RUSSIA CAPTURES BUMPER HAUL OF PIRATES

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By John Helmer in Moscow

The Russian government now leads the international naval powers’ tablewith 29 pirates under arrest, 14 more than the number being held by France, which has taken an estimated 71 Somalis in all; sent 11 to prison in Kenya; killed 4; and returned the rest to the Somali shore. The US has shot 3, and is currently holding one for trial in New York. On the Somali side, the pirates are estimated to be holding at least 16 vessels and about 270 seafarers.

Anatoly Serdyukov, the Russian Defence Minister, told a Moscowtelevision news programme on Wednesday afternmoon that “in the nearest time we will make a decision on what to do with pirates.” Russian naval interrogators are handling the pirates for the time being. Serdyukov added that the Russian Navy’s patrol of waters of the Gulf of Aden and Horn of Africa will continue.

The heavy destroyer, Admiral Panteleev, which is designed primarily for anti-submarine warfare, captured the Somali pirates,their vessel, and weapons on Tuesday evening, 15 miles off the Somali coast. How exactly this was done has not been disclosed. The Panteelev had deployed against the pirates after they attacked the Russian tanker, NS Commander, a 105,000-dwt vessel built for Novrossiysk Shipping Company in South Korea in 2006. The Commander was manned by a crew of 23 Russians.

The Russian Navy had despatched its anti-piracy patrol to the Horn of Africa last year, following the pirate capture of an Israeli-owned, Belize-registered vessel, the Faina, which was carrying Soviet-made tanks, air-defence weapons, and other arms intended for Kenya, and then possibly the southern Sudan. Most of the crew were Ukrainian; the master of the vessel and 2 crew memberswere Russian, and the master was reported to have died during the hostage-taking.

Russian tankercrews have also been taken for ransom off the west African coast.
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FOR K + S, WHEN IT DOESN’T RAIN, IT STILL POURS — GERMANS SLIP POTASH INTO CHINA TO UNDERCUT THE MARKET

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By John Helmer in Moscow

In the global marketplace for potash — one of the vital nutrients for plant growth, food production, and fertilizer fortune — noone is sharper at spotting a bargain than China. That’s because Chinese farmers, and the state fertilizer distributors, comprise the world’s largest consumers and importers of potash. And more than that, when the Chinese fix their annual contract price for potash imports, they set the marker for counterparts in India, southeast Asia, and Brazil, the next biggest potash markets, to follow.

During the last few years, China’s demand has been supplied by several sources , including Canpotex of North America, representing Canadian and US mining companies such as Potash Corporation; the Belarusian Potash Corporation (BPC), representing potash mined in Belarus and Russia; and Israel Chemicals Ltd. (ICL). During the past four years of farm potash supply hunger, and commodity price boom, the China market grew steadily, and so did potash prices.

But that’s history now. In the last half of 2008, the crash of all commodity prices and the shortage of farm credit have led most producers of potash to curtail their production dramatically, and prevent the accumulation of unsold stocks. In the first quarter of 2009, the Russian producer Uralkali, for example, cut its production of potash from 1.3 million tonnes to 459,000 tonnes, a reduction of 63%. Potash Corporation, the world’s largest potash producer in Saskatchewan, has reported that in the same period it cut sales volumes to North American customers by 86%, and to the rest of the world by 78%.

But it’s spring in China; and after an unusually rainless winter, farmers preparing to plant must have more potash than usual to improve their yields out of the dry ground. This is also the time that China’s big-volume buyers usually meet with the major producers and suppliers to fix the volume of deliveries of imported potash for another six to twelve months. But if the China National Agricultural Means of Production Corporation (CNAMPGC), the China National Chemical Construction Company (CNCCC), and Sinopec — the three major Chinese import buyers – keep their pens in their pockets, and their contract orders off the table, what exactly is happening?
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RAPID RELIEF OF JAPAN’S GAS PAIN — GAZPROM STARTS TO BUILD A GLOBAL LNG MARKET

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By John Helmer in Moscow

Russia’s maiden LNG terminal became operational in late 2008, after years of controversy over seismic and ground contamination onshore; threats to whale habitats at sea and tax evasion claims in Moscow. Gazprom, Russia’s dominant gas producer and monopoly exporter, now has shareholding control of the project operator, Sakhalin Energy, replacing Royal Dutch Shell. On March 29, the first LNG cargo was loaded aboard a tanker at Prigorodnoye port, on Aniva Bay, with 145,000 cubic metres of LNG bound for the Sodegaura terminal in Tokyo Bay, and for end-users, Tokyo Gas and Tokyo Electric. When the two planned production trains of the project reach full capacity in a year’s time, the Sakhalin LNG terminal will ship 9.6 million tonnes of LNG each year. Japan will take roughly two-thirds of the LNG from Sakhalin; South Korea will take most of the remainder.

As the world’s largest exporter of natural gas by pipeline, Gazprom has made no secret of its ambition to increase its share of the global LNG market, and improve the netback margins it may earn from exported gas sales. A recent Gazprom management review pointed out that LNG earns spot-price premiums compared to fixed-price long-term natural gas supply contracts that form the bulk of Gazprom’s sales revenues. But LNG projects are capital- and engineering-intensive, and take from 5 to 10 years to start. For these reasons, Gazprom concedes that it has run into capital-raising problems for the Shtokman field, in the Barents Sea; and these in turn are delaying a clutch of schemes for gasification and shipment of LNG from northwestern Russia.

Total of France, one of the Shtokman field developers with Gazprom, had been saying that it envisaged four LNG plants to be built as Shtokman’s output capacity ramps up; the first of these was intended for a start date of 2014.

According to Gazprom’s plan for entering the US and Canadian LNG markets, first announced in 2005, this first northwestern gasification plant and loading terminal was intended for Primorsk, near St. Petersburg, on the Gulf of Finland; its capacity was for 7.2 million tonnes per annum. A Gazprom analysis in 2005 claimed that “the most promising market in terms of LNG supplies is the USA where… LNG imports will grow tenfold (from 18 to 180 bcm/y) .” ConocoPhillips and Chevron agreed to study marketing plans for shipments to the US with Gazprom. The Russian company also negotiated potential supply deals with the Canadian LNG terminals being built in Quebec.
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CAT IN A SACK, PIG IN A POKE — MECHEL’S BLUESTONE COAL DEAL DRAWS FIRE

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By John Helmer in Moscow

Confirmation this week by Mechel of its takeover of the West Virginia coal producer, Bluestone, has drawn fire from Moscow bank and brokerage analysts, who claim the price paid exceeds the value of the deal.

The Mechel announcement was issued on April 22, confirming details of a transaction which first commenced late in 2008, when Mechel made a cash down-payment, first reported at $425 million. An issue of about 80 million preferential shares, completed in March, was the second payment stage of the transaction. Although undisclosed to shareholders or to the US Secutiries and Exchange Commission, which regulates US-listed Mechel, the early reports indicated a valuation of Bluestone, owned by James Justice, of about $870 million. The share issue, it was speculated before this week, would amount to a 19% dilution for current shareholders.

Negotiations to finalize the deal appear to have continued between Justice of Bluestone and Igor Zyuzin, Mechel’s controlling shareholder and chief executive. According to the new release of the “definitive agreement”, Mechel says “”the aggregate merger consideration is $436 million paid in cash (including $36 million interest paid), approximately 83.3 million preferred shares, plus the assumption of approximately $132 million of net debt”.

Additional terms disclosed set out a more complex valuation of Bluestone, and substantially more to be paid for its acquisition by Mechel over the next five years. An analysis of the transaction by Uralsib Bank indicates that “if the value of the market value plus dividends paid in the next five years is less than $1585 million in five years’ time, Mechel will make a top up cash payment on the fifth anniversary of the deal. Finally, Mechel will pay an additional $3.04/ton for every ton of proven coal reserves in excess of 458 mln tons. Mechel’s expectation is that reserves could be 730 mln tons, implying that an additional $828 mln will be paid when the reserves are proven.”
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WHERE DID THE RUSAL FORTUNE OF OLEG DERIPASKA DISAPPEAR TO, PART-1: NOT IN AFRICA, WHERE AFRICAN GOVERNMENTS CHARGE THAT RUSAL UNDERPAID FOR ASSETS, OR DIDN’T PAY AT ALL

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Deripaska’s cashflow chart

By John Helmer in Moscow

Clark’s Nutcracker is the name of a bird, a member of the crow family, and one of the most famous in the world for a feat of intelligence few human beings, even certified public accountants, can match.

Ornithologists have observed that this fellow can remember hundreds of locations where he has stashed away food. A relative, the American Scrub-jay, is on record as being able to steal from the caches of other birds, and re-hide its own, once it suspects they have been spotted by other birds. If only the problem of tracking down the money of United Company Rusal, and its controlling shareholder Oleg Deripaska, was ornithological, then locating it for repayment to creditors would require no more than banding the wrists or ankles of Deripaska, and a handful of his lawyers and accountants.

So far, however, Deripaska has managed to do a Clark, and give his creditors the bird.

This presents an urgent problem for at least 70 international banks, and several Russian ones, which are owed large sums of money by Rusal, and which neither the company, nor Deripaska’s personal holding Basic Element, acknowledges it can repay – at least, not any time soon. Deripaska holds 56.8% of Rusal, and 100% of Basic Element. Depending on how the sums are calculated, and whether they include interest, penalties, and lawsuit contingency provisions, as well as loan principal, Deripaska and his companies currently owe between $20 and $30 billion. That’s the biggest debt stash in Russia. And in the world, perhaps only Bernard Madoff is charged with owing more. According to an official statement this week from Olga Zinovyeva, first deputy general director of Basic Element, Rusal owes $16.8 billion, while the Basic Element holding is obligated for about $3 billion in non-aluminium business debts.
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NOW YOU SEE MY GOLD ASSETS, NOW YOU DON’T – MIKHAIL PROKHOROV AND POLYUS GOLD ARE TARGET OF FIRST-EVER FSA ACTION

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By John Helmer in Moscow

For the first time since Russian goldminer listings began on the London Stock Exchange more than a decade ago, Russian shareholders have taken a major Russian goldminer to the UK regulator, alleging asset stripping and share value dilution, along with the charge that no justice is possible in the Russian courts. At the heart of the complaint filing is the sale of shares at what is alleged to have been ten times less than their fair value, and the valuation of gold reserves transferred at many muliples below book. The gold in question includes part of the most celebrated vein of unmined gold in Russia – the fabled Sukhoi Log deposit, in the southeastern Siberian region of Irkutsk.

A Moscow-based holding, Westway Alliance Corporation, with an 8% shareholding in the Irkutsk region goldminer Lenzoloto (“Lena [River] Gold”), filed its claim with the Financial Services Authority (FSA) on January 29.

The corporate targets identified in the complaint are the AIM-listed Polyus Gold (PLZL:RU, PLZL:LI), its management, and controlling shareholder, Mikhail Prokhorov. The FSA told Westway in March that an investigation has commenced. However, the FSA declines to respond publicly to questions about the case. The agency also warns complainants that its charter allows it to dispose of a complaint without informing anyone, unless the outcome is a disciplinary action posted on the FSA’s website. In 2007, the FSA says it issued just one disciplinary order or enforcement notice; in 2008, there were 8; and in 2009 so far, 2.

Westway told Minesite that between 2003 and 2006, Polyus took over the gold-producing and exploration assets of Lenzoloto at one price; then devalued them for transfer to Polyus; raised their value to achieve a significantly greater capital value for Polyus; and thereby deprived Westway as a minority shareholder in Lenzoloto of the substantial difference in value. Calculated on the basis of under-valued or reserves allegedly lost to Lenzoloto, Westway’s claim targets an amount estimated at $526 million; of that, its 8% stake should represent a claim to about $42 million.

In 2007, when Westway filed its initial claim in the Irkutsk regional arbitration court, the case was dismissed on a technicality. This was that, at the time of filing, and in the court papers, Westway failed to provide proof that it was the owner of Lenzoloto shares, although at the time the record of title indicated a nominee shareholder.
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MEDVEDEV VISIT TO CAP RUSSIAN HONEST-BROKER BLITZ IN AFRICA

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By John Helmer in Moscow

President Dmitry Medvedev will make his first visit to Africa in June, with stops planned in Egypt, Nigeria, and Angola. The disclosure of the Russian President’s first Africa trip was made in an interview with Business Day by Mikhail Margelov, the chairman of the Foreign Affairs Committee of the Federation Council, the upper house of the Russian parliament. Since December last, Margelov has been Medvedev’s special representative for Sudan, and the Kremlin’s first roving troubleshooter for Africa.

“Russia is back in Africa,” Margelov had said on arrival in Khartoum in January. Since then he has also toured the Darfur region, and met with Arab mediators in Cairo, Beirut, and Qatar to help bolster international efforts in the Sudanese conflict.

Margelov told Business Day that he recently held talks in Moscow with Awad Ahmed Al-Jazz, a special emissary from the Sudanese President Omar al-Bashir.

Russia is able to play the “honest broker role” in the Sudan, Margelov said, because Russia does not carry the burden of the colonial ties of the UK; the multi-billion dollar investment stakes of China; or the ideological positions of the US. Margelov said he is trying to build a balanced approach, and gather information from all of the Sudanese political factions. He said he has already held talks with Minni Arcua Minawi, a former rebel and leader of one of the Sudanese Liberation Army factions, who signed the Abuja peace settlement of 2006.

Margelov told Business Day he expects to meet other Sudanese opposition groups and neighbouring governments in Chad, Uganda, and Kenya, probably after Medvedev’s visit to the region.
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ALROSA’S DIAMOND FUTURE SUDDENLY VERY VERY SLIGHTLY INCLUDED

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By John Helmer in Moscow

If the senior management of Alrosa, the world’s number-2 diamond miner, mounted the review platform above Lenin’s tomb in Red Square, and stood in line for a two-hour military review, the goings-on inside the corporate executive suite wouldn’t be any clearer. But the body language might signal whether the company’s boss, Sergei Vybornov, is out of line, terminally.

But without that, all that can be read into an announcement from last Friday’s session of the Executive Board, is that the company management had an important visitor on Friday, and that after he had left, all that could be announced was uncertain.

Alrosa, the Russian diamond miner, is to reduce its dollarised production target for this year by 15.9%, according to the company’s record of an Executive Board meeting, held at Mirny, in the Sakha republic, on Friday.

The future of CEO Sergei Vybornov is also being considered by the company board, according to sources, who have told Polished Prices that Vybornov has agreed to step down once a replacement has been found for him. The board has also agreed, according to these sources, that Sakha President, Vyacheslav Shtirov, will not be Vybornov’s replacement.

The board’s new communique says nothing explicitly about the long-running feud between Vybornov and Shtirov. However, it notes that the Executive Board, a senior management body, included Shtirov in its deliberations on Friday. This is unusual. Shtirov is formally a member of the company’s Supervisory Board, equivalent to a corporate board of directors, which includes members nominated by the shareholders, and is chaired by federal Finance Minister, Alexei Kudrin. The last Supervisory Board meeting was held on December 30. The last public notice of an Executive Board meeting, convened on December 12, did not include Shtirov.
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FLOOD WARNING FROM SWITZERLAND!!! — RUSSIAN STEEL SURGE THREATENS THE WORLD!!!

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By John Helmer in Moscow

A report issued this week warns that Russian steelmills may try to export their way out of the current global economic crisis, exploiting their low-cost power and raw material advantages, and creating a potential glut in global steel supplies for another twelve months or longer. Steel analysts from the Swiss bank UBS produced the report on April 8.

“We see a severe looming export threat from Russia and its neighbors for several reasons”, UBS claims to clients. “The ruble has devalued ~30% vs the US dollar and domestic demand has fallen sharply with energy’s slump. The CIS are among the lowest cost producers and are running at ~65% capacity utilization. Exports are a great solution to their woes, and their prices are very competitive with global mills given low freight costs. We believe the worst-case scenario of a global mkt share battle is emerging.”

Included in the analysis of an export surge is steel from the Ukraine, Kazakhstan, and Belarus. “The CIS is a major global steel exporter, particularly to both the US and Europe. We believe the region has the capacity, motivation, and low costs to be a sizable export force in 2009. UBS estimates capacity utilization in the region is about 65% but generally weak domestic markets and balance sheets are motivating producers to try to return to full utilization…We estimate 50-60M tonnes available for export on an annualized basis, which eclipses recent Chinese exports at a run rate of 12-15M tonnes, and approximates the maximum annual exports from China of 52M tonnes in 2007.”
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EASTER BUNNY STRIKE — MECHEL HIT BY SHAREHOLDER LAWSUIT IN NEW YORK AS CLASS ACTION ADVERTISING STARTS

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By John Helmer in Moscow

Mechel today confirmed reports that the company is the target of a shareholder lawsuit, alleging that the company and its controlling shareholder, Igor Zyuzin, have failed to disclose material information affecting Mechel’s share price to the market.

Before news of the lawsuit filed Wednesday reached the market, Mechel’s share rose 10% on the day to $5.38. It has risen 20% over the past week, and 68% over the previous month. The steel, coal, and ferroalloy group’s current market capitalization is $2.2 billion.

In a report released Monday on Russian prospects in the global steel environment, Rob Edwards, Renaissance Capital’s steel analyst, said: “We have cut our target price for Mechel from $13/share to $9/share, reflecting current market conditions and 2009 uncertainties. We think Mechel represents the most attractive play on a risk/reward basis in the Russian metals and mining sector for investors seeking maximum upside potential among riskier names.”

Wire services reported overnight that the new lawsuit names Mechel and Zyuzin as co-defendants. The plaintiff is reported to be Dean Frederick, a Mechel shareholder. However, the lawfirm initiating the claim, Coughlin Stoia Geller Rudman and Robbins, is believed to be pursuing a class action, on behalf of a much larger group of minority shareholders of the New York Stock Exchange (NYSE) and US-regulated Russian steelmaker. The lawfirm, which has offices throughout the US, lists 39 pending class-action cases involving securities market claims. The Mechel filing is not yet listed on the law firm’s website.

Coughlin Stoia’s website reports that it is currently investigating the Bernard Madoff securities fraud “on behalf of large institutional and individual clients”, and advertises for shareholders who believe they may have been hurt by securities fraud to make contact.
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CURTAIN UP, CURTAIN DOWN — THE PUGACHEV & JUDY SHOW AT ST PETE’S SHIPYARDS

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By John Helmer in Moscow

As the curtain goes up this week on Russia’s newest shipbuilding company, the 100% state-owned United Shipbuilding Corporation (USC), maritime sources say the curtain may be coming down on St. Petersburg yard, Baltic Plant (“Baltiysky Zavod”).

Baltic is owned by the United Industrial Corporation (UIC) of Sergei Pugachev, who also owns Northern Shipyard (“Severnaya Verf”) in St. Petersburg. For some time Pugachev has been hoping to consolidate the Baltic works on the territory of Northern, and then dispose of the Baltic yard’s land for real estate development. The city government of St. Petersburg, which holds a golden share in Baltic, is vetoing that idea for the moment. But Baltic currently owes an estimated Rb4.5 billion ($132 million), and its newbuild order-book and current cashflow are running down. State shipyard officials, who announced the formal chartering of USC on April 7, have been contemplating a takeover of Northern, if Pugachev lowers his price. Baltic, they say, hasn’t been part of their plan.

The Baltic yard, Russia’s main producer of icebreakers, submarines, and tankers, seemed a better prospect in 2004, when it was owned by the ICT group, a St. Petersburg-based partnership headed by Alexander Nesis. It had been Nesis’s ambition, hesaid at the time, to leverage his 18% stake in Northern, and with Kremlin backing, to merge the two yards under ICT’s control.

A year earlier,when Nesis announced his bid to acquire the rest of Northern from its then owner Boris Kuzyk, a former advisor to the Yeltsin administration, he claimed: “there are several players on the Russian [shipbuilding] market, who are not strong enough, and for whom it is difficult to compete with the main competitors – foreign companies. The weaker Russian producers should not compete against each other, but should concentrate their resources. This will help solve the problem of pre-financing in developing their products. We want to establish situation of an absolute technological advantage, when noone else besides the holding will be able to fulfill the contract.”

At one stage in the conflict, sensitive documents were leaked that revealed serious supply, standard, and contract violations in Northern’s performance of a top-secret contract to build destroyers for the Chinese Navy.
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YURY TRUTNEV IS NO DRONE — THE MINING MINISTER WITH THE MOSTEST DIGS DEEP POCKET

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By John Helmer in Moscow

Yury Trutnev, the Russian minister in charge of Russia’s oil and mineral licences, is the top-earning member of Prime Minister Vladimir Putin’s cabinet for another year, according to official income data just released.

For 2008, Trutnev has declared earnings of Rb369.94 million, equivalent now to $10.9 million. Presiding at the ministry headquarters, a stone’s throw from the lions’ cage at the Moscow Zoo, Trutnev was first appointed to his federal job in March 2004. He has been well fed since then. In 2005, according to Trutnev’s report to the government, his earnings totaled Rb211.4 million (then $7.9 million). That was double his first official earnings report for 2004, and almost eighteen times more than the next-placed official, Minister of Transport, Igor Levitin, who reported 2005 income of Rb12 million ($446,482). In 2005, Trutnev’s income was four times larger than the incomes of all the other cabinet ministers combined. In 2008, his pocket is forty-two times deeper than Putin’s and President Dmitry Medvedev’s combined; it is 4.2 times larger than the combined earnings of his cabinet colleagues.

Trutnev’s name in Russian refers to the short-lived bee , whose only work in the hive is to fertilize the queen bee, before he dies. By association, the Russian word “truten” — literally, a drone — has come to mean someone who lives at another’s expense.

There is nothing unlawful about Trutnev’s income, his spokesman has explained, for it represesents deferred earnings from a company he used to own. This was called EKS, a privately owned concern which says it trades in food and runs supermarkets in the central Russian region of Perm, Trutnev’s birthplace. Trutnev, according to his ministry, sold out of EKS in 2006, and has been receiving instalments from the deal since then.

According to the official biography Trutnev posted on a personal website, he was born into a family of oil-industry workers in Perm. He graduated from university as a mining engineer, and after a brief spell working on oilfields, he returned to Perm to work as an administrator of the local sports organization. He was well-known in sports circles as a contestant and instructor in various forms of wrestling and oriental martial arts. As the Soviet Union crumbled, he and his fellow sportsmen went into business together, creating EKS to import Swiss foodstuffs, pharmaceuticals and other goods on order from the region. Russian press estimates suggest that by the mid-1990s, this had made him a comfortable fortune, and he moved into politics, first as a municipal councilman in Perm city, then mayor, and finally, in the year 2000, governor, replacing the incumbent who fallen out of favour with the Kremlin.
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SA STEEL TARGETED BY RUSSIAN MILL FACING DEFAULT

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By John Helmer in Moscow

South Africa’s Columbus Stainless Pty Ltd, the country’s only producer of stainless steel, has been targeted for anti-dumping action by a Russian steelmaker, who is himself under pressure of a foreign bank default, and takeover interest from the state.

The Mechel specialty steel and mining group, owned by Igor Zyuzin, has lobbied the Russian government for protective duties to block imports of stainless steel. Although Mechel denies lobbying, and Russian trade ministry officials have denied preparing a new import duty penalty, the ministry has published an official notice, confirming that it has commenced an anti-dumping inquiry.

Columbus confirms that it has received official papers relating to the Russian action, but declined to comment for the time being. Acerinox of Spain has a 76% shareholding in Columbus. The rest of the shares are held equally by Samancor (which is an Anglo American and BHP Billiton Plc joint venture) and the Industrial Development Corporation of South Africa, a state enterprise. Columbus is situated in Middelburg, Mpumalanga.

Stainless steel is the 9th largest export from South Africa by value, according to statistics of the Department of Trade & Industry (DTI). However, DTI reports no sales to Russia. These appear to have been recorded as entering Russia from another country office of the Acerinox group.

Last year, there was a sharp downturn in SA exports of stainless steel to R2.8 billion worldwide ($301 million); in Rand terms, this was a 75% decline from the 2007 total of R11.4 billion ($1.7 billion).

Most of the imports which Mechel is attempting to keep out of Russia originate from China. According to the latest import statistics from the Russian Customs Committee, in 2007 SA sold 10,707 tonnes of thin stainless sheet to Russia, for a declared value of $24.5 million. China sold 24,622 tonnes at $46.2 million. In the last quarter of 2008, the Russian customs data show SA sold 3,621 tonnes for $12.6 million; China sold 6,466 tonnes for $17.4 million.
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A NEW CAUCASIAN CHALK CIRCLE — VARSHAVSKY IN TUG WITH GUTSERIYEV FAMILY OVER STEEL ASSETS

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By John Helmer in Moscow

This is a tale of how the appetite for assets comes full circle, and who gets carved up in the process.

Vadim Varshavsky, a deputy of the State Duma and member of the parliamentary Committee on Industry, used to own steel-producing assets as part of a larger coal and steel group, which he shared with his partner, Mikhail Gutseriyev, also a one-time member of the State Duma. Both have been much honoured. Varshavsky is a renowned collector of cognacs. Gutseriyev has won the Order of Friendship, the Order of the Mark of Distinction, and other orders and medals, including the Peter the Great National Prize, and the “Best Mayor of the Year” award.

Varshavsky’s philosophy of partnership is succinct. He told a Moscow newspaper in 2007: “I have a controlling stake everywhere, but in each project I have different partners”. Between 2004 and 2005, he and Gutseriyev had something some people call a falling-out; and others call a parting of the ways. The outcome was that they decided to divide their possessions, so that Gutseriyev took over coal assets, and then concentrated on the oil business. Varshavsky formed the Estar holding as a steel-only group. Exactly what happened hasn’t been told, except that Varshavsky told a Moscow newspaper not long after: “It’s a sad story. But I am not involved in any negotiations to buy his share, and have no intentions to acquire Russian Coal.”

As Varshavsky expanded his steel possessions, the borrowings of the Estar holding grew rapidly, By the middle of 2008, the debts were estimated at Rb11.7 billion (now worth $344 million). In the autumn that followed, a refinancing note issue didn’t succeed, and Varshavsky announced he would raise the required funds from Vnesheconombank (VEB), the state bailout bank chaired by Prime Minister Vladimir Putin. Sergei Shapovalov, a vice president of Estar, told CRU Steel News on March 16: “The talks with VEB are continuing. The issue [of the refinancing loan] has not been solved yet.” VEB declined to confirm the status or amount of Estar’s loan application.
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THE WHITE LADY, THE LION, AND THE CIRCUS — URALCHEM AND PHOSAGRO FIGHT TO TAKE ON PHOSPHATE MINING

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By John Helmer in Moscow

In the Russian fertilizer business, the days are gone when you could make enormous profits mixing fertilizer ingredients into sacks; loading the sacks aboard ship; and earning your profit margin between the rising export price of the sack, and the government-fixed price of its constituents in the home market.

Today, manufacturers of these mixtures, known in the fert trade as complex fertilizers or NPK, must restructure, or die. That’s in part because the export prices of nitrogenous fertilizers, phosphates and potash (NPK, with K the chemical symbol for potassium) have collapsed worldwide. In part, it’s because the Russian government has imposed export taxes to reduce the spread between external and internal prices, and cut the profit. Finally, it’s because Russian gas and other energy prices have been deregulated, and must rise towards the international level.

It is also commonsense for state administrators to reason that there is greater profit for the state, and for themselves, in regulating domestic fert supply prices to the farm sector within one or two vertically integrated fert companies, instead of the existing collection of competing gas refiners, phosphate and potash miners, and intermediary traders and distributors.

In circuses these days, the crowds pay to see the lady tame the lion. It’s been two thousand years since the Romans paid to see the lion eat the lady. Naturally, vertical integration of nitrogen-refined ammonia, phosphate and potash production into a single corporate structure makes more pleasant sense if you are on top of the incorporation, rather than on the bottom. The reason Dmitry Rybolovlev, controlling shareholder of potash miner Uralkali (URKA:LI), has been feeling so uncomfortanble for months is that he suspects the Kremlin is preparing to subordinate his company, and buy his shareholding out, in favour of the NPK producer, Acron (AKRN:LI).

Acron’s new mining unit, Salt of the Earth (real name, no joke), has been created to consolidate phosphate and potash mining licences which Acron has acquired since 2006, and which, for the time, it lacks the cash to develop. Whether it also absorbs Rybolovlev’s chunk of Uralkali remains to be seen.
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AND THEN THERE WERE NONE

By John Helmer, Moscow
  @bears_with

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.  

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RUSSIANS RAISE THEIR GLASSES – THE TOAST IS TO BEATING THE BLOCKADE OF MOSCOW



By John Helmer, Moscow
  @bears_with

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.  

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THE INTERNATIONAL ATOMIC ENERGY AGENCY GOES TO WAR — GORILLA RADIO GOES NUCLEAR

By John Helmer, Moscow
  @bears_with

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.

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INTERNATIONAL ATOMIC ENERGY AGENCY TAKES UKRAINE SIDE IN WAR IN SEPTEMBER 15 VOTE, MAKING UN SECRETARY-GENERAL GUTERRES EITHER A LIAR OR A FOOL

By John Helmer, Moscow
  @bears_with

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.  

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THE RUSSIAN SITUATION COMEDY IS NO LYING MATTER – THE JOKE IS ON THE OFFICE OF FOREIGN ASSETS CONTROL

By John Helmer, Moscow
  @bears_with

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),  Mail.ru (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.  

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RUSSIAN AVIATION INDUSTRY CORRECTS YELTSIN YAW – BOEING, AIRBUS DITCHED



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

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.

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FOR WANT OF A NAIL THE KINGDOM WAS LOST – ENGLISH PATHOLOGIST GUY RUTTY FACES CHALLENGE TO THE RELIABILITY OF HIS NOVICHOK EVIDENCE



By John Helmer, Moscow
  @bears_with

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.

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KILLING IS CHEAPER — THE US ARMY SPECIAL OPERATIONS COMMAND WEAPONIZES TWITTER, FACEBOOK, INSTAGRAM, WHATSAPP, TELEGRAM

By John Helmer, Moscow
  @bears_with

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.

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MARIA YUDINA OUT OF THE DARK – THE RUSSIAN CLASSICAL PIANIST PLAYS AGAIN

By John Helmer, Moscow
  @bears_with

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.

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