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By John Helmer in Moscow

Sergei Vybornov, the chief executive officer of Alrosa for the past two years, is mobilizing federal government and industry support in Moscow to oppose a bid by Sakha President, Vyacheslav Shtirov, to replace him, and take over the top post at Alrosa.

Shtirov made his bid at a meeting with Prime Minister Vladimir Putin on February 25. A spokesman for Putin told PolishedPrices that Shtirov was alone with Putin at the meeting. The spokesman declined to say what the two men had discussed on the subject of the diamond industry and the future of Alrosa.

The official text from the prime ministry is in the form of a partial transcript, in which Shtirov refers to the problems of his region, but mentions Alrosa only once, diamonds once. The transcript of Shtirov’s remarks refers in some detail to the region’s oil, coal, and gold-mining developments. All Putin is recorded as saying is that while the market prices of oil, coal, metals, and diamonds are declining, the price of gold is rising. He is reported to have repeated himself on this point, while Shtirov is reported as pointing out that gold production from the region, while a healthy 18 tonnes (579,000 ounces) last year, cannot be expected to increase without fresh and costly capital investment, which the Russian banks are reluctant to finance. According to the transcript, Putin said: “We’ll solve the problem with gold mining.” Shtirov then says that he expects a solution for state guaraneteed advance funding of goldminers will be devised soon. The published transcript ends with Putin saying: “Good.”

Since sources familiar with what was discussed claim that Shtirov’s bid to leave the presidency of Sakha and retake Alrosa was the piority of discussion with the Prime Minister, they interpret Putin’s reported remark about goldmining as taken too crudely out of context to make sense; and also to be irrelevant to the decision Shtirov was asking for.

In the past, Putin has met with the leadership of Alrosa, as well as with Shtirov, whenever diamond policy has been considered. When Putin has met with Shtirov alone, however, it has been to discuss the post of the Sakha presidency, and the leadership of Alrosa. Shtirov was CEO of Alrosa for several years until, in 2001, Putin ordered him to take the regional presidency from its two-term incumbent, Mikhail Nikolaev. Nikolaev, who had been Shtirov’s godfather in the regional government and at Alrosa, was shunted into a sinecure in the federal senate, while Shtirov was ordered to Yakutsk with a mandate to clean up the regional administration, and transfer control over Alrosa to the federal government.

Critics say he did neither. On December 28, 2004, Putin met him alone in Moscow, and warned him against obstructing the federal takeover of Alrosa. On January 6, 2006, they met again, this time in Yakutsk, the regional capital, and Putin repeated the warning. On October 31 of the same year, Shtirov was summoned for another rebuke for continuing to hold out against the completion of federal shareholding control at Alrosa. During that year, Shtirov also threw his weight against the then CEO of Alrosa, Alexander Nichiporuk, and played a supporting role in Vybornov’s promotion to replace Nichiporuk in February 2007

Subsequently, Putin rebuffed Shtirov’s pleas to be released from the regional presidency, telling him that he should remain until the parliamentary and presidential election cycles were completed. Since then Shtirov has been champing at the bit to break out of the confines of his administrative post.

Shtirov’s assistant, Yury Kravtsov, told PolishedPrices.com he would not answer questions relating to last week’s meeting with Putin. He also refused to say if Shtirov had briefed Vybornov on what had been discussed. Vybornov’s spokesman, Andrei Polyakov, said there will be no comment on Shtirov’s meeting with Putin.

Sources in the Russian diamond industry say it has been no secret that for months Shtirov has been seeking to leave the Sakha post, and take Alrosa from Vybornov. The battle that has ensued has also spilled into press leaks aimed at undermining or compromising one or the other of the principals. Sources close to Alrosa believe Shtirov’s campaign will fail.

An investigation of Alrosa’s financial performance by auditors at the Accounting Chamber, the federal government audit agency, has been under way for months. On January 27, the Chamber issued a statement claiming it had applied in the Mirny regional court (Sakha) for a ruling to sanction Alrosa for refusing to hand over documents which chamber auditors had requested. The court, the statement claims, has ruled in favour of the chamber. A source at the chamber said the audit is still under way, but he declined to identify the auditors responsible.

The one certainty, on which sources appear to agree, is a temporary one: Putin has not made up his mind yet on whether to keep Vybornov and Shtirov in their places, or what changes to make at Alrosa, if any.

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