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By John Helmer in Moscow

Russian regulator Oleg Mitvol wins battle for tougher federal mine licensing.

Little children trying to sleep in the bungalows of the British colonial territories in India were once entranced by the tale of Little Black Sambo, whose story was first published by Helen Bannerman in 1899. Pursued by four tigers, Sambo must save himself, which he does by giving up his green parasol, his brand-new red jacket, blue short-pants, and purple curly-toed shoes. Still ravenous, the tigers chase around the tree in which Sambo is perched, until they turn into ghee butter. Sambo then climbs down, and goes home, where he slaps the ghee on to 169 pancakes he devours for his supper.

In the federal regulation of the Russian mining sector, Oleg Mitvol has just proved that he can turn his predatory superior, Sergei Sai, into something edible for supper.

Last week, Sai announced he had resigned his post as chief of Rosprirodnadzor, the licence inspectorate and environment regulator. According to Sai, in remarks reported by a Russian news agency, “We lost control. For example, the head of the [regulator] does not appoint his own deputies. Instead of being able to issue an ordinary reprimand to the head of a regional department, I have to write a letter to the minister to initiate an administrative investigation.”

Sai also claimed that a year earlier, in December 2006, Sai had written to Yury Trutnev, Minister of Natural Resources, who supervises Rosprirodnadzor, Rosnedra, and other quasi-autonomous branches of the mining ministry. Sai’s letter, he claims, sought an investigation into Mitvol’s activities, as well as his dismissal.

Subsequently, as Mitvol clashed with Sai over alleged manipulation of licence violations and licence renewals for Highland Gold, Peter Hambro Mining, Ovoca Gold, and other companies, Mitvol told Mineweb he was seeking Sai’s dismissal. According to Mitvol, Sai was one of the ministry officials who arranged to ignore key inspection reports.

Mineweb has regularly monitored Mitvol’s position up the proverbial tree, as the tigers circled beneath him. As Mitvol’s direct superior at Rosprirodnadzor, Sai was one; Anatoly Ledovskikh, head of Rosnedra, the licence issuing agency, was another. Officials at the regional branches of both organs, plus officials in charge of approving new reserve estimates for mine properties, have also been barking for Mitvol’s blood.

In its last report on Highland Gold’s troubles in December, Mineweb revealed that, according to Mitvol, Ledovskikh had approved the renewal and extension of Highland ‘s key asset, Mayskoye, after the report from Mitvol, recommending its revocation, had been lost inside the ministry in Moscow. “They were found again,” Mitvol claimed, “only after the prolongation of the licence was granted.” Lobbying by Roman Abramovich, governor of Chukotka, was one of the factors in the prolongation; so was Abramovich’s acquisition of de facto control of Highland, shortly afterwards, for $400 million.

Neither Sai nor Ledovskikh has ever agreed to respond to Mineweb’s inquiries.

A ministry source, close to Trutnev’s office, told Mineweb that it was last July, when Sai outran himself. Trutnev then sent a proposal to the prime ministry to authorize Sai’s resignation. No formal action was taken, however, while Sai began to absent himself on sick leave or business trips. An investigation of Sai’s management was undertaken and then the results lost in the ministry. Then, the source claims, on December 26 “a serious person I would rather not name talked to Sai, and Sai wrote out his resignation statement.”

Speculation on who will be named Sai’s successor has focused on Mitvol, but he is considered too controversial, and his promotion is unlikely, a ministry source says. Nor will the balance between Mitvol and the new man be changed significantly, at least until after the Russian presidential election scheduled for March 2. A caretaker until then, possibly one of Sai’s assistants, has been mentioned in Russian press reports. There is no doubting the significance of the role Rosprirodnadzor can play in regulating the hard-rock mining sector, as well as in hostile raiding of assets in the oil and gas sector, but no one in Moscow is confident of how this role will be discharged after the election of Dmitry Medvedev as the new president.

Mitvol said this week he will “target big and very big companies” for thorough checks on their compliance with environmental standards starting next month. “A comprehensive list of the big foreign and Russian companies slated for inspection will be published from January 25. We plan to inspect the largest companies — the biggest offenders in environmental pollution and the biggest violators in utilization of subsoil assets.”

Mitvol also says he expects Trutnev will remain as minister after the changeover in the Kremlin.

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