ZAICHIK MAKES A STOP IN ABUJA – MEDVEDEV TRIES TO OPEN DOORS FOR DERIPASKA, BUT CAN RUSAL AFFORD THE NIGERIAN PRICE?

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By John Helmer in Moscow

South of the Sahara desert, the Kremlin doesn’t have a strategy so much as a checklist of commercial interests. These days it can ill afford even those. But when it was decided in the spring that President Dmitry Medvedev would make his first presidential visit to the region, he was assigned the two African countries, whose economic resources make them more valuable to Russian corporations than anywhere else in Africa.

They are Nigeria and Angola. Medvedev stopped in each for less than 24 hours last week.

Nigeria is much the more important, commercially, of these two, because Gazprom, Russia’s largest company and the world’s dominant producer and exporter of gas, wants to bring the Nigerians, with the 7th largest gas reserves in the world and a major exporter of gas to the US, in line with the marketing strategy being developed by the Gas Exporting Countries Forum (GECF), led by Russia, Iran, and Qatar.

Gazprom would have started working on the Nigerians much earlier, had it not been for an unpleasant hostage-taking in 2004 and 2005, when Nigerian officials were suspected by the Kremlin of aiming to profit from the ransom demand for 12 Russian seamen, taken off the Greek-owned oil tanker, African Pride.
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BRUSSELS’ FETISH DEFLATED AS GAZPROM BAGS AZERI GAS

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By John Helmer in Moscow

The Russian and Azeri governments have taken the air out of a scheme to provide Europe with an alternative source of gas supply to Gazprom, which signed an agreement on Monday with the State Oil Company of the Azerbaijan Republic (SOCAR). When it comes to putting the gas into high-priority political schemes for Europe’s energy needs, the Kremlin proves once again that it is prepared to put money where its mouth is, while the European Union raises hot air in think-tanks and editorial columns.

The new deal, signed in Baku during a visit by President Dmitry Medvedev, provides for Gazprom to begin purchasing gas from Azerbaijan from the start of next year. The initial volumes are very small — just 500 million cubic metres per annum. But they give Gazprom the option to increase them, as Azeri production from the Shah Deniz field, in the Caspian, ramps up. “All things being equal among potential buyers, priority will be given to Gazprom,” Gazprom CEO Alexei Miller said at the signing ceremony. “Other buyers would have to offer conditions that are more financially attractive.”

According to unidentified sources cited in the press, Gazprom is going to pay some $350 per thousand cubic metres, a substantial premium to the current market price, and roughly in line with the $340 price paid by Gazprom to Turkmenistan in the first quarter of this year. From the point of western brokerages and western shareholders, this is costly for the company’s bottom-line, and thus for its dividends and share price. So long as gas prices remain low on low demand, there is the potential, argues a report from Unicredit Securities, “to force Gazprom to cut its own production while replacing it with virtually zero-margin Central Asian gas.”
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RUSSIAN BANKRUPTCY CHARADES — MAXIMOV IS THE FIRST OF THE RUSSIAN STEELMEN TO FALL

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By John Helmer in Moscow

In Russia today, there is a word that dares not speak its name — and it isn’t the one that got Oscar Wilde into his famous trouble at the Old Bailey in the spring of 1895. That word is банкротство — “bankruptcy”.

In the short history of Russian politics, it is to be expected that now — just as in 1998 and 2003 — the dominating fear of Prime Minister Vladimir Putin is of a domino-effect collapse of the banking system. Given the growth and potential size of the non-performing loans Russia’s banking system is currently carrying, it is realistic to fear this could happen some time in the second half of this year. For the time being, then, it is realistic for the Russian government to aim at short-term measures to avert a series of corporate bankruptcies that might then trigger bank failures, with tsunami impact on the cities and regions that depend on them. This has the policy corollary of persuading all high-policy decision-makers to camouflage or protect the insolvent trading positions of oligarchs like Oleg Deripaska. He has managed to get President Dmitry Medvedev to beg Alfa Bank to call off its loan repayment call (in vain); and then Putin to announce, months before it falls due, a rollover of his largest debt, while obliging a state bank and a regional budget to cover the wage bill his Pikalevo cement plant had run up.

For the time being, therefore, the men who produce aluminium, nickel, and copper are being protected at the highest level from the B word. The steelmakers are another kettle of fish — and most of those are getting the same protection. But not all — and not Nikolai Maximov.
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OUT OF THE CAULDRON AND ON TO THE BACK-BURNER — UDOKAN, RUSSIA’S BIGGEST UNMINED COPPER PROJECT, GETS GOVERNMENT CLEARANCE FOR DELAY — AND PERHAPS A LET-IN FOR FOREIGN MINERS

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By John Helmer in Moscow

The Udokan copper deposit, in southeastern Siberia, will not be mined any time soon, according to government and commercial mining sources in Moscow. For miners, who have been watching this particular copper pot pass from one hand to another, including BHP’s very briefly in 1992, this should come as no surprise. According to one of the current stakeholders with the mining licence, Alisher Usmanov’s Metalloinvest, there is simply too much copper in the market to warrant the capital cost of digging more out of Udokan.

Officially, all the closely held Metalloinvest group will say, in a press release dated June 25, is that after a nine-month delay, it has finally signed the Udokan licence agreement with the federal mine licensing agency, Rosnedra, a branch of the Ministry of Natural Resources. The terms have been changed, the release acknowledged: “In the course of negotiations between Metalloinvest and Rosnedra the parties reached an agreement about changes in the terms of the license agreement taking into consideration the interests of the government and the investor.”

A ministry source told Minesite, off the record, that the licence terms have not been changed since Metalloinvest won a state tender for the project last September, and accepted the licence price and terms at that time. A source at Metalloinvest said “the terms are the same as the initial ones.” But he acknowledged that the “time frame” is being renegotiated. In short, the investment spending and production targets set out in the licence agreement remain, but the time allowed to the mining group to reach them is being stretched out. “The timing was set while the copper price and demand for copper were completely different,” Metalloinvest now says, admitting the delay in making payment for the licence, and signing this week’s agreement. “We are delaying, not because of lack of financing, but because we don’t understand whether market needs that much copper soon.”
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IS MEDVEDEV BUILDING MUSCLE ON WEET-BIX? RUSSIAN GRAIN EXPORTERS SKEPTICAL OF PRESIDENT’S DEAL WITH EGYPT

   

By John Helmer in Moscow

The grain trade war between Moscow and Cairo took a fresh twist this week, following the announcement during President Dmitry Medvedev’s visit to Egypt on Tuesday that the two governments have agreed on terms for direct, large-volume shipments.

A Russian government briefer has claimed that Medvedev agreed with his counterpart, Egyptian President Hosni Mubarak, to the Egyptian proviso that Russian grain sales to Egypt would grow above the current annual 3-million tonne level, if quality issues are resolved.

In May, government officials at the Egyptian ports, Safaga and Damietta, seized and quarantined an estimated 137,000 tonners of grain which had been put on board ship at Novorossiysk. The seizures were reported in the Egyptian and Russian media to have been ordered by the Egyptian prosecutor, allegedly on claims of high weevil infestation. Subsequently, there are unconfirmed reports of the release of 56,000 tonnes, leaving an estimated 81,000 tonnes of Russian grain in Egyptian limbo. Medvedev’s one-day appearance in Cairo, and reference to the grain trade problem, appears not to have produced the release of this cargo, according to a source at the Russian Grain Union.

What then was Medvedev intending to do about the problem in Russia’s most important market for export wheat?
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IF MECHEL TELLS WASHINGTON THE EXTENT OF ITS FINANCIAL TROUBLES, WHAT HAVE THE OTHER RUSSIANS GOT TO SAY?

By John Helmer in Moscow

The Mechel steel and mining group — Russia’s largest producer of stainless steel and coking coal — is the only Russian metals and mining company to submit to the regulatory requirements of the US Securities and Exchange Commission (SEC). That began in 2004, when Mechel, then owned by Igor Zyuzin and Vladimir Iorikh, were the co-owners. Since then, Iorikh sold out, and moved his investment operations to Switzerland. He opted to jump. The New York Times and its reporter who published a different story were recently obliged to admit their mistake, and apologize to Iorikh.

Zyuzin has remained behind to borrow heavily and pay premium prices for ferroalloy and coal assets he is now having trouble affording. In retrospect, Iorikh’s calculation and timing gather wisdom.
In the meantime also, all the other Russian metals and mining proprietors, who wished to sell unsecured securities in their concerns to foreign investors, get an international market valuation, and borrow against it, have opted not to submit to the requirements of a US listing. Their debts, pledges, and loan covenants are probably just burdensome as Zyuzin’s. But they have been obliged to disclose much less to the market than the SEC has required of Mechel.
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MORDASHOV CAN RELAX — HIGH RIVER GOLD SHAREHOLDERS COMBINE TO REJECT BUYOUT OFFER, PROPOSE TO SIT BACK AND GET RICH

By John Helmer in Moscow

The buyout offer for minority shareholdings in Toronto-listed High River Gold (HRG:TSX) now looks double-doomed. A combination of minority shareholders has now formed that is numerically strong enough to prevent the Russian Severstal group, owned by Alexei Mordashov, from suceeding in his 22-cent offer for the 42.7% of shares he doesn’t already control. And Mordashov himself, and his Severstal group, appear to be under strict bank loan covenants to preclude any new deal worth $150 million, and thus in no position to raise their bid high enough, or borrow more money, to make the buyout possible.

HRG will hold its annual general shareholder meeting on June 30 in Toronto. Although the buyout bidding has been the dominating topic of shareholder talk for weeks — Mordashov raised his offer from 18 Canadian cents to 22 cents on June 9 — no action on that issue is expected. In the meantime, there have been threats of litigation against Severstal and the HRG management, while the Ontario Securities Commission is considering a shareholder complaint filed on April 24.

An HRG board deadline for a delisting review has been fixed for August 17. If Mordashov’s buyout offer of 22 cents fails by then, there will no delisting top speak of.
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ALROSA ISSUES NEW STATEMENT ON VYBORNOV

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By John Helmer in Moscow

Responding to a request from PolishedPrices.com for clarification of the June 20 election of a new Alrosa board of directors, without chief executive Sergei Vybornov, Alrosa spokesman, Yelena Nikiforova, has provided the following company statement. “The largest shareholder of the company in the name of the government of the Russian Federation does not consider necessary the presence of representatives of executive management as a part of the Supervisory Board of Alrosa… According to the government decision, the structure of boards of directors of state companies should include professional counselors, Alrosa says, and so representatives of the Russian Federation voted for inclusion in the structure of the Supervisory Board of the company of independent directors. The President of Alrosa [the chief executive] in any case participates in the Council work as the head of an executive office of the company. As to the election in the structure of the Supervisory Board of Alrosa vice-president Ivan Demyanov, this [was the] decision of the second-largest shareholder, the Government of the Republic of Sakha.”

Nikiforova also said that Vybornov is a member of the presidential delegation, led by President Dmitry Medvedev, which leaves Moscow today for a tour of Africa, with stops in Egypt, Nigeria, Namibia, and Angola.

NOT EVEN CHINA CAN CATCH THIS FALLING STAR — ZYUZIN PLEDGES PLUMMETING MECHEL SHARES TO SECURE BANK LOANS

By John Helmer in Moscow

Igor Zyuzin, the controlling shareholder of the Mechel steel and coal-mining group has disclosed to the US Securities and Exchange Commission (SEC) that he has pledged as security about 158 million of his shares in the group, in order to secure bank loans now under negotiation. Mechel is the Russian leader ion stainless steel production, and one of the world’s largest coking-coal miners.

The purpose of the pledges is reported to the SEC as “in connection with certain financings.”

Since Mechel has on issue about 416 million shares, Zyuzin’s pledge represents just under 38% of the total issue. It is not quite clear what proportion this represents of his own control stake in Mechel. According to the SEC filing, as well as Moscow brokerage reports, Zyuzin was obliged to give up a 3.1% stake in the company when convertible bondholders were repaid 12.9 million shares worth $150 million in a transaction of three months ago. Following that transfer, Zyuzin reportedly held 66.8% of the Mechel share issue, or 278 million shares. The latest SEC disclosure means that Zyuzin has lost direct control of 57% of his shareholding.

This is an outcome that industry and company sources have consistently suggested that Zyuzin himself had been trying to avoid in his negotiations with the Russian state-controlled banks, as well as with the commercial lending sydicates, with which Mechel has been discussing terms for the refinancing and repayment of more than $3.5 billion in overdue loans.
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ALROSA MAKES CHANGES TO ITS SUPERVISORY BOARD

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By John Helmer in Moscow

Sergei Vybornov, chief executive of Alrosa, has been omitted from the new board of directors, known as the Supervisory Board, according to a company announcement posted after the annual general shareholders meeting on June 20: http://www.alrosa.ru/press/releases/detail.php?ID=4338

Other changes in board membership have also been disclosed in the new board listing; these suggest the impact of the financial crisis on Alrosa’s operations, and of problems reportedly uncovered by the Accounting Chamber, the independent Russian state auditor. A member of the Chamber audit team said the check of Alrosa took place at the beginning of this year, and the results were reviewed by the Chamber Collegium in April. She said the results were reported to the government iun a report stamped confidential.

The new 15-member board has 5 representatives of the Sakha republic, including the Sakha President Vyacheslav Shtirov; the 2007-2008 board had 6 Sakha representatives, so the Sakha representation has been reduced in line with the 32% shareholding in Alrosa held by the regional government.

The Alrosa management had two seats on the old board — the Chief Executive Officer Sergei Vybornov and the Vice President, Ivan Demyanov. Vybornov has been omitted from the new listing, and Demyanov remains. No CEO of Alrosa has been excluded from the board before. Last week, Vybornov told an industry outlet: “Alrosa has only one shareholder — the state — who could fire me, and it has said it does not plan to do so.” Vybornov’s spokesman was contacted for comment, but his telephone was not answering.
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WISHING-WELL OR BLACK HOLE — RUSSIAN COKING COAL REVIVES ON CHINA HOPE

   

By John Helmer in Moscow

A briefing by Russian coking coal producer Raspadskaya this week suggests pessimism that sales to the domestic steelmills will recover beyond their current monthly level. For brokers and speculators, the fortunes of the publicly listed mining company (ticker RASP:RU) now depend on betting that China will continuing substituting costly home-grown coal supplies with cheaper Russian imports, and that Russian miners like Raspadskaya can continue beating the Australians and South Africans on price.

Deputy General Director Alexander Andreyev said on June 17 that Raspadskaya is currently operating at a 75% capacity utilization rate, compared to pre-crisis September 2008. At that time, the company produced 734,000 tonnes of coking coal concentrate, so the implied June 2009 output should be about 550,000t. The last officially reported production figure from Raspadskaya was for March at 529,000t.

Andreyev also said that the current price for his concentrate is $53 per tonne.

According to a report on Raspadskaya today by Michael Kavanagh, steel analyst at Uralsib Bank, coking coal output in April and May was also at the 550,000t level, so “production appears to have reached a plateau.” He also notes that earlier targets announced by the company have not been met. “Raspadskaya’s management had previously stated that 2Q09 production was expected to be 2.5 mln tons of coal (1.87 mln tons of concentrate), and that production capacity utilization should reach 80%. It now looks as though 2Q09 production will be just 2.2 mln tons of coal (1.65 mln tons of concentrate), which is 12% below the previous target. ”
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STEELMAKERS GET A BANKERS’ HAIRCUT — MORDASHOV SELLS AND BORROWS TO FIX HIS RATIOS; ZYUZIN EXPLAINS TO SHAREHOLDERS

   

By John Helmer in Moscow

Severstal announced Monday that the Russian state savings bank Sberbank has granted it a three-year $300 million credit line. Quoting the chief financial officer, Sergei Kuznetsov, the steelmaker said: “These credit facilities will allow the Company to further strengthen its liquidity and extend maturity profile. Sberbank facility is a reliable long-term source of capital which will be used to finance ongoing needs and replace some of our maturing obligations.” There was no disclosure of the interest rate, the security pledged, or the loan covenants imposed by Sberbank.

Severstal’s financial reports to date indicate that atotal of about $1.9 billion in debt matures this year, and must either be repaid or refinanced. In February already, the group repaid $325 million in Eurobond obligations; and must repay another $480 million by year’s end. In 2010 Severstal will have another $900 million in debt repayments. Then between 2010 and 2013, about $4 billion in debt will reportedly fall due.

Although Severstal, the third-ranked Russian steelmaker, has indicated confidence it has enough cash on hand, and current cashflow, to handle this year’s repayments, the Eurobond loan agreements which Severstal signed are putting pressure on Mordashov to remove losses from his current balance-sheet by selling loss-making North American steelmills. At the same time, the loan covenants imposed by loans outstanding and Eurobonds sharply curtail the company’s refinancing and restructuring options.
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PRICE, NOT POLITICS, BEHIND RUSSIA’S MILK WAR, AS PUTIN CALLS OFF CAMPAIGN

by John Helmer in Moscow

The attempt last week by Russia’s consumer protection agency to halt all imports of Belarus dairy products on technical labeling grounds has been called off, after an agreement was reached between Moscow and Minsk to impose a quota on imports of dry milk shipments, and increase the tonnage of imported Belarussian cheese, yoghurt and other dairy products.

Industry sources in Belarus and Moscow believe that two of Russia’s largest dairy companies, Wimm Bill Dann (WBD) and Unimilk, sought to improve the pricing and profitability of their dry-milk business by blocking the low-price Belarus imports. WBD is owned by David Yakobashvili; Unimilk by managers, who acquired their stakes from Roman Abramovich.

Last week, Russian politicians, including President Dmitry Medvedev, issued personal attacks on Belarus president Alexander Lukashenko, who responded in kind. The import ban was an orchestrated political campaign against him personally, Lukashenko charged. Prime Minister Vladimir Putin then said at yesterday’s cabinet meeting that Russian officials “need to be accurate in their statements. To offend someone is not the best option. We and Belarus, whatever happens, are part of one family.”

After Putin and other officials claimed that Belarus dry-milk imports would be lowered from 110,000 tonnes to 70,000 tonnes annually, the Russian Minister of Agriculture Elena Skrynnik revealed yesterday that dry-milk imports from Minsk will be halted for six months, while the volume of other dairy imports will be permitted to increase from 110,000 tonnes to 132,000 tonnes.
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DIAMOND DISENGAGEMENT — ELLIOTT WITHDRAWS BUYOUT BID FOR ARCHANGEL DIAMOND

Napoleon's retreat from Moscow

By John Helmer in Moscow

A bid to revive the Russian mine prospects of Toronto-listed Archangel Diamond Corporation (ADC), and head off liquidation by De Beers, failed over the weekend with the disclosure that a US and UK hedge fund operated by Elliott Management Corporation and Elliott Advisors was withdrawing its offer to buy a controlling share in ADC and clear its debts to De Beers.

An announcement by ADC, issued to the market on June 15, says: “Archangel Diamond Corporation… announces that it has received notice from the investor group under the non-binding private placement term sheet announced June 4, 2009 that the investor has determined not to proceed on the terms contemplated in that term sheet and has, therefore, terminated it.”

Despite the fact that negotiations between the investor group, De Beers and ADC have been under way for some time, ADC has not publicly identified Elliott as the bidder. This is Elliott Management Corporation, which is headquartered in New York, and was founded by a lawyer, Paul Singer, in the 1970s. The hedge fund has been reported to be managing almost $13 billion in investor funds, but the company website provides no information. A subsidiary, Elliott Advisors, based in London, has also been involved in the De Beers buyout bid.

No reason has apparently been given by Elliott for withdrawing its interest in ADC, which did not publicly confirm the offer until June 4, three days after Polished Prices.com reported it.
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ZYUZIN’S CHICKENS COME HOME TO ROOST — DEUTSCHE BANK ISSUES DEBT WARNING FOR MECHEL

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By John Helmer in Moscow

A client alert was issued Thursday by Deutsche Bank analyst Olga Okunova, warning that even if the Mechel Group succeeds in refinancing a $1.5 billion loan, which has been overdue since March, the group faces serious cash shortage and debt service problems this year and next.

Mechel has made new information available to shareholders and banks, though not in a public news release, ahead of the scheduled annual general meeting (AGM) of shareholders on June 30. This identifies problems with creditors, who have loaned Mechel $2 billion for the purchase of fareastern coal mining assets, including Yakutugol, which the group controlled by Igor Zyuzin won at a state auction in October 5, 2007.

Mechel won the large but relatively undeveloped assets with a bid ofRb58.196 billion (then $2.3 billion), defeating Arcelor Mittal and Alrosa. Zyuzin then raised $2 billion in new loans to finance the acquisition. The money was provided in the form of a 5-year loan for $1.7 billion, secured for repayment by coal exports; and a smaller 3-year loan of $300 million, apparently secured by shares. The original lenders were ABN AMRO, BNP Paribas, Calyon, Natixis, Sumitomo Mitsui Banking Corporation Europe Limited, Société Générale Corporate & Investment Banking, and Commerzbank Aktiengesellschaft. Sumitomo had already been identified as a financial backer for Mechel to expand its coal output, and exports to Japan, from the Yakut coalfields. The assets included the issued share capital of Yakutugol (75% of the statutory issued share capital minus one share), Elgaugol (68.86% of the statutory issued share capital), and the real estate complex of a railway and a road from the Zeysk Railway Station (Far Eastern Railway) in Zeysk to the Elga coal deposits.

It appears from the latest Deutsche Bank report that the five-year term of the loan, requiring repayment in 2012, was foreclosed by the banks, because of loan covenant breaches by Mechel that have not been disclosed before.
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KREMLIN’S MILK TRADE BAN GOES SOUR

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By John Helmer in Moscow

Russia’sconsumer protection service has issued a ban on imports of milk and dairy products from Belarus. Although the reason given publicly appears to apply to imports from the Ukraine, Lithuania, and Latvia, their milk trade has so far not been interrupted. This has encouraged speculation that the Kremlin is using the milk bottle to strike at Belarus President, Alexander Lukashenko.

TheRussian dairy product import market is worth about $6 billion per year, Moscow agriprod experts say; Belarus holds the largest share of about one-third, while Finland, New Zealand, Germany, and other European sources account for the remainder. Virtually all of Belarus’s milk exports go to Russia, so the sudden cutoff, which started Saturday and widened on Tuesday, is financially costly to the government in Minsk.

The head of Rospoterbnadzor (RPN), Gennady Onishchenko, claims the problem is that Belarus has failed to update the product information required by six-month old Russian package disclosure regulations. But his spokesman refuses to explain why non-compliance by other Baltic state exporters has not been hit with bans. A publication by RPN on May 29, reporting on package check for domestic dairy products, as well as imports, found that five Russian regions had no packaging that met the new rules, while 13 regions were reporting less than 50% compliance. Even in Moscow, the RPN report suggests, one product package in five being sold lacked the right information labels.
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COURT OPENS MANGANESE ASSET BATTLE BETWEEN SINGAPORE’S OMH AND UKRAINIAN-AUSTRALIAN STRATFORD SUN

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By John Helmer

At a hearing on June 9, the Australian Federal Court issued filing deadlines, and ordered a hearing date in August for adjudication of the clash between manganese miners, OM Holdings (OMH) of Singapore and Stratford Sun Ltd, a unit of Consolidated Minerals. It is the first skirmish over the tactics OMH has been employing to preserve current shareholder control in what is increasingly viewed as a test of strength in the global manganese market that supplies China’s steelmills.

China rules the world of steel — biggest producer, biggest consumer, and until this year, biggest exporter. Manganese is vital to steel production, because it is an alloy that hardens the metal for most industrial applications. So China also rules the world of manganese, which is concentrated in Australia and two southern African countries; and also the price of manganese; and thus, the share price of the manganese mining companies.

But if a China-linked, publicly listed manganese company — one of the only pure manganese miners in the world — wants to block buyers of its shares in the marketplace from buying, and shareholders from holding the management to account, can anyone lift the bamboo curtain, and oblige the company to follow the market governance rules? For the first time, that’s a question for the Australian Federal Court to decide.

More importantly, the action, which commenced hearing this week in the Perth division of the court, is a curtain-raiser on an even larger play — this one is about how the world of manganese is being prepared for a redistribution of shareholding ownership and control, in which big actors, like BHP Billiton, Australia’s most powerful enterprise, are contemplating their exit, while challengers from all over the mining world calculate their opportunity to move in. Because the price of manganese is so volatile, the potential in a new carve-up of global manganese is high risk, but also high profit. But for the dominant Chinese steelmakers, volatility and unpredictability for inputs like manganese should be curbed, if possible. So, will the Chinese act directly to buy up manganese miners now, while they are relatively cheap? Or will they act indirectly, having regard for the way the direct approach to buying resource companies can trigger popular backlash and political resistance in countries like Australia, South Africa, the US, or Russia?
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ALROSA ISSUES STATEMENT AGAINST HELMER

The Scapegoat by William Holman Hunt, 1854.  Hunt had this framed in a picture with the quotations "Surely he hath borne our Griefs and carried our Sorrows; Yet we did esteem him stricken, smitten of GOD and afflicted." (Isaiah 53:4) and "And the Goat shall bear upon him all their iniquities unto a Land not inhabited." (Leviticus 16:22)

Alrosa has issued the following statement, dated June 8, through a Russian internet publication, www.rough-polished.com:

“ALROSA intends to bring a case before the Court of the United Kingdom claiming damage to the company’s commercial interests due to the publications by John Helmer posted on the PolishedPrices website. The Russian diamond mining company has already engaged the Mezhregion Bar Association to prepare this lawsuit.

As ALROSA informed rough-polished.com, the company “believes that publishing materials on would-be changes in its management with reference to some unnamed sources is directly damaging the company’s commercial interests while ALROSA is concluding long-term contracts.”

“Indeed, the company’s important customers had anything but simple experience interacting with ALROSA, when the rules and principles of mutual relationship were not transparent providing enough grounds for all kind of rumours,” ALROSA stressed.
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STATE OWNED ALROSA IS TWICE AS PROFITABLE AS DE BEERS AT DIAMOND MINING, BUT LOAN BREACHES WILL FORCE ASSET DISPOSALS THIS MONTH

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By John Helmer in Moscow

A new ratings report by Fitch has declared Alrosa, the state-owned Russian diamond miner, to be twice as profitable — as measured by Ebitda margin — than global leader, De Beers.

Alrosa doesn’t issue production figures for its mines by carat, but claims a 25% share of global diamond mine output by value. Diamond sales in 2008 have been reported at $2.8 billion. Anglo American, a part-owner of De Beers, reports that the latter produced last year about 48 million carats, and holds a 40% global mine market share. De Beers’s sales in 2008 were $6.9 billion.

According to the report issued by Fitch on May 21, Alrosa’s advantages include its lower rouble cost structure and state financial backing. “The company’s EBITDA margin is 30%, on average, ” according to Fitch analyst Sergei Grishunin, “which exceeds the EBITDA margin of market leader De Beers, which had an EBITDA margin of 17% in 2008 and 2007.”

According to Grishunin, the value of the Kremlin’s financial support for Alrosa this year will include Rb45 billion in procurement of rough diamonds for the state stockpile agency Gokhran in the first half of the year; and Rb44 billion in financing from the state VTB Bank for covering some of Alrosa’s maturing obligations to foreign lenders. At the current exchange rate, these inputs are worth $1.5 billion and $1.4 billion, respectively.
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STEPTOE & BROTHER — RASHNIKOV SELLS THE FAMILY SCRAP BUSINESS, AND BUYS IT TOO

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By John Helmer in Moscow

There wasn’t much that the two Steptoes could ever agree on in the near-50 year old English comedy series about the scrap business — except that they would have sold out, if anyone was buying.

There is nothing at all comical about the Rashnikov family. But now brother Victor has managed to arrange the sale of his and his brother Sergey’s scrap business, one of the largest in Russia. The buyer, you might say without joking, is in the family.

Magnitogorsk Metallurgical company (MMK), operator of Russia’s largest steelmill, has reported this week that it has “acquired 99.99% of ZAO Profit – the largest metal scrap collector and processor in Russia. The acquisition of the strategic raw material supplier will significantly strengthen MMK security in terms of raw materials supplies.” The deal is reported to have been agreed at a board of directors meeting two weeks ago, on May 20.

The company announcement discloses that Profit’s financial results from scrap trading will be consolidated in MMK’s international accounting standards reports from the second half of 2009. Profit is also reported as supplying 75% of the ferrous scrap volume of about 5 million tonnes per annum, required by MMK.

The announcement omits to disclose the seller, or the transaction price.
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SCARAB OUTPOINTS WEEVIL — RUSSIA BACKS DOWN IN GRAIN TRADE FIGHT WITH EGYPT

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By John Helmer in Moscow

The Russian government and the association representing Russian grain exporters in Moscow appear to have backed down from claims that Egypt wrongfully seized several cargoes of Russian wheat last month.

Until now, the public position, according to Arkady Zlochevsky, spokesman for the Russian Grain Union, was that Egyptian claims to have found weevil infestation in 137,000 tonnes of grain arrested at the ports of Safaga and Damietta, were false. He told Fairplay the affair was an attempt “at internal political manipulation in Egyptian government circles.” He added that Russian grain traders believed the seizures were a form of pressure to lower the Russian price at state grain tenders; and a bid by the Egyptian industry to reallocate shares in their market in favour of domestic or foreign rivals.

Russia provides about one-quarter of Egypt’s annual grain imports, more than double the next largest exporter, India. This year, Moscow has been planning to ship 3 million tonnes of grain to Egypt. But there is acute pressure on the Russian state stocking agency to move the grain out of silos and into the export trade, because this year’s new harvest is expected to be another bumper one.

Last year’s crop totaled 108 million tonnes, a 15-year record. And unless room is quickly cleared in the silos this month, there will be no room to store the incoming crop. Forced and discounted selling is inevitable. This dynamic has convinced some importing countries to defer their purchases until the exporters cut their prices.
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THE RUSSIAN BEAR-HUG SQUEEZES VALUE OUT OF HIGH RIVER GOLD, BUT NOT FOR MINORITY SHAREHOLDERS

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By John Helmer in Moscow

You don’t have to be a child with an especially good memory to remember this one, which is pre-Mother Goose:

Jack Sprat could eat no fat.
His wife could eat no lean.
And so between them both, you see,
They licked the platter clean.

What four hundred years of nurses, mothers, and cooks have done to twist the meaning shouldn’t obscure the original moral of the tale – when it comes to appetite, rapacity will usually clear the plate ahead of modesty.

What attorneys for a Canadian shareholder in High River Gold (HRG:CN) have told stock market regulators in Vancouver and Toronto recently is that, when it comes to the management of the company and its share price by its Russian owner, Alexei Mordashov, there’s something decidedly unbalanced about the way HRG has been handled since Mordashov’s takeover of last November.

HRG is a Toronto-listed junior with four operating gold mines in Russia and Burkina Faso, and two mine projects in development. It 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.
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DE BEERS SELLS ARCHANGEL DIAMOND TO LITIGATION ATTACK FUND

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By John Helmer in Moscow

De Beers has agreed to sell its controlling stake in Archangel Diamond Corporation (ADC) to a North American investment fund which aims to intensify the litigation campaign in the US and Europe against LUKoil and Archangelskgeoldobycha (AGD), the two Russian companies charged with raiding the Grib diamond pipe.

At a board session on Friday, a bid by De Beers to call in a $10 million loan, and put ADC into liquidation, was topped by an offer to repay the loan, ADC’s remaining creditors, and conserve the company and its minority shareholders. Had the liquidation plan gone ahead, the latter would have lost everything.

ADC has yet to make an announcement, identifying who has made the offer which the board has accepted, or the terms. It is believed the offer comes from a lawyer-managed US fund, which is well-known as an investor in high-value litigations, with a strong record of winning large settlements for the cases it has taken on.

At this point, the fund appears to be paying about $14 million to clear ADC’s debts, and committing itself to a litigation budget of another $10 million, in order to pursue claims against the Russians of $4.8 billion; this sum includes $30 million in ADC’s direct investment in the exploration and testing of the Grib pipe; $400 million in lost profits according to ADC’s 40% stake in the halted mining venture; $800 million in profits lost from other diamond pipes within the Verkhotina-area exploration and mining licence; and $3.6 billion in triple punitive damages under the Colorado state racketeering statute.

The most recent De Beers valuation of the Grib pipe, based on early 2008 diamond prices, puts the project’s mineable value between $8 and $10 billion.
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RUSSIA’S ANTI-PIRACY POLICY SAYS NO TO KENYAN CIRCUS

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By John Helmer in Moscow

Russia’s Chief Prosecutor’s office has acknowleded that putting Somali pirates ashore for trial in Kenya is no longer an option, unless the Kenyan courts are replaced by a fully funded international tribunal.

Responding to questions from Fairplay, Alexander Zvyagintsev, the deputy prosecutor-general, has issued the longest official statement on the piracy issue since the Russian Navy despatched a destroyer squadron to patrol the waters off Somalia last year. According to Zvyagintsev, the 29 pirates captured by the Admiral Panteleyev on April 29, following an armed attack on a Russian oil tanker, included 12 Pakistanis, 11 Somalis, and 6 Iranian nationals; he claimed their excuse of being fishermen is not credible.

But Zvyagintsev did not disclose what has been done with the men. Russia is unlikely to put them on trial in Moscow, he hinted. Sending them to the Kenyan courts is also unlikely, because he said Kenya will have “serious problems” in trying up to 100 men already charged there with pirate offences off Somalia.

Rejecting “extreme unilateralism” as a policy, Zvyagintsev said the pros and cons of an international piracy tribunal have yet to be resolved by negotiation with the African coast states, and the Group of Eight states. Zvyagintsev said that he will be meeting with prosecutors from the other G8 states in Rome over the weekend to consider what is to be done next. Among the legal problems the G8 lawyers are discussing is the problem of sufficient evidence to secure convictions against the Somali pirates. Noting that “the legislation of many states does not provide the possibility of prosecuting the criminal liability of foreign citizens and persons without citizenship for crimes of piracy committed out of the [territorial or juridictional] limits of these states, [and so] there is the issue of how implement criminal prosecution using the mechanisms of international law.”
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RED HAS TURNED YELLOW – THE GREEK AND CYPRIOT COMMUNISTS ARE FLYING A DIFFERENT FLAG IN THE UKRAINE WAR



By John Helmer, Moscow
  @bears_with

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

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

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

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

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

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IF IT SMELLS ALLURING, IT’S RUSSIAN – IN WARTIME L’ORÉAL (FRANCE) AND ESTÉE LAUDER (US) MAKE A BAD SMELL



By John Helmer, Moscow
  @bears_with

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

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

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

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

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

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THE WAR AGAINST FOOD – WHO IS TO BLAME



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

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

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

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

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EXILE



By John Helmer, Moscow
  @bears_with

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

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

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

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

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IN THE FOG OF WAR THERE’S THE GUTERRES CERTAINTY AND THE CADIEU CERTAINTY – GORILLA RADIO SEES THROUGH THE COVER-UP



By John Helmer, Moscow
  @bears_with

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

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

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DID UN SECRETARY-GENERAL GUTERRES COMMIT A WAR CRIME AT AZOVSTAL?

By John Helmer, Moscow
  @bears_with

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

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

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

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

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THE LAST DITCH IS POLAND – RUSSIA’S PHASE-3 PLAN FOR WESTERN UKRAINE



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

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

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

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THE MATLIN PLOT, THE BROWDER PLOT AND THE NEW YORK TIMES PLOT



By Lucy Komisar,  New York*
  @bears_with

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

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

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YELLOW COAL, THE FUEL MADE OUT OF RACE HATRED — MAY DAY MESSAGE FROM SIGIZMUND KRZHIZHANOVSKY, 1939



By John Helmer, Moscow
  @bears_with

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

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

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

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IS CAESARISM THE PROBLEM, THE SOLUTION, A FANCY DRESS COSTUME, OR A PROPAGANDA CARTOON?



By John Helmer, Moscow
  @bears_with

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

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

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

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

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

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

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

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

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

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