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By John Helmer, Moscow

A reporter for the New York Times has scooped the global press in Sochi. Named David Herszenhorn, the newspaper’s specialist on the New York City borough of Queens, the reporter has uncovered a plot to kill a group of stray dogs – by poison darts causing suffocation — in front of the main venues of the Sochi Winter Olympic Games. The dog death plot, according to Herszenhorm, was intended to “undercut the image of a friendlier, welcoming Russia that President Vladimir V. Putin has sought to cultivate in recent months.”

Herszenhorn (image, centre) also reveals that a counter-plan to save Sochi from televised images of violent canine death is being financed by Oleg Deripaska (image, left), chief executive of United Company Rusal. “Mr Deripaska, an industrialist who largely made his fortune in aluminum, provided $15,000 to get the shelter started on land donated by the local government. He has also pledged about $50,000 a year for operations.”

The dogs rescued by Deripaska’s philanthropy will be available to do something he cannot – live in the United States. According to Herszenhorn, “all of them [dogs] will be eligible for adoption, even to fans attending the Olympics.” For the full story, click here. For Deripaska’s plan to obtain a US visa, see here.

Sources close to Rusal, the loss-making aluminium monopoly, claim the reason Deripaska is paying so little to save Sochi’s dogs now, and promising so much in the future, is that Rusal has run out of cash. Part of the reason for that is the Kremlin’s refusal to order Vladimir Potanin, the control shareholder of Norilsk Nickel, Russia’s largest metal producer, to accept Deripaska’s demand for cross-financing between Norilsk Nickel and Rusal.

sechinIn 2012 Rusal reported a loss of $55 million on its bottom line. But that was after collecting $751 million in Rusal’s share of profits from associated companies, primarily from Norilsk Nickel. At the time, Rusal held almost 191 million shares in Norilsk Nickel for an effective interest of 30.27%. But for four earlier years Deripaska had failed in his hostile takeover bid for Norilsk Nickel. Fighting between him and Potanin appeared to be going Potanin’s way when Igor Sechin (right) was the deputy prime minister in charge of the resource sector. But Sechin moved to Rosneft in May 2012. At the end of that year, the Kremlin devised a new scheme, interposing Roman Abramovich and his Millhouse holding between Potanin, his Interros holding, and Deripaska. Their scheme was reported here.

putin_dogsAccording to the terms reported by those close to Deripaska, Rusal was to hold a 27.8% interest in the restructured shareholding of Norilsk Nickel. It was also to receive that much of a share in $9 billion of dividends to be paid out by Norilsk in 2013, 2014, and 2015 – whether or not there was sufficient profit in the Norilsk Nickel kitty to cover the outgoings. In short, it looked like Deripaska and Abramovich had persuaded President Putin (right) to agree to a scheme of state bank borrowing by Norilsk Nickel to pay down Rusal losses, so that it could meet its state bank borrowings – out of one state pocket into another, and along the way, profit for Abramovich’s pocket. For Rusal the lifebuoy appeared to be about $2.5 billion over three years, or about $840 million per annum.

However, such a momentous deal for the two public shareholding companies, the state banks, and the Kremlin has never been finalized — not in the 25 months which have now elapsed since Deripaska claimed the deal had been done.

The first notice from Rusal to its shareholders on December 4, 2012, told Rusal shareholders no more than that the agreement “provides for certain measures ensuring stability of dividends paid by Norilsk Nickel in relation to the years 2012, 2013, and 2014 respectively.” Twenty days later, Rusal issued a second notice responding to its own press leaks about the deal terms. This time Rusal explained concretely what Deripaska wanted from Potanin. “Norilsk Nickel is expected to declare dividends in respect of 2012, 2013 and 2014 (to be paid in 2013, 2014 and 2015, respectively) in the amount of US$2 billion, US$3 billion and US$3 billion, respectively, and such dividends shall be increased by US$1 billion payable in connection with Norilsk Nickel’s proposed disposal of foreign or non-core energy assets.”

“Moreover, pursuant to the Agreement, the dividends of Norilsk Nickel in respect of 2015 and subsequent years (which shall be payable from 2016) shall be equal to 50% EBITDA of Norilsk Nickel calculated based on the audited consolidated financial statements of Norilsk Nickel according to IFRS for the year in respect of which the dividend is paid. Payment of any such proposed dividends shall be subject to, among other things, applicable law, downward adjustments and other prevailing conditions such as the right of the General Director of Norilsk Nickel to defer in certain cases a portion of the dividends to subsequent periods, or as otherwise agreed by the Company and Millhouse.”

At the time, Norilsk Nickel’s earnings (Ebitda) had been running above $7 billion for the years 2010 and 2011; in 2012 Ebitda was down to $4.93 billion. So Deripaska was proposing that from 2015 on, the dividend payout from Norilsk Nickel would be even greater – more than $3.6 billion if earnings continued at their former level.

For reasons known to the entire world, they didn’t. Nickel and copper prices have fallen dramatically, and according to Norilsk Nickel’s last financial report – for the first half of 2013 – profit was down 63% from the year before to $545 million. Ebitda fell 8% to $2.3 billion. For 2012 Norilsk Nickel managed to pay dividends of just $1.9 billion, so Rusal’s share was much less than Deripaska thought he had in the bag. For 2013, the dividend payout is bound to be even less; that’s so long as Norilsk Nickel isn’t obliged to borrow the extra funds.

According to Rusal’s most recent financial report for the nine months to September 30, 2013, Rusal was running a bottom-line loss of $611 million, a sixfold increase over the year before. . But the number would have been worse had it not been for $181 million from Rusal’s share in Norilsk Nickel profits. This was down by 67% from the same period of 2012.

The Rusal financial report explains that Norilsk Nickel was refusing to hand over the full financial data it needed to be sure of its share. “The information used as a basis for these estimates,” claims the Rusal auditor, KPMG, “ is incomplete in many aspects. Once the consolidated interim financial information for Norilsk Nickel becomes available, it is compared to management’s estimates. If there are significant differences, adjustments may be required to restate the Group’s share in profit, other comprehensive income and the carrying value of the investment in Norilsk Nickel which has been previously reported.”

This means that not only is Deripaska’s survival dependent on Potanin’s payout, but also that Potanin is refusing to stick to the terms Deripaska thought Abramovich had arranged with Putin two years ago.

KPMG, which is also auditor for Norilsk Nickel, is obliged to issue qualified accounts for Rusal. Worse, Rusal cannot deliver on its promise to its shareholders to issue a circular setting out what they can expect from Norilsk Nickel to add to Rusal’s balance-sheet each year. This is why the latest Rusal notice, dated January 30, 2014, says: “Reference is made to the announcements of United Company RUSAL Plc (the “Company”) dated 4 December 2012, 11 December 2012, 24 December 2012, 25 April 2013, 30 August 2013, 1 October 2013 and 29 November 2013, respectively, regarding the settlement with Interros in relation to Norilsk Nickel…As additional time is required to finalise the contents of the Circular, the Company expects to despatch the Circular to the Shareholders on or before 31 March 2014.”

dog_interrosInterros, the Potanin holding, has a special programme for dogs, but it won’t say what terms it is offering Rusal. It is plain that Potanin is playing for time, and he intends to squeeze Deripaska until the state banks and Kremlin tire of the scheme from which Abramovich profits most.

This is the reason why this week Deripaska had $15,000 to save Sharik’s life. But after the Sochi Games conclude, it’s a fair bet he won’t have the $50,000 he’s promised Sharik and his comrades. Will the readers of the New York Times and groups campaigning against the Games save the dogs?

According to one of the homosexual athletes competing at Sochi, as reported by Rupert Murdoch’s Sky News, after counting the voices against discrimination in love from All Out, Trans Athlete, and Athlete Ally there is nothing to spare for canines. “ ‘Ms Brockhoff, 21, the only openly gay member of the Australian team, has said she won’t take part in organised protestsvirus during the games, but is keen to use the event to raise awareness of discrimination. She added, of President Vladimir Putin: “After I compete, I’m willing to rip on his ass.’”

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