1. Recently, President Medvedev urged Russian oligarchs to pay their “moral debt”? What does this mean in concrete terms?

Moral debt in Russia is a case of the three monkeys who see, hear, and speak no evil.

In theory, the Russian President means that men who seized most of Russia’s natural resource wealth more than a decade ago by a combination of corrupt and fraudulent means, and then generated vast fortunes abroad by manipulating Russia’s weak tax and capital controls, have an enormous debt to repay to the state and the economy. In practice, Medvedev does not intend to name names, let alone take any action to collect that debt, whether moral or fiscal.

Indeed, Medvedev is going to unusual lengths to protect one of the oligarchs, Oleg Deripaska, from having to honour the loan obligations he has to Russia’s state banks, as well as to a group of more than 70 commercial banks, some Russian, most foreign. If anyone in Russia carries the largest moral, as well as money debt today, it is Deripaska. Consider then why Medvedev said, at a regional conference in Irkutsk on February 20, in Deripaska’s presence: “I fully agree with what Oleg Vladimirovich [Deripaska] said about situations when the crisis leads to settling scores… There should be no situations when different structures’ rivalry can lead to the collapse of an entire group of companies…Such actions should get adequate reaction from the state. For that purpose we have one serious institution, the government of the Russian Federation … There are situations when power must be used.”

In case anyone was in doubt that Medvedev meant to reach up, and put his arm around Deripaska, he repeated the message at a Kremlin meeting on March 17. On that occasion, the president was meeting with Mikhail Fridman, controlling shareholder of the Alfa Bank group. Alfa, to whom Deripaska is overdue in repaying between $650 million and $1 billion, has led the commercial banks in launching court action in Moscow, and also in Jersey (where Deripaska registers some of his companies). Medvedev the lawyer appeared to be telling Fridman the banker: “We cannot sacrifice entire companies with many thousands of staff to meet the ambitions of certain credit organizations.”

It is one thing for a politician not to mean what he says, or to mean different things to different audiences. It is quite another thing for a politician to say things he has no power to do, with the purpose of intending to do in secret what he would not dare acknowledge in public.



By John Helmer in Moscow

The announcement from Mechel on March 26 that it has agreed with its bankers on a 51-day extension of time to repay or refinance a $1.5 billion loan, which fell due on March 20, has exposed a grave failure of arithmetic in the marketplace. And that’s not all.

Headlined by Bloomberg and Reuters as a two-month extension, and repeated by rote in client bulletins from the principal Moscow brokerage and investment houses, the new loan payment deadline, which New York-listed Mechel reported to the Securities and Exchange Commission, is May 15. That was just 51 days away from the signing of the new agreement — not 60 or 61, as two months usually add up to. The nervousness of the banks in setting the short deadline seems to have been obscured by the unwillingness of the market-makers and media to take out their fingers and thumbs, and check the official release from Mechel itself.

That said: “On March, 25, 2009, following negotiations with the banking syndicate which provided Mechel a one-year loan for the Oriel Resources Ltd. (United Kingdom) acquisition, an agreement for a two month payment term extension was reached. The new payment date is May 15, 2009. The prolongation period will be used to complete negotiations with the bank participants of the syndicate aiming at refinancing the bridge loan with long term instruments.”

As has been reported in the archive, Oriel is a chrome miner and refiner. Since the takeover a year ago, it has been included in Mechel’s ferroalloy division, supplying chrome to Mechel’s specialty steel diivision for the production of nickel and chrome-plated products.



By John Helmer in Moscow

Far Eastern Shipping Company (Fesco) has released through a wire service a set of unaudited financial estimates for the full year 2008. The release was unusual, analysts said, and appears timed to counteract the impact of a downgrade by the Moody’s rating agency in Moscow on Thursday.

Despite better than expected revenues, as well as the earnings figure Ebitda, the shipping, ports and rail group has acknowledged a heavy writedown in the value of its fleet. In a note to clients and investors, Troika transportation analyst, Kirill Kazanli, says “the group’s bottom line is expected to range between breakeven and net loss of around $1 mln.” Fesco’s controlling shareholder Sergei Generalov, the executive chairman, issued a public statement confirming the possibility of this bottom-line loss for the year.

The company has not released a financial report for the year on its website, and spokesmen for the company refuse to answer questions about the calculation of the vessel writedown, which appears to have been taken in the fourth quarter of 2008.

The last financial report, audited by Moore Stephens, was issued for the six months to June 30 last, and posted on November 28. This identifies Raffeisen and ING as the biggest lenders to Fesco for fleet additions. With Citibank and Unicredit (Italy), these banks take up about 66% of the Fesco loan book.

As ships lose their market value, banks which have made loans for their purchase and which hold the vessels as collateral for repayment are likely to raise cash or margin calls from the borrower, or seek additional security. When asked whether it has considered margin-calls on Fesco loans, Raffeisen asked for a written letter of request, and then refused to reply. Unicredit and Citibank refused to talk about loan terms, margin-calls or vessel valuation policy.



By John Helmer in Moscow

In 1930, at the start of the Great Depression, a story was published in the US with the purpose of convincing children that if they worked hard, they would be rewarded. That idea being none too original, it turns out that the tale of the small anthropomorphic locomotive, who pulls a heavy line of freight-wagons over a mountain-top, was cribbed from a publication a quarter of a century before.

If your mother read it aloud to you as a youngster, you’ll remember the best parts. The first was at the shunting yard when the bigger locomotives refuse the job, and the little one chants: “I think I can. I think I can. I think can.” With tantalizing tension as he slows on the up-grade, he manages the feat, and then celebrates as he runs downhill: “I thought I could. I thought I could. I thought I could.”

High River Gold (HRG:CN) is the Toronto-listed junior who’s lived to tell this tale. Only the children in the market don’t appear to have heard it, yet.

With four operating gold mines in Russia and Burkina Faso, tw and two mine projects in development, HRG has currently attributable production of about 300,000 ounces per annum, and is cashflow positive. Attributable gold reserves were estimated in February by Dan Hrushewsky, HRG’s investment relations director, at 2.2 million oz, with silver reserves at 5.2 million oz. A subsequent release from the company on March 17 reported a MICON expert audit of gold reserves at the Zun-Holba and Irokinda mines (Buryat region of southeastern Siberia). Altogether, counting the Bissa gold project in Burkino Faso and the Prognoz silver project (Sakha region of fareastern Siberia), and converting silver reserves into gold equivalent, HRG’s gold equivalent reserves and resources, on the Canadian NI 43-101 basis, add up to 6.1 million oz.

A recent international investment bank valuation of HRG estimates it at almost $770 million. The current market capitalization, however, is C$112 million (US$91 million). This compares with Russian peer Polyus Gold (PLZL:LI) at $9.1 billion; Polymetal (PMTL:LI), $2.2 billion; Peter Hambro Mining (POG:LI), $686 million; and Highland Gold (HGM:LI), $203 million.



By John Helmer in Moscow

Russia’s steelmakers have a better chance to lift output and revenues on a recovery in export demand, especially in the China market, than on reviving domestic demand for steel. This forecast, issued in a steel sector report of March 24 by Troika Dialog investment bank in Moscow, flatly contradicts the consensus of Russian steel analysts a year ago. At that time, they told investors they were certain Kremlin spending on public works would sustain demand for steel for domestic construction and infrastructure, and so buffer the domestic steel industry against external shocks.

What a canard that turns out to be.

“Now that demand for steel is falling,” the new Troika report claims, “international trade is going to decline dramatically as well, but we think that Russian players are well positioned to claw back at market share thanks to the cost advantage, and hence protect export volumes from falling massively…On the domestic front… we expect demand to drop by around 40% in 2009 from its peak 2007 level…At the same time, we do not entertain illusions about a possible positive impact from the government economic stimulus program, which seems to be growing smaller by the day.”

The report predicts that the protectionist option may also grow in importance, as Russian mills and pipemakers apply to the Trade Ministry in Moscow for domestic injury or anti-dumping relief, primarily to keep out Chinese steel imports. “Russian producers could partly offset the drop in demand by squeezing out imports, which averaged 13% of Russian consumption last year (the same as during the entire previous decade), but this might be difficult without official support. The Russian government took the first step in January, imposing import duties on certain types of long products and pipes ranging from 15-20%, thoughthis may not be enough to put a barrier in the way of imports.”



By John Helmer in Moscow

For weeks, Alrosa, Russia’s diamond mining challenger to De Beers, has been waiting for the appearance of a miracle to keep the mines producing at last year’s volumes, and avoid layoffs and financial damage to the fareastern region of Sakha, where Alrosa is the chief income generator.

That miracle is a secretive government agent called Gokhran. Legally a branch of the Ministry of Finance, it has a history going back three hundred years to the time when Tsar Peter the Great decided he needed something more formal than bodyguards and hobnailed chests in which to keep his treasure.

During the 1990s, Gokhran played a key role in releasing, as well as withholding Soviet-era stocks of rough diamonds, plus platinum and palladium. The result created several diamond fortunes in Tel Aviv and San Francisco; the speculative spikes in the price of the platinum group metals were the foundation on which several celebrated Johannesburg mansions and Eastern Cape beach villas were erected.

Today, much depleted in valuables, compared to fifteen years ago, Gokhran is rebuilding its strategic significance in the international diamond market. This is because it has the potential, with Russian state funding, to buy up Russian rough diamond production. Unlike the other global diamond miners, which are halting mine operations, slowing mills, and laying off miners and prospectors, the alliance between state-owned Alrosa and state-funded Gokhran has the potential to make an enormous Russian grab of global diamond market share — and keep it.

That is what Alrosa, with a 25% share of the market, is waiting for. But will Godot, I mean Gokhran arrive in time? On Thursday last [March 19], it seemed so. Russian government ministers agreed then to make a substantial increase in budget money for Gokhran to buy Alrosa’s mine output this year. It is far from clear, however, what proportion of the production will not be bought by Gokhran; and what cuts to the mine output plan Alrosa management may now be obliged to make, if any.



By John Helmer in Moscow

Denmark-based fleet operator Norden has hit United Company Rusal, the Russian aluminium monopoly controlled by Oleg Deripaska, with claims for shipping contract violations since last September. The liabilities total $98.3 million. Court documents break publicly for the first time the code of silence which usually covers Russian commodity trades, the cargo owners and the shippers.

Norden chief executive Carsten Mortensen refuses to say if London arbitration to enforce Norden’s contracts has already commenced.

US court records from the southern federal district of New York show, however, that Norden is charging a Jersey-registered Rusal trading company with breaking contracts for the shipment of 2.6 million tonnes of Queensland bauxite from the port of Weipa to Porto Vesme, the alumina refinery port in Sardinia. The tariff agreed was $64.64 per tonne, making a gross charge of $167 million. For this year, the contracts specify 15 shipments of 300,000 tonnes.

Rusal, one of the leading primary aluminium, alumina and bauxite producers in the world, has said in the past that all shipping data are company secrets; the company itself is privately owned and publishes no financial reports. Trade data are kept secret, because of the complex tolling and tax schemes which Rusal uses in Russia, and in its international operations. The Australian government keeps bauxite export data confidential.

According to the US court documents, Norden went into the New York federal district court in February to attach Rusal bank funds to secure payment, in the event the London arbitration awards Norden its claim. On February 10, US judge Richard Berman ordered 15 US and international banks, including Nordea of Finland, to freeze Rusal accounts up to $93.8 million in cash value.



Starting in the third quarter of last year, United Company Rusal started cancelling shipping contracts for cargoes of bauxite between Australia and Sardinia. On February 4, 2009, Norden, a Danish company with whom Rusal had a long-term contract for vessel delivery of its bauxite, filed suit in the federal US Court in New York, seeking the freeze and attachment of almost $100 million in cash which the company was believed to have on deposit in banks in the New York area. The bank accounts and money were ordered frozen by a court order on February 10. The legal proceedings for contract claims will now be heard in an arbitration court in London.

The freeze order obtained by Norden was the largest secured to date by a creditor against the Rusal group, which is now facing debt claims from more than 70 foreign banks and at least half a dozen Russian banks.

For readers with a special interest in these matters, here is Norden’s US complaint:
Norden A/S v Rusal Trading International Limited

And here is the freeze order that followed:
US court order of attachment against Rusal Trading International Limited



By John Helmer in Moscow

Prime Minister Vladimir Putin has put his signature on one of the strangest mining prospector’s pay-sheets ever drafted in the history of mining.

According to the prevailingRussian law, now one year old, if a miner does not qualify as Russian, and if what he discovers is big and valuable enough, he must hand over what he’s found to the state, which may then auction it to the highest domestic bidder. In compensation, Putin’s formula, according to a decree he signed on March 10, will provide reimbursement of prospecting expenses, plus a finder’s fee ranging from 25% to 50% of these expenses, depending on how inhospitable the territory that has been explored.

There’s also a catch — the expense reimbursement, and the premium, cover only those costs for exploring, finding, and proving the deposit which the state takes back. Thus, the unlucky prospector has to be really lucky to hit paydirt with a single drill-core, otherwise Putin will slam the pay-window down on his fingers. A prospector might count himself more fortunate if he should find much less than the state, or his Russian rivals, would like to acquire.

In practice, the Putinformula encourages the very schemes which Oleg Mitvol, Russia’s mining regulator until he was ousted last year, attacked as boosting London-listed share prices, instead of investing in mining as such. It remains to be seen whether the formula proves to be El Dorado for consolidators of junior assets and M&A speculators.

A year ago, the Russian parliament enactednew legislation setting out a list of 42 strategic sectors and metals, and also thresholds for mineable reserves of oil, gas, copper and gold that identified such deposits as “strategic”. The purpose was to protect the national resource base from takeover by cash-rich internationals. After several years of argument over the thresholds, the new legislation fixed the foreign exclusion limit for oil at 70 million tonnes (490 million barrels); gas at 50 billion cubic metres; gold at 50 tonnes (1.6 million ounces); and copper at 500,000 tonnes. A zero threshold was fixed for the mining of uranium, diamonds, quartz, cobalt, nickel, platinum group metals, beryllium, and lithium.



By John Helmer in Moscow

The Moscow and New York stock markets appear to have been taken unawares by the disclosure that Igor Zyuzin’s steel and coal-mining group Mechel is in court over an unpaid demand by BNP Paribas for $60 million. The share price of the fifth-ranked Russian steelmaker rose 1.3% in Wednesday’s Moscow market trading, and 10% in subsequent trading in New York. However, there is no sign that Mechel has informed the US Securities & Exchange Commission (SEC) of the material change in the company’s financial position and asset value, stemming from the court action in Geneva.

This is the second instance in as many months when Mechel has failed to notify the US regulator and US shareholders of material changes. The first, reported by CRU Steel News on February 26, exposed Zyuzin’s acquisition of the West Virginia-based Bluestone Coal for a cash down-payment of $425 million, and the issue of 80 million Mechel preference shares. As one analyst reported what happened at the time, “the money simply disappeared from Mechel’s balance-sheet, without an explanation.”

Zyuzin’s spokesman Ilya Zhitomirsky has refused to clarify the circumstances of the Bluestone Coal deal. He is also refusing to answer questions about the BNP Paribas claim.

Zyuzin is generally believed in the Russian market to have overpaid for previous mining acquisitions — of coking coal deposits in the Sakha region in January 2005, and again in October 2007, for a combined total of $2.7 billion; and of Oriel Resources, a chrome miner and refiner, in March 2008 for $1.5 billion. Following the Oriel deal, transacted at a 90% premium to the prevailing market price, Mechel’s share price dropped 3%.

Today, Thursday, a note from Alfa Bank confirms that Mechel’s trouble with BNP Paribas is connected to this week’s March 20 deadline for repayment of a $1.5 billion loan. That was issued last year to finance Zyuzin’s premium-priced acquisition of Oriel, whose assets are located in Kazakhstan and Russia. According to the report by Alfa steel analyst Barry Ehrlich, Mechel “had a low cash balance at the beginning of the year, we estimate, and then obtained a three-year $1 bln credit line from Gazprombank in February.” Referring to the BNP Paribas debt, Ehrlich said: “We believe this conflict may be related. We also believe that negotiations with the Oriel Resources loan syndicate are still ongoing.”



By John Helmer in Moscow

Sometimes it can happen that men of steel have a soft underbelly. It’s to protect that that they wear armour-plate.

The release this week of group financial results for Severstal, the third ranked Russian steelmaker owned by Alexei Mordashov, exposes the high cost, and poor judgement perhaps, of Mordashov’s purchases of US steelmaking and coal assets last year.

According to Uralsib Bank steel analyst Michael Kavanagh, “the consensus [is] that Mordashov bought the US assets as a hedge against losing the Russian assets. However, bear in mind that the Russian steel operations are subsidising all other assets. With hindsight, all acquisitions made in the last two years will look expensive. Acquisitions should be judged over time and through the cycle. However, it does look like they [Severstal] over-paid in the context of today’s market.”

According to Severstal’s financial report for 2008, issued last week with auditor’s notes by KPMG, a total of $1.54 billion has been written off against 2008 operating profits, slashing the pre-tax profit figure by almost 50%. The comparable writeoff loss for 2007 was $28.9 million; $57.8 million in 2006.

Mordashov is quoted in the company’s press release, accompanying the financial report, as claiming that a healthy 44% increase in the group’s 2008 revenues (to $22.4 billion) was “due to strong demand in the first nine months of the year, a favourable price environment and the consolidation of our assets in North America.” Mordashov was coy when it came to explaining the unprecedented loss of asset value. The public statement says: “There was an exceptional drop in the demand for steel in Q4 2008. This, combined with valuation adjustments of $411 million on inventories to NRV and a $1,540 million of impairment of non-current assets, contributed to a net loss of $1,208 million in the last quarter.”

Nowhere in Mordashov’s public statement is there any mention that most of this “impairment” was caused by the loss of value of the American assets Mordashov has recently purchased. All that he could find to say about the performance of these assets was how much better they are doing than before he paid premiums to take them over a year ago; and also how successful the company’s lawyers have been in claiming insurance and contract violation pay-outs.



By John Helmer in Moscow

Steelworkers at the Zlatoust steel mill, which is owned by Vadim Varshavsky’s Estar group, have won an unprecedented claim for wages cut by the company, following a local court ruling and a 5-day hunger strike. It is the first known case of a successful protest action by Russian steelworkers since capacity reductions, furnace shutdowns, and layoffs began last October. Zlatoust produces specialty steels for auto, military, toolmaking and other applications; before the crisis, output was running at about 40,000 tonnes per month.

The steelworkers’ success coincides with an ongoing negotiation between Varshavsky’s managers and the state-owned Vnesheconombank (VEB) to refinance Estar’s loans. Some of these loans support Varshavsky’s acquisitions of Alpha Steel in Wales; and the Istil group, with a mini-mill in Donetsk, Ukraine; and another in construction in the UAE. According to a source at Estar, there have been no layoffs in the UK at the re-named Mir Steel plant.

Local press reports indicate, and Estar sources confirm, that 16 steelworkers from the Zlatoust plant, in the Chelyabinsk region of central Russia, suspended a hunger strike on the weekend, after the Zlatoust mill director confirmed by letter that a claim for an initial Rb6.7 million ($186,111) in back pay for October through December would now be paid. The protest organizer, Alexander Negrebetskikh, was reported as saying: “Estar agreed to pay 30 percent of the sum they owe the workers by March 18. We are suspending the hunger strike, but if they don’t pay [the rermainder of the pay claim] we will resume.” The total backpay claim amounts to almost Rb40 million ($1.1 million, repayable over six months).

An Estar source told CRU Steel News “the delay in wages was not actually a delay. Currently, the amount of orders [for the mill’s products] has declined by fourfold. So Estar has moved its workers to a shorter week of 3 to 4 days. The payment for the idle period was two-thirds of the regular wage. The workers appealed to the local court, and demanded the full wage to be paid. They won the court ruling, so now Estar will compensate this money.” A schedule for repayment has been agreed, starting from March 18.



By John Helmer in Moscow

Despite a blackout of news from Archangel Diamond Corporation (AAD:CN), the Canadian mining junior will seek US court orders to oblige two key Russian executives to give testimony on oath in ADC’s claim that it has been unlawfully deprived of its stake in the multi-billion dollar Grib diamond pipe, in northwestern Russia.

The threats of a US court order to testify, and of legal sanctions for possible evasion of the subpoena or perjury, have been the most powerful weapons ADC has held in its decade-long attempt to recover its mining rights from the Russians named in the court claims. It has taken that long for the US courts to consider whether to exercise jurisdiction over the Russians — the ruling could come very soon.

Before diamond values crashed last year, De Beers had estimated the Grib deposit to contain 74 million recoverable carats, worth about $8.2 billion. It is the largest diamond mine ever discovered by a foreign mining company in Russia. Despite technical mining difficulties, the project is believed to have significantly better profitability prospects than new DeBeers projects in Canada, where book values have been heavily written down.

Financed by DeBeers, which holds a 59.4% stake, ADC held a conference last month with the presiding judge in the Denver, Colorado, District Court. The judge has called for the filing of third-party deposition notices, which may be signed shortly. Lawyers for ADC will not comment on the identities of those to be deposed. However, in an earlier phase of the US proceedings, 11 individuals were listed for interrogation. They included the former CEO of ADC, Timothy Haddon; Vagit Alekperov, the CEO of LUKoil, one of Russia’s leading oil companies; and Alisher Usmanov, a well-known owner of iron-ore mines and steelmills in Russia, and part-owner of the UK football club, Arsenal.

The named defendants in ADC’s claim are two Russian companies, Arkhangelskgeoldobycha (AGD), the current licence holder and miner of the diamond project; and LUKoil, the controlling shareholder of AGD. Alekperov and Usmanov are accused in ADC’s court claim of being participants in “a scheme of fraud, breach of express and implied contract, civil conspiracy, intentional interference with contract, breach of fiduciary duty, and unjust enrichment”. ADC is claiming $1.2 billion in compensatory damages for the loss of its investment and profits in the diamond project, plus triple punitive damages of $3.6 billion for the alleged racketeering conspiracy.



By John Helmer in Moscow

On February 24, at the headquarters of Russia’s state media, Prime Minister Vladimir Putin visited the offices of Russia Today, an English-language cable and satellite broadcaster. He was escorted by Svetlana Mironyuk, the head of the Russian News and Information Agency (RIA-Novosti), an administrative holding for state media; in the Russian administrative jargon, the holding is a “federal state unitary enterprise”, without shareholdings, fully funded from the state budget.

Her boss, Mikhail Seslavinsky, head of the Federal Agency for Press and Mass Communications (FARMS, aka Rospechat), wasn’t reported to be in attendance. But then Putin wasn’t visiting for long. Actually, fifteen minutes — according to Moscow News, a weekly tabloid in English, which is also funded and managed by the state from an office in the same complex, a stone’s throw from the Foreign Ministry.

Mironyuk has headed the state news agency since 2003; before that she worked for Vladimir Gusinsky’s Most media group, and survived his downfall. Her agency began before she was born, in 1941, as an information outlet for the Communist Party’s Central Committee, focusing on reporting from the war fronts. By the war’s end, it was running media outlets, including newspapers, magazines and radio stations, in more than 20 countries. The target audience had shifted from domestic to foreign.

In 1961, the two audiences were combined in a mission charter that aimed “to contribute to mutual understanding, trust and friendship among peoples in every possible way by broadly publishing accurate information about the USSR abroad and familiarizing the Soviet public with the life of the peoples of foreign countries.” During Mikhail Gorbachev’s perestroika, the charter was modified to democratize the media themselves. The Gorbachev mission statement of 1990 said the new agency was “to provide information support for the USSR’s state domestic and foreign policies and proceeding from the interests of the democratization of the mass media.” At the time, the agency was running an extraordinary number of bureaux in 120 countries.

Whether the media output was propaganda, or accurate news reporting, depended on which side of the Cold War and the Iron Curtain you were on. When the curtain came down on the Soviet Union, according to Mironyuk’s agency website, “the main criteria of RIA Novosti’s information services were the combination of promptness, objectiveness, authenticity and its own opinion regardless of the political situation.”



By John Helmer in Moscow

The only internationally listed Russian port company is turning out to be one of the stable revenue survivors in the shipping, trading, container, and currency storms now blowing havoc across the Black Sea. But don’t pay attention to the stock markets, the company management and Russian maritime analysts warn.

Shares of Novorossiysk Commercial Sea Port (listed as NCSP:LI in the London market, NMTP:RU in the Russian market) retreated 10% in trading on March 2; they have lost 40% since January 1. At a current share price of 60 US cents, market capitalization of the company is currently $1.2 billion. At peak in June 2008, the share price was 22 cents, and the market cap, $4.3 billion. The controlling shareholder is board chairman Alexander Ponomarenko; the Russian government holds a 20% stake; and since a London initial public offering in 2007, the free share float is between 20% and 30%.

However, share turnover has been minimal, according to a source close to the company, adding that when a Moscow investment bank stopped speculating in the shares last year, the volume of shares offered for sale has been too small to be significant. Large swings up and down in the share price are therefore dismissed by senior management of the company as lacking meaning. Whether the instability is without impact on the management, the institutional shareholders, and bank lenders to the port is another issue.

A London broker told Fairplay there was significant dumping of shares in the last quarter of 2008, and in January of this year, as hedge funds sold out of all their emerging market positions. More recently, he said the position for Novorossiysk port has stabilized, as the management message begins to get through. The management claims the main institutions, which bought into the company at the IPO, haven’t budget. It also claims that’s the message it is getting regularly from Morgan Stanley and other marketmakers.



By John Helmer in Moscow

The Belarusian Potash Company (BPC), the trader for Uralkali and Belaruskali, has announced it will offer a 25% discount off the spot price of potash on the Brazilian market from $1,000/tonne to $750-$765/tonne (including cost and freight, CFR). The offer is good from this month to end-May.

Brazil is one of the drivers of the spot market for potash; whither the Brazilians lead, the Chinese and Indians are bound to follow.

To date, producers have managed to defend pricing at the nominal $1,000/tonne CFR level reached in mid-summer 2008 by concerted production and supply cuts. In practice, during the grim second half of last year, only a minor share of global potash sales — maybe no more than 5% — were done at the $1,000/tonne price, while the de facto average price on the market has been at the $600 to $650/tonne level since August.

Industry analysts claim that Brazil has been hit hard by the liquidity crisis and economic slowdown, with fertilizer purchasing activity virtually coming to a halt. But in 2008, Brazil imported more potash than China, India, or the southeast Asian market altogether, and the accumulated inventories have yet to be emptied to the point where importing can start again. To do that, there is anecdotal evidence that Brazilian importers are demanding the “Carnival discount” of 50%; the price of boxes to watch the Rio Carnival’s closing pageant last month were reportedly cut to 50% of the 2008 level in dollar terms.

The BPC discount price offer is less than it seems, for the new price represents a 3% to 5% increase over the average price to Brazil for all of 2008, which was $725/tonne CFR.



By John Helmer in Moscow

Russian steel proprietors are showing their anger at negative market reports, and share price cuts, following recent disclosure of their heavy investment spending on North American assets. But there has never been a time when the future growth and profitability of Russian steelmaking has depended less on the United States — or more on decisions being taken in China. How long it will take the Kremlin to deal with this contradiction between the national interest and the self-interest of the steel oligarchs is anyone’s guess.

The outcome of the Chinese government’s new stimulus programme, and of contract negotiations between Australian, Brazilian, and South African coal and iron-ore suppliers, are being closely watched in Moscow. That’s because the Russian steelmakers believe their future depends on Chinese demand for low-priced Russian steel. If Chinese buyers do no better than a 20% to 30% cut in spot and contract prices for these raw materials, Russian steel will still be better priced for Chinese importers.

Novolipetsk Steel (NLMK), Russia’s third largest steelmaker and slab specialist, says that a recent surge of sales of its steel slabs to China may enable the company to increase mill capacity and steel output next month. But the steelmaker also warns that this increase in steel production may not prove to be sustainable, because Chinese buying depends on the relative low price of Russian steel in the current international market. This price advantage for Russian exports in the Asian market could be lost, Novolipetsk believes, if competing steel producers benefit from significantly lower iron-ore and coking coal supplies from Australia, Brazil, and elsewhere.

A report of the Novolipetsk assessment has been issued by Uralsib Bank in Moscow. “Currently”, the bank says, “the Russian steel industry and NLMK in particular have a cost advantage over those steelmakers around the world who use expensive Brazilian and Australian iron ore and Australian coking coal. This has enabled Russian steel producers (who produce more than domestic consumption) to find an attractive export market for their semi-finished and low value-added finished steel products, particularly in Asia.”


By John Helmer in Moscow

More than one worker in ten in the Russian mining and metals sector is currently out of work, or facing company-ordered reductions of work time or pay, or both.

The statistics are being gathered by the Russian Mining and Metallurgical Trade Union, which has been monitoring job and pay conditions at 240 enterprises in the sector since last October. At that time, a total of 752,409 workers were on the employment rolls. A union source said their data have been compiled up to the end of February. At this point, the union says that 14,039 have been dismissed; 66,747 have had their working hours reduced, but retain their jobs; 1,384 are on enforced furlough without pay; and 1,247 are on furlough with partial pay. In total, 83,417 production and support workers at Russia’s mines, mills and metal works have now been hit by the economic crisis; about 11%.

The union also charges that many of the layoffs and pay cuts have been made illegally. An estimated 5,430 of those on the dismissal list, 42%, purportedly agreed to severance, but there is ample anecdotal evidence that they were forced by company managers into signing resignation papers. The union also charges that 35 companies in the sector are paying wages to 11,598 employees at a two-thirds reduced level that is not allowed under Russian labour regulations.

Layoffs of between 2,000 and 4,000 workers on the payrolls of Evraz (EVR:RU) steelmills and mines in Russia are a violation of the agreement Evraz signed with worker and regional representatives in November, a union leader told Minesite.

Lyudmila Zavzyalova, secretary of the Nizhny Tagil municipal authority, in Sverdlovsk region, told Minesite that 1,400 workers from Evraz’s lead Russian mill at Nizhny Tagil were recently listed for dismissal, and 582 workers from the nearby Vysokogorsky iron ore mine.



By John Helmer in Moscow

Sergei Vybornov, the chief executive officer of Alrosa for the past two years, is mobilizing federal government and industry support in Moscow to oppose a bid by Sakha President, Vyacheslav Shtirov, to replace him, and take over the top post at Alrosa.

Shtirov made his bid at a meeting with Prime Minister Vladimir Putin on February 25. A spokesman for Putin told PolishedPrices that Shtirov was alone with Putin at the meeting. The spokesman declined to say what the two men had discussed on the subject of the diamond industry and the future of Alrosa.

The official text from the prime ministry is in the form of a partial transcript, in which Shtirov refers to the problems of his region, but mentions Alrosa only once, diamonds once. The transcript of Shtirov’s remarks refers in some detail to the region’s oil, coal, and gold-mining developments. All Putin is recorded as saying is that while the market prices of oil, coal, metals, and diamonds are declining, the price of gold is rising. He is reported to have repeated himself on this point, while Shtirov is reported as pointing out that gold production from the region, while a healthy 18 tonnes (579,000 ounces) last year, cannot be expected to increase without fresh and costly capital investment, which the Russian banks are reluctant to finance. According to the transcript, Putin said: “We’ll solve the problem with gold mining.” Shtirov then says that he expects a solution for state guaraneteed advance funding of goldminers will be devised soon. The published transcript ends with Putin saying: “Good.”

Since sources familiar with what was discussed claim that Shtirov’s bid to leave the presidency of Sakha and retake Alrosa was the piority of discussion with the Prime Minister, they interpret Putin’s reported remark about goldmining as taken too crudely out of context to make sense; and also to be irrelevant to the decision Shtirov was asking for.



By John Helmer in Moscow

Layoffs of between 2,000 and 4,000 workers on the payrolls of Evraz steelmills and mines in Russia are a violation of the agreement Evraz signed with worker and regional representatives in November, a union leader told CRU Steel News today.

Lyudmila Zavzyalova, secretary of the Nizhny Tagil municipal authority, in Sverdlovsk region, told CRU Steel News that 1,400 workers from Evraz’s lead Russian mill at Nizhny Tagil were recently listed for dismissal, and 582 workers from the nearby Vysokogorsky ore-processing combine.

Alexander Mironov, a spokesman for the Kemerovo region branch of the Russian Mining and Metallurgical Trade Union told CRU Steel News the numbers to be laid off at Evraz’s plants and mines in his region were revealed in a company document, dated December 30. According to Mironov, the shutdown of two blast furnaces and two coke batteries at the West Siberian Metallurgical Combine (Zapsib) and Novokuznetsk Iron & Steel Works, both in Novokuznetsk city, will cost 700 and 150 jobs, respectively. Another 900 workers were targeted, according to the union official, at mines of the Evrazruda (“Evraz ore”) subsidiary.

Combining worker layoffs in the two regions makes a total of 3,732. The official payroll of the Evraz group, which is controlled by Roman Abramovich and Alexander Abramov, is not cited in the last company annual report, nor in any of the company’s references to its operations on the official website;. except for a note that 90% of the Evraz group workforce is employed in Russia; 10% in the rest of the world. According to the company’s 2007 Annual Report, labour accounts for 10% of the costs of the Russian steel division.


By John Helmer, Moscow

Agatha Christie’s whodunit entitled And Then There Were None – the concluding words of the children’s counting rhyme — is reputed to be the world’s best-selling mystery story.    

There’s no mystery now about the war of Europe and North America against Russia; it is the continuation of Germany’s war of 1939-45 and the war aims of the General Staff in Washington since 1943. Defense Minister Sergei Shoigu (left) and President Vladimir Putin (right) both said it plainly enough this week.

There is also no mystery in the decision-making in Moscow of the President and the Defense Minister, the General Staff, and the others; it is the continuation of the Stavka of 1941-45.  

Just because there is no mystery about this, it doesn’t follow that it should be reported publicly, debated in the State Duma, speculated and advertised by bloggers, podcasters, and twitterers.  In war what should not be said cannot be said. When the war ends, then there will be none.  



By John Helmer, Moscow

Alas and alack for the Berlin Blockade of 1948-49 (Berliner Luftbrücke): those were the days when the Germans waved their salutes against the unification of Germany demilitarised and denazified; and cheered instead for their alliance with the US and British armies to fight another seventy years of war in order to achieve what they and Adolf Hitler hadn’t managed, but which they now hope to achieve under  Olaf Scholtz — the defeat of the Russian Army and the destruction of Russia.

How little the Germans have changed.

But alas and alack — the Blockade now is the one they and the NATO armies aim to enforce against Russia. “We are drawing up a new National Security Strategy,” according to Foreign Minister Annalena Baerbock. “We are taking even the most severe scenarios seriously.”  By severe Baerbock means nuclear. The new German generation — she has also declared “now these grandparents, mothers, fathers and their children sit at the kitchen table and discuss rearmament.”  

So, for Russia to survive the continuation of this war, the Germans and their army must be fought and defeated again. That’s the toast of Russian people as they salute the intrepid flyers who are beating the Moscow Blockade.  



By John Helmer, Moscow

Last week the International Atomic Energy Agency’s (IAEA) board of governors voted to go to war with Russia by a vote of 26 member countries against 9.

China, Vietnam, India, Pakistan, Egypt, Senegal and South Africa voted against war with Russia.  

The IAEA Secretary-General Rafael Grossi (lead image, left) has refused to tell the press whether a simple majority of votes (18) or a super-majority of two-thirds (23) was required by the agency charter for the vote; he also wouldn’t say which countries voted for or against. The United Nations Secretary-General Antonio Guterres then covered up for what had happened by telling the press: “I believe that [IAEA’s] independence that exists and must be preserved is essential. The IAEA cannot be the instrument of parties against other parties.” The IAEA vote for war made a liar of Guterres.

In the IAEA’s 65-year history, Resolution Number 58, the war vote of September 15, 2022,  is the first time the agency has taken one side in a war between member countries when nuclear reactors have either been attacked or threatened with attack. It is also the first time the IAEA has attacked one of its member states, Russia, when its military were attempting to protect and secure a nuclear reactor from attack by another member state, the Ukraine, and its war allies, the US, NATO and the European Union states. The vote followed the first-ever IAEA inspection of a nuclear reactor while it was under active artillery fire and troop assault.

There is a first time for everything but this is the end of the IAEA. On to the scrap heap of good intentions and international treaties, the IAEA is following the Organisation for the Prohibition of Chemical Weapons (OPCW), and the UN Secretary-General himself.  Listen to this discussion of the past history when the IAEA responded quite differently following the Iranian and Israeli air-bombing attacks on the Iraqi nuclear reactor known as Osirak, and later, the attacks on Pakistan’s nuclear weapons sites.



By John Helmer, Moscow

The International Atomic Energy Agency (IAEA) decided this week to take the side of Ukraine in the current war; blame Russia for the shelling of the Zaporozhye Nuclear Power Plant (ZNPP); and issue a demand for Russia to surrender the plant to the Kiev regime “to regain full control over all nuclear facilities within Ukraine’s internationally recognized borders, including the Zaporizhzhya Nuclear Power Plant.”      

This is the most dramatic shift by the United Nations (UN) nuclear power regulator in the 65-year history of the organisation based in Vienna.

The terms of the IAEA Resolution Number 58, which were proposed early this week by the Polish and Canadian governors on the agency board, were known in advance by UN Secretary-General Antonio Guterres when he spoke by telephone with President Vladimir Putin in the late afternoon of September 14, before the vote was taken. Guterres did not reveal what he already knew would be the IAEA action the next day.  



By John Helmer, Moscow

Never mind that King Solomon said proverbially three thousand years ago, “a merry heart doeth good like a medicine.”  

With seven hundred wives and three hundred concubines, Solomon realized he was the inventor of the situation comedy. If not for the sitcom as his medicine, the bodily and psychological stress Old Solly had to endure in the bedroom would have killed him long before he made it to his death bed at eighty years of age,  after ruling his kingdom for forty of them.

After the British sitcom died in the 1990s, the subsequent stress has not only killed very large numbers of ordinary people. It has culminated today in a system of rule according to which a comic king in Buckingham Palace must now manage the first prime minister in Westminster  history to be her own joke.

Even the Norwegians, the unfunniest people in Europe, have acknowledged that the only way to attract the British as tourists, was to pay John Cleese of Monty Python and Fawlty Towers to make them laugh at Norway itself.   This has been a bigger success for the locals than for the visitors, boosting the fjord boatman’s life expectancy several years ahead of the British tourist’s.  

In fact, Norwegian scientists studying a sample of 54,000 of their countrymen have proved that spending the state budget on public health and social welfare will only work effectively if the population is laughing all the way to the grave. “The cognitive component of the sense of humour is positively associated with survival from mortality related to CVD [cardio-vascular disease] and infections in women and with infection-related mortality in men” – Norwegian doctors reported in 2016. Never mind the Viking English:  the Norwegian point is the same as Solomon’s that “a sense of humour is a health-protecting cognitive coping resource” – especially if you’ve got cancer.  

The Russians understand this better than the Norwegians or the British.  Laughter is an antidote to the war propaganda coming from abroad, as Lexus and Vovan have been demonstrating.   The Russian sitcom is also surviving in its classic form to match the best of the British sitcoms, all now dead – Fawlty Towers (d. 1975), Black Adder (d. 1989), You Rang M’Lord? (d. 1988), Jeeves and Wooster (d. 1990), Oh Dr Beeching! (d.1995), and Thin Blue Line (d. 1996).

The Russian situation comedies, alive and well on TV screens and internet streaming devices across the country, are also increasingly profitable business for their production and broadcast companies – not despite the war but because of it. This has transformed the Russian media industry’s calculation of profitability by removing US and European-made films and television series, as well as advertising revenues from Nestlé, PepsiCo, Mars, and Bayer. In their place powerful  Russian video-on-demand (VOD) streaming platform companies like Yandex (KinoPoisk), MTS (Kion), (VK), and Ivi (Leonid Boguslavsky, ProfMedia, Baring Vostok)  are now intensifying the competition for audience with traditional television channels and film studios for domestic audiences.  The revenue base of the VOD platforms is less vulnerable to advertisers, more dependent on telecommunications subscriptions.

Russian script writers, cameramen, actors, designers, and directors are now in shorter supply than ever before, and earning more money.  “It’s the Russian New Wave,” claims Olga Filipuk, head of media content for Yandex, the powerful leader of the new film production platforms; its  controlling shareholder and chief executive were sanctioned last year.  



By Olga Samofalova, translated and introduced by John Helmer, Moscow

It was the American humourist Mark Twain who didn’t die in 1897 when it was reported that he had. Twain had thirteen more lively years to go.

The death of the Russian aerospace and aviation industry in the present war is proving to be an even greater exaggeration – and the life to come will be much longer. From the Russian point of view, the death which the sanctions have inflicted is that of the US, European and British offensive against the Soviet-era industry which President Boris Yeltsin (lead image, left) and his advisers encouraged from 1991.

Since 2014, when the sanctions war began, the question of what Moscow would do when the supply of original aircraft components was first threatened, then prohibited, has been answered. The answer began at the Federal Aviation Administration (FAA) in 1947 when the first  Supplemental Type Certificate (STC) or Parts Manufacturing Approval (PMA) was issued by Washington officials for aircraft parts or components meeting the airworthiness standards but manufactured by sources which were not the original suppliers.   

China has been quicker to implement this practice; Chinese state and commercial enterprises have been producing PMA components for Boeing and Airbus aircraft in the Chinese airline fleets for many years.  The Russian Transport Ministry has followed suit; in its certification process and airworthiness regulations it has used the abbreviation RMA, Cyrillic for PMA. This process has been accelerating as the sanctions war has escalated.

So has the Russian process of replacing foreign imports entirely.



By John Helmer, Moscow

The weakest link in the British government’s four-year long story of Russian Novichok assassination operations in the UK – prelude to the current war – is an English medical expert by the name of Guy Rutty (lead image, standing).

A government-appointed pathologist advising the Home Office, police, and county coroners, Rutty is the head of the East Midlands Forensic Pathology Unit in Leicester,  he is the author of a post-mortem report, dated November 29, 2018,  claiming that the only fatality in the history of the Novichok nerve agent (lead image, document), Dawn Sturgess, had died of Novichok poisoning on July 8, 2018. Rutty’s finding was added four months after initial post-mortem results and a coroner’s cremation certificate stopped short of confirming that Novichok had been the cause of her death.

Rutty’s Novichok finding was a state secret for more than two years. It was revealed publicly   by the second government coroner to investigate Sturgess’s death, Dame Heather Hallett, at a public hearing in London on March 30, 2021. In written evidence it was reported that “on 17th July 2018, Professor Guy Rutty MBE, a Home Office Registered Forensic Pathologist conducted an independent post-mortem examination. He was accompanied by Dr Phillip Lumb, also an independent Home Office Registered Forensic Pathologist. Professor Rutty’s Post-Mortem Report of 29th November 2018 records the cause of death as Ia Post cardiac arrest hypoxic brain injury and intracerebral haemorrhage; Ib Novichok toxicity.”  

Hallett, Rutty, Lumb, and others engaged by the government to work on the Novichok case have refused to answer questions about the post-mortem investigations which followed immediately after Sturgess’s death was reported at Salisbury District Hospital; and a cause of death report signed by the Wiltshire Country coroner David Ridley, when Sturgess’s body was released to her family for funeral and cremation on July 30, 2018.  

After another three years, Ridley was replaced as coroner in the case by Hallett in March 2021. Hallett was replaced by Lord Anthony Hughes (lead image, sitting) in March 2022.

The cause-of-death documents remain state secrets. “As you have no formal role in the inquest proceedings,” Hallett’s and Rutty’s spokesman Martin Smith said on May 17, 2021, “it would not be appropriate to provide you with the information that you have requested.” 

Since then official leaks have revealed that Rutty had been despatched by the Home Office in London to take charge of the Sturgess post-mortem, and Lumb ordered not to undertake an autopsy or draw conclusions on the cause of Sturgess’s death until Rutty arrived. Why? The sources are not saying whether the two forensic professors differed in their interpretation of the evidence; and if so, whether the published excerpt of Rutty’s report of Novichok poisoning is the full story.   

New developments in the official investigation of Sturgess’s death, now directed by Hughes, have removed the state secrecy cover for Rutty, Lumb, and other medical specialists who attended the post-mortem on July 17, 2018. The appointment by Hughes of a London lawyer, Adam Chapman, to represent Sergei and Yulia Skripal, opens these post-mortem documents to the Skripals, along with the cremation certificate, and related hospital, ambulance and laboratory records. Chapman’s role is “appropriate” – Smith’s term – for the Skripals to cross-examine Rutty and Lumb and add independent expert evidence.

Hughes’s appointment of another lawyer, Emilie Pottle (lead image, top left), to act on behalf of the three Russian military officers accused of the Novichok attack exposes this evidence to testing at the same forensic standard. According to Hughes,  it is Pottle’s “responsibility for ensuring that the inquiry takes all reasonable steps to test the  evidence connecting those Russian nationals to Ms Sturgess’s death.” Pottle’s responsibility is to  cross-examine Rutty and Lumb.



By John Helmer, Moscow

The US Army’s Special Operations Command (SOCOM) has been firing several hundred million dollars’ worth of cyber warheads at Russian targets from its headquarters at MacDill Airforce Base in Florida. They have all been duds.

The weapons, the source, and their failure to strike effectively have been exposed in a new report, published on August 24, by the Cyber Policy Center of the Stanford Internet Observatory.  The title of the 54-page study is “Unheard Voice: Evaluating Five Years of Pro-Western Covert Influence Operations”.

“We believe”, the report concludes, “this activity represents the most extensive case of covert pro-Western IO [influence operations] on social media to be reviewed and analyzed by open-source researchers to date… the data also shows the limitations of using inauthentic tactics to generate engagement and build influence online. The vast majority of posts and tweets we reviewed received no more than a handful of likes or retweets, and only 19% of the covert assets we identified had more than 1,000 followers. The average tweet received 0.49 likes and 0.02 retweets.”

“Tellingly,” according to the Stanford report, “the two most followed assets in the data provided by Twitter were overt accounts that publicly declared a connection to the U.S. military.”

The report comes from a branch of Stanford University, and is funded by the Stanford Law School and the Spogli Institute for Institutional Studies, headed by Michael McFaul (lead image).   McFaul, once a US ambassador to Moscow, has been a career advocate of war against Russia. The new report exposes many of McFaul’s allegations to be crude fabrications and propaganda which the Special Operations Command (SOCOM) has been paying contractors to fire at Russia for a decade.

Strangely, there is no mention in the report of the US Army, Pentagon, the Special Operations Command, or its principal cyberwar contractor, the Rendon Group.



By John Helmer, Moscow

Maria Yudina (lead image) is one of the great Russian pianists. She was not, however, one who appealed to all tastes in her lifetime, 1899 to 1970.

In a new biography of her by Elizabeth Wilson, Yudina’s belief that music represents Orthodox Christian faith is made out to be so heroic, the art of the piano is diminished — and Yudina’s reputation consigned again to minority and obscurity. Russian classical music and its performers, who have not recovered from the Yeltsin period and now from the renewal of the German-American war, deserve better than Wilson’s propaganda tune.


Copyright © 2007-2017 Dances With Bears

Copyright © 2007-2017 Dances With Bears

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