By John Helmer, Moscow
Alrosa, the largest diamond miner in the world, and a public shareholding company listed on the Moscow Stock Exchange, has replaced its chief executive, Andrei Zharkov (lead image, left) , twelve months before his contract was due to expire. On Monday the company refused to announce the change, or explain the reason. It refused even to disclose that Zharkov’s contract, which commenced on April 23, 2015, is for a three-year term ending in 2018. Nor has the company confirmed that Zharkov’s replacement is Sergei Ivanov Junior (right side, 1st) the 37-year old son of former Kremlin chief of staff, Sergei Ivanov (right side, 3rd).
The official announcement of the switch was made by Prime Minister Dmitry Medvedev, when he called Ivanov Junior into his office on Monday afternoon. Medvedev told Ivanov “the Alrosa company is the world’s largest [in diamond mining] and has backbone value for our country, in particular for development of the Far East. Therefore, I would ask you to concentrate on this. It is necessary to work actively according to all production and economic programs with the [federal] Government, with the Ministry of Finance, to build up a fully fledged relationship with the regional authorities because the company has unconditional value for the Republic of Sakha-Yakutia. You should put all these factors into the set of your priorities as the company’s chief executive.”
Even after the ceremony at the prime ministry and the signing of the government’s appointment paper for Ivanov, Alrosa management was in denial. By the next day the company website had not removed Zharkov from the chief executive’s page; there was no mention of Ivanov. According to Alrosa spokesman Andrei Ryabinnikov, speaking on Monday afternoon: “we do not comment on the details of the employment agreement with Mr. Zharkov. We report all new appointments in the company in special press releases.”
Sources close to Alrosa in Moscow and in diamond trade centres abroad believe Zharkov’s abrupt ouster was the outcome of a power play between former Finance Minister Alexei Kudrin, an economic advisor to the Kremlin, and Yury Trutnev, the deputy prime minister in charge of the Russian Far East. For many years the dominant state official on the Alrosa board, Kudrin was defeated. Trutnev, victorious, leaked first word of Zharkov’s replacement by Ivanov on February 27.
The sources also reveal that Zharkov, a long-time protégé of Kudrin and subordinate of the current finance minister Anton Siluanov (lead image, right centre) was removed for pushing too hard the share sell-off and cash collection schemes of the Finance Ministry, also touted by Kudrin. The Sakha republic, where most of Alrosa’s mines are based, and which holds 25% of the company’s shares, opposed Zharkov, and got Trutnev to agree. Medvedev and President Vladimir Putin then decided that the man they could trust to satisfy the locals, but remain under their thumb, was Ivanov Junior.
“This is piratization by the state,” explains a London source. “It makes nonsense of the privatization of Alrosa shares, of the 34% free float, of the governance rules of the company. It is simply state companies reverting to form – that’s Soviet form but with less control than in the Soviet days. It’s now a gang of men wearing state uniforms feathering their nests.” State piratization is so sensitive that noone inside Alrosa, and almost noone in the Russian diamond industry, will admit what is happening. (more…)