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By John Helmer in Moscow

The truth hurts, speaking musculoskeletically.

Vladimir Potanin (right) usually gives his nerves away when he’s under pressure by the rapid tapping of his foot under the table. Oleg Deripaska (left) shows his nerves, when gulping noises are audible in his throat and he forces a smile.

The micro-expressions are so obvious, these men wouldn’t qualify as guest stars or for cameo parts on the US television thriller, “Lie To Me” — their plot is too obvious too quickly. If you haven’t seen the television series, it isn’t difficult to perform your own experiment on these oligarchs, applying the Facial Action Coding System (FACS) to clips of their performances:

http://en.wikipedia.org/wiki/Facial_Action_Coding_System


http://news.bbc.co.uk/2/hi/programmes/newsnight/8146052.stm

Vladimir Putin and Igor Sechin don’t give themselves away so easily, and as part of their game is to make the oligarchs who depend on their continuing favour as nervous as possible, they like to increase the pressure by wagging their fingers.

Now that Deripaska is fighting Potanin for shareholding control of Norilsk Nickel, their nervousness is rising as they wait to see which way the finger wags.

From the start of the 2008 crash, Kremlin finger-wagging was mostly for theatrical effect. President Dmitry Medvedev, for example, uses his index finger from his lawyer’s training: he thinks he’s performing in an imaginary court in front of an invisible judge.

Security men and secret service agents are trained differently. When Putin means to exert his authority, he tightens his lips and stretches his mouth, baring his teeth. Putin leaves his fingers alone, because his canines do the job more convincingly.

Speaking musculoskeletically, since the autumn of 2008, when the crash exposed the cash-stripping, money laundering, and leveraging tactics of the oligarchs to national reproof, the Kremlin hasn’t clenched a muscle, and the oligarchs haven’t displayed a flinch. Medvedev has protected them from the bankruptcy procedures of the courts. The pen-tossing and finger-pointing episode between Putin and Deripaska at Pikaelovo in June of 2009 was strictly for the television audience – the left index-finger theatricality was not accompanied by firmness around the mouth:

http://www.youtube.com/watch?v=UMlsbB33QSc

Now, one year later as the Russian economy emerges more certainly out of the crunch, it looks like the thumbs are out, and down, for two major oligarch figures, plus one minor one.

Sergei Pugachev, owner of shipyards, coal deposits, a French delicatessen, and Mezhprombank, is one of the two. The others are Dmitry Rybolovlev, the former controlling shareholder of potash miner Uralkali; and Vadim Varshavsky, the former owner of the Estar group of steelmills. Rybolovev sold his control stake of Uralkali last month to a syndicate which is holding the asset for a merger with Silvinit, another potash producer. Varshavsky’s steelmills have been taken over by Mechel and a steel distributor in central Russia.

These fellows agreed to go so quietly, the Kremlin wasn’t obliged to put on a hand-and-mouth show. But the hostile takeover now being mounted by Deripaska, in order to merge Rusal, the aluminium monopoly, into Norilsk Nickel, Russia’s largest mining company, is a fight of much greater magnitude. And also of much, much more money. According to a calculation by Alfa Bank’s research department, Norilsk Nickel will generate at least $10 billion in free cash over the next two years or so. Thus, while Rusal drifts downwards financially, growing increasingly desperate for cash to avoid default triggers in its banking agreements, Norilsk Nickel sits on the biggest money pile in Russia.

What makes this week’s display by Norilsk Nickel’s chief executive, Vladimir Strzhalkovsky, exceptional, unprecedented even, is a level of confidence that money can’t buy, and oligarchs can’t employ. Unfortunately, the interview transcribed and published by Kommersant, is not available on video tape.

Strzhalkovsky was damning for Deripaska, with his 25% stake in the company. But just as confidently, he demonstrated he is not speaking for Potanin, with his 25% and his history of controlling the company since 1996. In Russia’s corporate sector, chief executives are either the controlling shareholder, or the closely guarded mouthpiece for the controlling shareholder. So, if Strzhalkovsky speaks with assurance, that is because he knows exactly who is behind him, and who is in his face. No Russian corporate boss has ever dared to strike at Deripaska so forcibly. No ranking public official in Russia has referred until now to Deripaska’s fate in the London High Court lawsuit of Michael Cherney (Chernoy), or the Spanish money-laundering prosecution pending in the Madrid court.

This then is a display by Strzhalkovsky that neither oligarch contesting for Norilsk Nickel is likely to win control when the Deripaska-Potanin fight is done. Strzhalkovsky is intimating that Deripaska will be defeated, and also that Potanin will not win. To be so certain, or so brave, Strzhalkovsky is bound to be speaking for the only source of power bigger than them all – Putin and Sechin.

Here are excerpts:

“All shareholders will not happen to have the same views and plans. The plans and actions of each of them is due to the situation in which he personally and his companies find themselves. Of course, management is interested to ensure that shareholders would always be well fed, content, calm, and without debt problems. But life is not always so composed. In that situation, some shareholders can be pushed somehow into some action. This, in turn, may trigger conflict with the interests of other shareholders…When there are different views, each click, every nod is perceived as a trick.”

“The theme of association between Rusal and Norilsk Nickel has not been discussed. If someone wants it and he talked about his desire to some journalist, it does not mean that the topic of merger is again on the agenda…I would not want our board of directors turned into a bazaar. That will not happen. It should be discussing such topics politely, constructively, rather than turning [board meetings] into marketplace squabbles. Despite the fact that some shareholders let their desire be known, personally I say, nice and loudly, I do not intend to move.”

“[Asked how Rusal did so poorly in shareholder voting for the Norilsk Nickel board on June 28] Very simple. As for the independent directors, as well as for management and me personally, all the minority shareholders voted in one block. I do not remember exactly — about 4%. All employees of Norilsk Nickel – these shareholders cast their vote for the management candidates. Why? The company really has preserved the entire social program, to improve transportation, recreation, housing. Why should they vote for someone else other than for management? Plus, the banks with whom we work telephoned and said that they voted for management. Interros [Potanin’s holding] only voted for four candidates, so they were all elected. In favour of Vasily Titov [representing VTB] was voted the shareholding of Alisher Usmanov [about 4% ], plus the VTB shareholding — this is about 1.5%. That was enough to go over the threshold for election.”

“I still can not understand, frankly, why Rusal put up five candidates, when really only four could be elected? Why? I believe that Rusal had a clear understanding that the board could take no more than four people [for Rusal’s share of the vote]. But there was also a desire to save face in front of those organizations and people who have been pledged to the Board of Directors of Alexander Voloshin. Well, if you have promised, you have to go through with it.”

“Rusal, as the owner of a shareholding bloc of more than 10%, certainly has the right to initiate an extraordinary meeting of shareholders, but the agenda of that meeting must first be approved by the Board of Directors. To change the current board, it is necessary that this board should also have voted for the approval of the termination of the powers of the board. Do you own a copy of the report of this outcome. Me, I don’t.”.

“Do I look like the kind of man on whom something can be imposed? You can try, of course, but can you succeed? No. With regard to government intervention in the conflict, I do not think that is possible. At least now it does not. Rather, I would say: maybe there have been attempts here and there, but there are no results.”

[Did you discuss this topic in the presidential administration or government, perhaps with President Medvedev or Prime Minister Putin?] Silence.

“I agree that there is always something to aspire to [when you are running a company]. But on the other hand, you always need to compare the results of the company with its competitors. For example, the positive or negative criterion of company performance is the dynamics of growth of stock price in the short term and the long term. If you look at the global players in the non-ferrous metals industry, there has been a decrease in share prices since the beginning of this year of 33%; that includes Rusal. For Norilsk Nickel, unique in the sector, the share price has increased by 3%. If we take data for the past 52 weeks, the share price of [Norilsk Nickel] has increased by almost twice that of its competitors – by 88%. The indicators of Norilsk Nickel are head and shoulders above the other companies. No doubt we could work even better, but that is another issue.”

“Speaking of attempts by Rusal to change management [at Norilsk Nickel], you probably have in mind the statement in the newspapers to the effect that in my position there ought to be placed a ‘world class professional metallurgist’. In their opinion, this should improve the performance of the company. Of course, this view has a right to exist. But then, Deripaska, let’s start with yourself. Let him step down from the CEO of Rusal, and let his position be assigned to a specialist of global standard. I allow myself to assume that the results of Rusal will then be a little different. However, one should take anything away from Deripaska. I admire the way in which he balances between the courts in London and Madrid, and runs from creditors; and yet manages to produce a different statement once every three days. This is really high efficiency. But I believe that once such a businessman takes a high position, he must behave accordingly.”

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