aluminum (SUAL) for the safety of foreign registration.

You do not have to like American westerns to know what the genre demands. When ambitious cowpunchers come into town, they either pay their respects to the sheriff, or they prepare to fight him. Gilbertson has yet to do the former. And if he can read the meaning of the Gazprom-Rosneft announcement, he will understand that it would be folly to try the latter. He is out-gunned.


Among soldiers and other hired gunmen, it is said that the bullet always tell the truth. It’s the triggerman’s way of passing moral responsibility for his deed, and his good or ill fortune, from the trigger to the target.

In interpreting a national shock like this month’s killings at Beslan, in the Northern Ossetian Republic, many contradictory truths have been claimed, some of them ripped almost literally from the corpses. But it is the single biggest mistake of most of these interpretations, foreign and Russian alike, to predict that the Beslan events will be a turning-point for Russia; that the truth-talking bullets that took so many lives will, somehow or other, change Russian politics in a decisive fashion.

Putin’s strength. The many Russians, and their Anglo-American patrons, who were already sharp critics of President Vladimir Putin, can’t avoid expressing the hope that the mismanagement of the Chechen war, and of the new violence in the Caucasus, will expose Putin’s weakness, and lead to his downfall. In fact, Putin has done the unprecedented thing of admitting what none of his predecessors has ever conceded – and thereby gained strength in popular, as well as elite support. If the Russian state is as weak as Putin admitted, and if the weak get exploited, as he warned and we all know, then who is there left standing to defend that state from its enemies, if not the President? Of course, Putin has a problem he hasn’t quite acknowledged, although his actions during and after the Beslan crisis demonstrate what he means. After almost five years in command, Putin has found not one spokesman who can be trusted to address the media, the people, or his own chain of command -except himself. This has awkward corollaries. The prime minister can’t open his mouth on a subject of national policy. Down the military chain of command, officers are reluctant to issue orders, or take the initiative, for fear of being countermanded, or sold out, by their superiors. They fear reporting intelligence assessments if they risk contradicting the vested interests of these who lie between them and the President. Putin himself trusts just five people to help him run the country. This six are too few. Little wonder that crises are difficult to anticipate, and slow to resolvne. But the alternatives to Putin are not simply worse. They are what brought the state to its knees in the first place.

Cockpit warfare. Several months ago, Beslan was chosen by those who directed the terrorist gang, not because it was close to an airport for a getaway; nor because the regional police were susceptible to bribes, nor because the school was wide open to attack. Those vulnerabilities are everywhere in evidence, all over Russia. Beslan was picked, because it is a cockpit for ethnic conflict between the tribes, clans, religions, and national loyalties of the Caucasus. And, as it was in Ottoman, British; Empire, Crimean War, and Hitler’s days, the Caucasus is the most vulnerable of Russia’s frontiers. In this respect, Beslan was for the planners of the operation what Lebanon was in the 1970s; Nicaragua in the 1980s; Yugoslavia in the 1990s. Set off a detonator in Beslan, it was thought, and the explosion would tear open such a hole in Russia’s under-belly, it would bleed to death, and outside powers gain the advantage, just as happened in the other cockpits. Putin made clear from his first speech after the freeing of the hostages that he understood this. Much of the interpretation of who the terrorists were, where they came from, who commanded them, and what they wanted, if anything, is beside the point that they were intent on triggering war in Beslan, not on negotiating Russian withdrawal from Chechnya, let alone an exit for themselves. Credible negotiators like Leonid Roshal, the Russian pediatrician, and Ruslan Aushev, the ex-president of Ingushetia – neither with a public axe to grind against Putin or the Chechen resistance — have said they doubted there was any exit for negotiation. The reported killings of three of the terrorists by their leader suggest the same thing. That the violence was inevitable doesn’t excuse the faults of the Ossetian security forces, or the federal commanders. But admitting those, and trying to rectify them in future, are only a small part of the cockpit war strategy Putin must now pursue.

The second front. For more than a year, Putin and his small band have been waging war on the other front in which they judged Russia was under direct attack, and against the other gang of bandits that has been staging repeated smash and grab raids, the accumulated value of which dwarfs the country’s (record-high) international reserves. The second front is the war to save Russia’s natural resource wealth from the Russian oligarchs, the half-dozen or so men, who began their operations against the state at the same time as the Chechen secession; with the same support from Washington and London; but with arguablt much greater firepower to destroy Russia. Boris Berezovsky, Vladimir Gusinsky, and Mikhail Khodorkovsky have been defeated; Oleg Deripaska, Vladimir Potanin, Roman Abramovich, Mikhail Fridman, Viktor Vekselberg, Anatoly Chubais, and some others remain. It is repugnant to compare the value of their thieving against the value of the lives lost in Beslan. It is enough to note that, from the start of the campaign against Khodorkovsky’s attempt to sell the Yukos oil company to the United States, none of theimedia voices, belatedly and reluctantly aroused today on behalf of the children of Beslan and Chechnya, has spoken in defense of Putin’s campaign against the oligarchs. Nor was there any support for Putin from his own chief of staff, Prime Minister and cabinet, regional governors, the State Duma, or the so-called parties then campaigning for the parliamentary election. Putin’s second-front campaign has had to be fought by the same small band, with many of the same problems of command and control visible at Beslan. Clumsy but successful nonetheless, Putin’s war against the oligarchs should now lead on to new targets, especially as very large, fresh sums of money must now be raised by the Kremlin to fund the cockpit war in the Caucasus. Should there be any doubtjabout his priorities, Putin will shortly explain why the billion-dolliar cash-out transactions attempted by the oligarchs take the country hostage just as surely as the Chechen secessionists and the Beslan gang. The corollary will be a renewal of the campaign to retrieve the wealth taken by the oligarchs, in order to fufid the bounties now required on the military front, and in the domestic economy of Chechnya.

The fourth column. Never has so much ill-gotten money been spent on a media campaign to make the breakup and asset-stripping of Russia look democratic and desirable, and the fight-back look Stalinist and indefensible. A newspaper editor who claims to have been fired after clashing over Beslan reportage with the oligarch who is his proprietor, and a pro-secession reporter whose claim to have been poisoned by Kremlin agents lacks the rudimentary corroboration required by her profession, have been treated in the western media as the only honest heroes to have emerged from the coverage of the Beslan affair. Putin’s public reminder that press lords like Rupert Murdoch do not make a free press outside Russia is a polite way of saying that the Russian media perform no worse, no better, and that Putin himself inherited this from his predecessor Boris Yeltsin. That the oligarchs he defeated fought with media weapons has made inevitable that the beaten media should be keen on revenge. It is a commonplace of the journalism profession to acknowledge that, in war, truth is the first casualty. For the Russian and foreign media to blame the casualties of Beslan on Putin is just another bullet, just another casualty, in the war for Russia that cannot be negotiated to a peaceful end any time soon.


By John Helmer, Moscow

The Ukraine war is splitting the communist parties of Europe between those taking the US side, and those on the Russian side.

In an unusual public criticism of the Greek Communist Party (KKE) and of smaller communist parties in Europe which have endorsed the Greek criticism of Russia for waging an “imperialist” war against the Ukraine, the Russian Communist Party (KPRF) has responded this week with a 3,300-word declaration:  “The military conflict in Ukraine,” the party said, “cannot be described as an imperialist war, as our comrades would argue. It is essentially a national liberation war of the people of Donbass. From Russia’s point of view it is a struggle against an external threat to national security and against Fascism.”

By contrast, the Russian communists have not bothered to send advice, or air public criticism of the Cypriot communists and their party, the Progressive Party of Working People (AKEL). On March 2, AKEL issued a communiqué “condemn[ing] Russia’s invasion of Ukraine and calls for an immediate ceasefire and the withdrawal of the Russian troops from Ukrainian territories….[and] stresses that the Russian Federation’s action in recognising the Donetsk and Luhansk regions constitutes a violation of the principle of the territorial integrity of states.”

 To the KPRF in Moscow the Cypriots are below contempt; the Greeks are a fraction above it.

A Greek-Cypriot veteran of Cypriot politics and unaffiliated academic explains: “The Cypriot communists do not allow themselves to suffer for what they profess to believe. Actually, they are a misnomer. They are the American party of the left in Cyprus, just as [President Nikos] Anastasiades is the American party of the right.” As for the Greek left, Alexis Tsipras of Syriza – with 85 seats of the Greek parliament’s 300, the leading party of the opposition – the KKE (with 15 seats), and Yanis Varoufakis of MeRA25 (9 seats), the source adds: “The communists are irrelevant in Europe and in the US, except in the very narrow context of Greek party politics.”



By John Helmer, Moscow

The war plan of the US and the European allies is destroying the Russian market for traditional French perfumes, the profits of the French and American conglomerates which own the best-known brands, the bonuses of their managers, and the dividends of their shareholders. The odour  of these losses is too strong for artificial fresheners.

Givaudan, the Swiss-based world leader in production and supply of fragrances, oils and other beauty product ingredients, has long regarded the Russian market as potentially its largest in Europe; it is one of the fastest growing contributors to Givaudan’s profit worldwide. In the recovery from the pandemic of Givaudan’s Fragrance and Beauty division – it accounts for almost half the company’s total sales — the group reported “excellent double-digit growth in 2021, demonstrating strong consumer demand for these product categories.”    Until this year, Givaudan reveals in its latest financial report, the growth rate for Russian demand was double-digit – much faster than the  6.3% sales growth in Europe overall; faster growth than in Germany, Belgium and Spain.    

Between February 2014, when the coup in Kiev started the US war against Russia, and last December, when the Russian non-aggression treaties with the US and NATO were rejected,   Givaudan’s share price jumped three and a half times – from 1,380 Swiss francs to 4,792 francs; from a company with a market capitalisation of 12.7 billion francs ($12.7 billion) to a value of 44.2 billion francs ($44.2 billion). Since the fighting began in eastern Ukraine this year until now, Givaudan has lost 24% of that value – that’s $10 billion.  

The largest of Givaudan’s shareholders is Bill Gates. With his 14%, plus the 10% controlled by Black Rock of New York and MFS of Boston, the US has effective control over the company.

Now, according to the US war sanctions, trade with Russia and the required payment systems have been closed down, alongside the bans on the importation of the leading European perfumes. So in place of the French perfumers, instead of Givaudan, the Russian industry is reorganizing for its future growth with its own perfume brands manufactured from raw materials produced in Crimea and other regions, or supplied by India and China. Givaudan, L’Oréal (Lancome, Yves Saint Laurent), Kering (Balenciaga, Gucci), LVMH (Dior, Guerlain, Givenchy), Chanel, Estée Lauder, Clarins – they have all cut off their noses to spite the Russian face.



By Nikolai Storozhenko, introduced and translated by John Helmer, Moscow

This week President Joseph Biden stopped at an Illinois farm to say he’s going to help the  Ukraine ship 20 million tonnes of wheat and corn out of storage into export, thereby relieving  grain shortages in the international markets and lowering bread prices around the world.  Biden was trying to play a hand in which his cards have already been clipped. By Biden.  

The first Washington-Kiev war plan for eastern Ukraine has already lost about 40% of the Ukrainian wheat fields, 50% of the barley, and all of the grain export ports. Their second war plan to hold the western region defence lines with mobile armour, tanks, and artillery  now risks the loss of the corn and rapeseed crop as well as the export route for trucks to Romania and Moldova. What will be saved in western Ukraine will be unable to grow enough to feed its own people. They will be forced to import US wheat, as well as US guns and the money to pay for both.

Biden told his audience that on the Delaware farms he used to represent in the US Senate “there are more chickens than there are Americans.”  Blaming the Russians is the other card Biden has left.  



By John Helmer, Moscow

The problem with living in exile is the meaning of the word. If you’re in exile, you mean you are forever looking backwards, in geography as well as in time. You’re not only out of place; you’re out of time — yesterday’s man.

Ovid, the Roman poet who was sent into exile from Rome by Caesar Augustus, for offences neither Augustus nor Ovid revealed, never stopped looking back to Rome. His exile, as Ovid described it, was “a barbarous coast, inured to rapine/stalked ever by bloodshed, murder, war.” In such a place or state, he said, “writing a poem you can read to no one is like dancing in the dark.”

The word itself, exsilium in Roman law, was the sentence of loss of citizenship as an alternative to loss of life, capital punishment. It meant being compelled to live outside Rome at a location decided by the emperor. The penalty took several degrees of isolation and severity. In Ovid’s case, he was ordered by Augustus to be shipped to the northeastern limit of the Roman empire,  the Black Sea town called Tomis; it is now Constanta, Romania. Ovid’s last books, Tristia (“Sorrows”) and Epistulae ex Ponto (“Black Sea Letters”), were written from this exile, which began when he was 50 years old, in 8 AD, and ended when he died in Tomis nine years year later, in 17 AD.  

In my case I’ve been driven into exile more than once. The current one is lasting the longest. This is the one from Moscow, which began with my expulsion by the Foreign Ministry on September 28, 2010.  The official sentence is Article 27(1) of the law No. 114-FZ — “necessary for the purposes of defence capability or security of the state, or public order, or protection of health of the population.” The reason, a foreign ministry official told an immigration service official when they didn’t know they were being overheard, was: “Helmer writes bad things about Russia.”



By John Helmer, Moscow

Antonio Guterres is the Secretary-General of the United Nations (UN), who attempted last month  to arrange the escape from Russian capture of Ukrainian soldiers and NATO commanders,  knowing they had committed war crimes. He was asked to explain; he refuses.   

Trevor Cadieu is a Canadian lieutenant-general who was appointed the chief of staff and head of the Canadian Armed Forces last August; was stopped in September; retired from the Army this past April, and went to the Ukraine, where he is in hiding. From whom he is hiding – Canadians or Russians – where he is hiding, and what he will say to explain are questions Cadieu isn’t answering, yet.



By John Helmer, Moscow

Antonio Guterres, the United Nations Secretary-General, is refusing this week to answer questions on the role he played in the recent attempt by US, British, Canadian and other foreign combatants to escape the bunkers under the Azovstal plant, using the human shield of civilians trying to evacuate.

In Guterres’s meeting with President Vladimir Putin at the Kremlin on April 26 (lead image), Putin warned Guterres he had been “misled” in his efforts. “The simplest thing”, Putin told Guterres in the recorded part of their meeting, “for military personnel or members of the nationalist battalions is to release the civilians. It is a crime to keep civilians, if there are any there, as human shields.”  

This war crime has been recognized since 1977 by the UN in Protocol 1 of the Geneva Convention.  In US law for US soldiers and state officials, planning to employ or actually using human shields is a war crime to be prosecuted under 10 US Code Section 950t.  

Instead, Guterres ignored the Kremlin warning and the war crime law, and authorized UN officials, together with Red Cross officials,  to conceal what Guterres himself knew of the foreign military group trying to escape. Overnight from New York, Guterres has refused to say what he knew of the military escape operation, and what he had done to distinguish, or conceal the differences between the civilians and combatants in the evacuation plan over the weekend of April 30-May 1.May.



By Vlad Shlepchenko, introduced & translated by John Helmer, Moscow

The more western politicians announce pledges of fresh weapons for the Ukraine, the more Russian military analysts explain what options their official sources are considering to destroy the arms before they reach the eastern front, and to neutralize Poland’s role as the NATO  hub for resupply and reinforcement of the last-ditch holdout of western Ukraine.

“I would like to note,” Defense Minister Sergei Shoigu, repeated yesterday, “that any transport of the North Atlantic Alliance that arrived on the territory of the country with weapons or material means for the needs of the Ukrainian armed forces is considered by us as a legitimate target for destruction”.  He means the Ukraine border is the red line.



By Lucy Komisar,  New York*

Here’s a story the New York Times has just missed.

US politicians and media pundits are promoting the targeting of “enablers” of Russian oligarchs who stash their money in offshore accounts. A Times article of March 11   highlighted Michael Matlin, CEO of Concord Management as such an “enabler.” But the newspaper missed serious corruption Matlin was involved in. Maybe that’s because Matlin cheated Russia, and also because the Matlin story exposes the William Browder/Sergei Magnitsky hoax aimed at Russia.



By John Helmer, Moscow

In 1939 a little known writer in Moscow named Sigizmund Khrzhizhanovsky published his idea that the Americans, then the Germans would convert human hatred into a new source of energy powering everything which had been dependent until then on coal, gas, and oil.

Called yellow coal, this invention originated with Professor Leker at Harvard University. It was applied, first to running municipal trams, then to army weapons, and finally to cheap electrification of everything from domestic homes and office buildings to factory production lines. In Russian leker means a quack doctor.

The Harvard professor’s idea was to concentrate the neuro-muscular energy people produce when they hate each other.  Generated as bile (yellow), accumulated and concentrated into kinetic spite in machines called myeloabsorberators, Krzhizhanovsky called this globalization process the bilification of society.



By John Helmer, Moscow

In imperial history there is nothing new in cases of dementia in rulers attracting homicidal psychopaths to replace them.  It’s as natural as honey attracts bees.

When US President Woodrow Wilson was incapacitated by a stroke on October 19, 1919, he was partially paralysed and blinded, and was no longer able to feed himself, sign his name, or speak normally; he was not demented.

While his wife and the Navy officer  who was his personal physician concealed his condition, there is no evidence that either Edith Wilson or Admiral Cary Grayson were themselves clinical cases of disability, delusion,  or derangement. They were simply liars driven by the ambition to hold on to the power of the president’s office and deceive everyone who got in their way.  

The White House is always full of people like that. The 25th Amendment to the US Constitution is meant to put a damper on their homicidal tendencies.

What is unusual, probably exceptional in the current case of President Joseph Biden, not to mention the history of the United States,  is the extent of the president’s personal incapacitation; combined with the clinical evidence of psychopathology in his Secretary of State Antony Blinken;  and the delusional condition of the rivals to replace Biden, including Donald Trump and Hillary Clinton.

Like Rome during the first century AD, Washington is now in the ailing emperor-homicidal legionary phase.  But give it another century or two, and the madness, bloodshed, and lies of the characters of the moment won’t matter quite as much as their images on display in the museums of their successors craving legitimacy, or of successor powers celebrating their superiority.  

Exactly this has happened to the original Caesars, as a new book by Mary Beard, a Cambridge University professor of classics, explains. The biggest point of her book, she says, is “dynastic succession” – not only of the original Romans but of those modern rulers who acquired the Roman portraits in marble and later copies in paint, and the copies of those copies, with the idea of communicating “the idea of the direct transfer of power from ancient Romans to Franks and on to later German rulers.”

In the case she narrates of the most famous English owner of a series of the “Twelve Caesars”, King Charles I — instigator of the civil war of 1642-51 and the loser of both the war and his head – the display of his Caesars was intended to demonstrate the king’s self-serving “missing link” between his one-man rule and the ancient Romans who murdered their way to rule, and then apotheosized into immortal gods in what they hoped would be a natural death on a comfortable bed.

With the American and Russian successions due to take place in Washington and Moscow in two years’ time, Beard’s “Twelve Caesars, Images of Power from the Ancient World to the Modern”,  is just the ticket from now to then.


Copyright © 2007-2017 Dances With Bears

Copyright © 2007-2017 Dances With Bears

Education Template