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Hardly anyone can remember the Baroness Emmuska Orczy these days, and were it not for a Broadway musical, her best-selling novel would have been forgotten, too. It was called The Scarlet Pimpernel, and it concerned the adventures of an apparently witless, secretly intrepid English knight, who defied the French Revolution to save aristocrats, who may have been pretty, but whose heads deserved the guillotine.

The least forgettable lines which Orczy wrote were: “We seek him here. We seek him there. Those Frenchies seek him everywhere! Is he in heaven? Is he in hell? That damned, elusive Pimpernel!” Playing in a subsequent BBC serial, Rowan Atkinson, aka Mr. E. Blackadder, abhorred the Baroness’s prejudice for the aristos by killing two London noblemen he suspected of being the Pimpernel. He also ridiculed Orczy’s plot for “filling London with a load of garlic-chewing French toffs… looking for sympathy all the time simply because their fathers had their heads cut off”.

The library at Oleg Deripaska’s expensive residence on Belgrave Square may not have a copy of Orczy’s book, and the backyard isn’t likely to include a planting of the angallis arvenis (scarlet pimpernel). Nonetheless, having established his London domicile as a refuge, in case Russian prejudice should turn against the unusually rich, Deripaska is preparing to persuade the London market to buy the bonds of his aluminium empire, or even better, the shares of an initial public offering of Russian Aluminium (Rusal), now a Jersey-listed listed entity.

In order to do either, Deripaska must remove much of the secrecy surrounding his ownership of the Rusal group. And before that is possible, he must make sure there are no major rivals claiming to own the assets which Deripaska says belong to him. In practice, no sooner does Deripaska settle the asset claims of one rival than another launches a new one, and prepares a lawsuit. They are a little like the aristos the Pimpernel used to rescue from the guillotine. Only in Deripaska’s case, the plot is reversed a little, with the Aluminium Pimpernel doing his best to top his rivals in secret, while appearing in London to be the reticent fellow he would like to be thought of by his English friends.

Although Rusal once claimed that the Zhivilo brothers, former owners of the Novokuznetsk aluminium smelter, had been defeated in the US courts, Deripaska has paid them about $65 million in confidential settlement relating to their smelter, one of Rusal’s four. At a second smelter, Krasnoyarsk, after calling the former chairman and controlling shareholder Antoly Bykov a gangster and murderer, and rejecting a Swiss arbitration award in his favour, Rusal paid Bykov $100,500,000, also in confidential settlement.

A claim in the courts of the British Virgin Islands by the Reuben brothers, relating to diverted cash allegedly taken by Rusal from trade proceeds owed to the Reubens, has also been partially settled. About $100 million of the $300 million bid was agreed for payment in a settlement of June 27, 2005. However, one of Deripaska’s companies – called Bluzwed Metals — recently went into the High Court in London, arguing that Trans World Metals, the Reubens’vehicle, had violated Clause 11.4 of the secret deal with Deripaska. Deripaska then sought High Court enforcement of the Reubens deal. He got his summary judgement last January 26 in a ruling by Justice Sir Andrew Morritt. One secret preserved in the ruling was the identity of a Lebanese arranger called Joseph Karam – “K” in the court text – whose payoff and indemnity from further claims Bluzwed accused the Reubens of threatening.Bluzwed’s venture into the High Court occurred in parallel with an attempt by another smelter company controlled by Deripaska, Tajik Auminium Plant (TadAZ), to seek a High Court award of several hundred million dollars against the former investor in TadAZ, Avaz Nazarov, and trading companies associated with him. Although Deripaska has suggested in a US speech that he controls TadAZ, and testimony in High Court proceedings persuaded the judge that Rusal was backing the TadAZ lawsuit, Deripaska and Rusal claim they have nothing to do with TadAZ. Their lawyers also argue that they are outside UK jurisdiction, and should not be subject to the counter suit against them by Nazarov. An attempt by TadAZ and Rusal to have the court endorse the seizure of Nazarov’s passport, his bank accounts blocked, and his papers and computer records removed has been rejected by the London judge, William Blackburne. A new hearing before Justice Blackbume on whether Deripaska and Rusal have entered the court’s jurisdiction is scheduled in a few weeks’ time.

Potential bond buyers or investors in Rusal won’t trouble to seek Deripaska here, or there, and don’t mind whether he is in heaven or in hell. They will pay attention to the rulings on jurisdiction by the High Court judges, and on the trials Deripaska may then face for his assets. Investors have an understandable curiosity to know whose assets he is pledging or selling, and what financial capacity his Rusal group has to honour its obligations.

When the Moscow newspaper Vedomosti published a front-page article this week, headlined “How Rusal is organized”, it added a second headline by way of explanation: “Deripaska opens the structure of his main asset”. To the uninitiated, the impression was that Deripaska was confirming his ownership of the Rusal group, and through four holding companies, his ownership of four aluminium smelters in Russia; three alumina refineries in Russia and the Ukraine; three companies in the west African republic of Guinea, mining bauxite and refining alumina; a 20% stake in Queensland Alumina Refinery; and some downstream aluminium fabricating plants.

In Moscow newspaper practice, it is customary that newspaper reports about business are placed at a price, and like advertising, there is a scale of prices governing editorial position, length and prominence. This custom is so well entrenched, it is also usual for Russian readers of such newspapers to infer from the published text who might have paid to place it there. This isn’t to say that Vedomosti, owned by the Wall Street Journal, the Financial Times, and a Finnish media group – or its affiliated English-language newspaper, The Moscow Times – received financial reward for running what appears to be a news report of Deripaska’s disclosures. Russian customs being what they are, however, the speculation is that the prime mover behind the prominent article wasn’t Deripaska at all. Instead, it appears to be one of the biggest claimants in Rusal’s litigation history, Mikhail Chernoy. He is currently living in Israel, where his freedom of movement is restricted. He has been saying for years that he put Deripaska in the aluminium business, and that Deripaska is bound to pay him for a 20% stake in Rusal he retained from those early days. Deripaska claims he bought Chernoy out years ago.

Sources close to both men have confirmed how fond they once were of each other. This week, Chernoy is quoted as telling Vedomosti that he received $250 million from Deripaska five years ago, but that he is still owed a balance of about $2 billion. Chernoy is quoted in the newspaper as saying: “The validity of the agreement [with Deripaska] has expired, and now my lawyers are preparing a letter to Deripaska in which he will be reminded that he has not carried out his obligations to me.” If Deripaska had arranged the Vedomosti publication to disclose how much he owns in Rusal, Chernoy would not have appeared.

According to the Vedomosti report, the Rusal spokeswoman Vera Kurochkina is quoted as explaining that the Jersey-listed Rusal Ltd. was created in 2005 to absorb Rusal Holding Ltd., a British Virgin Islands company. This had been created by Deripaska and Roman Abramovich, along with Abramovich’s shareholding partners in Millhouse Capital, a UK holding company, to hold the smelter, refinery, mining, and other factory assets. Deripaska bought out Abramovich’s 25% stake in the group for $1,578 billion, and later acquired the Millhouse stake of 25% for an undisclosed sum. These numbers are about equal to the fraction they represent of the official revenue figures for Rusal sales in the years the transactions were negotiated. But they are substantially less than the valuations Moscow investment bankers assumed Abramovich had placed on, and Deripaska agreed to pay for Rusal. According to Rusal releases, in 2003 sales revenues worldwide were $4.5 billion; in 2004 $5.4 billion; and in 2005 $6.1 billion. Abramovich and Millhouse apparently believed their shares were not worth the large multiples Moscow investment bankers currently attribute to these revenue figures.

One of the few additional figures Rusal has released that bears on the asset valuation is the group’s debt. After financial reports Rusal had provided potential lenders disclosed heavy related-party lending between Rusal and Deripaska’s asset holding, Basic Element, leaving little cash in Rusal’s coffers, Rusal’s indebtedness has been a sensitive point on which the company has been reticent. The most recent disclosure by the company indicates that debt has been rising sharply, and was at $2.8 billion at the end of 2005. According to the Vedomosti report, Rusal documents valued its own assets at $2.8 billion last June. Subtracting the debt, perhaps Rusal believes itself to have a net value of zero. This is hardly Deripaska’s estimation of his net worth.

Kurochkina was asked if she would verify that the information attributed to her in the Vedomosti publication was accurate. She refused to respond to written and telephone requests. Were there any suspicion that Deripaska initiated the disclosures in Vedomosti, Kurochkina’s silence dispels it.

There is one further reason forjudging that the Vedomosti report isn’t a pimpernel which Deripaska intended to leave behind. For there is no reference in either the report, or the accompanying asset chart, of the trading firms through which Rusal’s production plants sell their products. As The Russia Journal has reported in great detail in the past, Rusal’s trading is largely done through tolling contracts, which leave the Russian assets with much less than the market value of the sales revenues. This value has been flowing for years to the trading companies offshore. It is these trading schemes that have already exposed Deripaska’s vulnerability to much of the litigation issued to date. The evidence of how these schemes operated to pauperize the plants and enrich the proprietors of the trading companies has not yet been tried in court.

However, if Rusal will not, or cannot consolidate on to its balance-sheet the proceeds of the dozens, if not hundreds of trading companies which Deripaska operates, then it will be difficult for investors to calculate what would give Rusal a net value of better than zero.

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