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By John Helmer, Moscow

Victor Vekselberg, chairman of the board of directors of United Company Rusal, has done what no Russian business partner of Oleg Deripaska has dared to do before, with one exception – announced publicly, and to Deripaska’s face, that Deripaska has violated his signed agreements and brought discredit on his business. Vekselberg, who once proposed merging his Siberian Ural Aluminium (SUAL) company with Mikhail Chernoy’s (Michael Cherney’s) 20% stake in Siberian Aluminium, putting Deripaska out of the business, now follows Chernoy in charging Deripaska with dereliction of his fiduciary duty, and worse. Cherney, the exception now joined by Vekselberg, takes Deripaska to trial in London in June.

It is unprecedented in Russian business for the chairman of the board of a major Russian company to make a public attack on the competence and propriety of the chief executive. This is because the board chairman of a Russian public company is generally the control shareholder, or the trustee of the control shareholder. But in this case, Vekselberg with 15.8% of the Rusal shares (shared with his partner Len Blavatnik) is implicitly challenging Deripaska’s nominal shareholding of 47.41%, hinting at what is widely suspected in Moscow – that Deripaska doesn’t himself control that bloc, and can be called to account for the loss of Rusal value by those who do.

It is also unprecedented for Russian businessmen of Vekselberg’s financial size to resign in protest. They usually come to terms with their antagonists or rivals in a sale and purchase transaction that buries acrimony and buys silence.

Vekselberg issued this statement today on the website of his Moscow holding company Renova, resigning immediately as chairman of the Rusal board of directors and withdrawing also as a director. “It is with great regret that I have to state that, due to the actions of its management, UC Rusal is presently facing a deep crisis, as a result of which UC Rusal has, in my opinion, deteriorated from an international aluminum leader into a company overburdened with debt and entangled in numerous lawsuits and social conflicts. As Chairman and director, I disagreed with a number of decisions in relation to the company’s strategic development, modernization of production and social and human resources policies, some of which were adopted by management without Board approval and in breach of shareholder agreements. In view of this, I do not consider it appropriate to maintain my current position as the Chairman and a director of UC Rusal’s Board.”

Through his spokesman, Vekselberg declined to amplify for the time being what “strategic decisions”, “social conflicts”, and “social and human resources policies” his itemization refers to.

Rusal has reacted, counter-attacking Vekselberg, and charging him with absenting himself from board meetings. The company statement fails to address the central charge in Vekselberg’s announcement – that Deripaska runs the company without consultation or agreement with either his shareholders or the board. At least one of their conflicts is well-known – Vekselberg, Blavatnik, and Mikhail Prokhorov (with 17.02% of the shares) have wanted Rusal to sell its 25% stake in Norilsk Nickel at the premium price offered, and end the conflict with Vladimir Potanin, Norilsk Nickel’s control shareholder.

One of the costs of Deripaska’s refusal is that Rusal’s share price is currently 43% below its January 2010 initial public offering (IPO) price.

Just minutes after Vekselberg’s resignation was issued, and as the Rusal share price started plummeting on the Hong Kong Stock Exchange, trading was suspended at the company’s request.

RUSAL SHARE PRICE TRAJECTORY SINCE JANUARY 2010 LISTING

According to Rusal, “following media reports published in regards to Mr Vekselberg’s decision to resign as Chairman of the Board of Directors of the Company, UC RUSAL considers it necessary to make the following statement. The issue related to the change of the Board Chairman had been discussed on several occasions during recent Board meetings and further discussions were scheduled to take place at the forthcoming Board meeting on 16 March 2012. These discussions centred on improving the efficiency of the Board and were deemed necessary by the fact that Mr Vekselberg had failed to perform his functions as a public company board chairman over the past 12 months. In his role as an acting Chairman of the Board, Mr Vekselberg has not attended any of the live board meetings dating back to February 2011, was not present at the Annual General Shareholders’ meeting on 25 June 2011 in Hong Kong; neither had he taken part in any investor meetings over the year.

“In this respect, the decision of Mr Veskelberg to resign as Chairman of the Board preempted the anticipated consideration of this matter by the Board. In line with the best international practices of corporate governance, UC RUSAL will endeavor to appoint Independent [sic] director as Chairman of Board, which will undoubtedly raise the efficiency of the Board.”

Vekselberg holds 15.8% of Rusal’s shares in partnership with Len Blavatkin, the co-owner of SUAL when it was merged with Rusal on Kremlin orders in October 2006. At the time, SUAL was aiming at an independent listing on the London Stock Exchange, piloted by the then chief executive, Brian Gilbertson, the international mining entrepreneur and former chief executive of BHP Billiton. Gilbertson was the first chairman of the Rusal board until Deripaska forced him out in 2007.

The value of Vekselberg’s and Blavatnik’s stake in Rusal has dropped from $3.4 billion at the January 2010 listing in Hong Kong to $1.9 billion at today’s trading halt.

Vekselberg’s break with Deripaska comes almost nine years after Roman Abramovich ended his business partnership with Deripaska. According to Abramovich’s recent testimony in the UK High Court in the trial of Boris Berezovsky’s compensation claims, “we agreed with Mr Deripaska that we’ll finish our relationship because the relationship between our managing teams were very stressed, we knew it wouldn’t lead to anything good and that would put an end to our joint business.”

For Abramovich’s term “managing teams”, as for Vekselberg’s term “management”, there is just one and the same reference. But for the former’s pains, the takeaway price was $2 billion in 2003-2004 dollars. For the latter, there is the prospect of less, much less.

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