By John Helmer, Moscow
Norilsk Nickel has declared war on Alexander Popov (image centre), a 57-year old veteran of the oil industry and the new head of the Federal Agency for Subsoil Use, Rosnedra. In the circumstances this can mean only one thing — Vladimir Potanin (right), the dominant shareholder of Norilsk Nickel, has decided on a duel with Igor Sechin (left), former deputy prime minister and now chief executive of Rosneft. This is because Popov’s job for the past eighteen months has been as an assistant to Sechin; when Sechin left his government office in May, he put Popov in charge of Rosnedra’s key function – awarding licences for oil, gas and hard-rock mining. Sechin is also believed to have been behind Popov’s predecessor, Anatoly Ledovskikh, who decided last October not to allow Norilsk Nickel to extend its mining rights in the Norilsk-1 area on the ground that, though it is already mining in the area, it was the sole bidder for the adjacent mining rights.
This is the affair of Norilsk-1, a set of deposits rich in nickel, copper, and platinum group metals in the Taimyr district of northwestern Russia, north of Norilsk city. On June 15, after a competition which Popov adjudicated behind closed doors, the mining rights were awarded to Russian Platinum, an offshore company created by Musa Bazhaev. Why Bazhaev needed the new licences so badly was explained here . As that tale makes plain, Sechin has had a soft spot for Basaev before. This was in 2007, when Basaev was competing against Mikhail Fridman and the Alfa group for control of the Khabarovsk goldminer, Amur Artel. Amur is the predecessor of Russian Platinum; and if it wasn’t fast running out of platinum and palladium, Basaev wouldn’t be competing for new supplies of platinum in Norilsk Nickel’s backyard.
That Sechin and Popov have gotten involved on Basaev’s side and taken up arms against Potanin, makes for an unusual test of mineral resource policy for the new Russian government; and of personal power for Sechin, whose move to Rosneft removes his administrative presence from the metal and mining sector, which he dominated in the previous government.
A story published by Moskovskiy Komsomolets on July 3 by reporter Sergei Artemov claims it was Sechin’s idea to make the award of mining rights at the Norilsk-1 area an ostensibly competitive one by ruling out Norilsk Nickel’s sole bid last year, but then besting it with non-competitive measures behind the screen of Popov’s committee last month.
This form of administration by remote control flies directly in the face of the announcement by President Vladimir Putin early this week at a meeting of federal energy administrators, including Sechin. According to Putin, there should be competitive bidding in open auctions for deposits of oil, gas and minerals of a size or volume designated under Russian law to be strategic. Here  is what strategic means for precious metals.
What Popov did for Russian Platinum has been termed by Norilsk Nickel executives biased, probably illegal, and possibly corrupt. They have attacked Russian Platinum’s submission to Rosnedra for proposing to invest less money, undertake higher costs, and start mining more slowly than the Norilsk Nickel plan. Oleg Simonov, director of exploration for Norilsk Nickel, has publicly criticized Russian Platinum for promoting to investors its Chernogorskoye platinum project, south of Norilsk-1, when the fieldwork and testing already done there by Norilsk Nickel indicate that mining would be unprofitable.
Norilsk Nickel says it will challenge Rosnedra in court. State Duma deputies from the Krasnoyarsk territory, where the deposit is located, have supported a formal request from the Speaker of the Duma, Sergei Naryshkin, for an investigation of violations of Russia’s law on competition by the Federal Antimonopoly Service (FAS), and of the criminal code by the General Prosecutor and the Federal Security Service (FSB).
Notwithstanding, Russian Platinum has declared victory in the first round at FAS. In a release issued on July 2, the company said “the FAS has not identified any procedural violations under Art. 18.1 of the Law ‘On Protection of Competition’ and dismissed the complaint from Norilsk Nickel… the victory in the competition was awarded on the basis of proposals made by [the company] to comply with the conditions of competition for a deposit of federal significance, and represented a superior competitive offer. The new company, formed to develop the southern part of Norilsk-1, will ensure the creation of more than three thousand jobs in the Krasnoyarsk Territory. The service life of the mine will be about 60 years. The work will be carried out in close integration with the Chernogorskaya Mining Company, which is part of Russian Platinum.”
The company announcement also quotes Musa Bazhaev as saying: “Investing in this asset is strategic[and] long-term for us. We have already invested in Russian Platinum more than $450 million, and in five years we’re planning to invest another $4 billion to build in Russia a world leader in platinum group metals.”
Russian Platinum spokesmen were asked to clarify the investment calculations. They responded without clarification.