By John Helmer, Moscow

The takeover announced at the start of this month by Global Ports Investments (GPI) of the National Container Company (NCC) gives control of more than 72% of container transportation volume in Russia’s west, including the Black and Baltic Seas; and more than 82% of Russian box volume in the northwest, from the Gulf of Finland to the Arctic. Calculations by Moscow maritime expert Alexei Bezborodov indicate that with accumulated capacity of 1.7 to 1.8 million Teu per annum, Global Ports is taking “a monopoly position in the market”. Teu stands for twenty-foot equivalent unit, a measure of container length and of cargo capacity roughly equal to 22.6 tonnes.

As of August 31, the volume of the total Russian market stands at 3.5 million Teu. In the Russian Fareast, volume is currently 1 million Teu.
(more…)

by John Helmer - Sunday, September 15th, 2013
No Comments »

By John Helmer, Moscow

In Gogol’s well-known story Dead Souls, Chichikov (left), the central character and villain of the piece, makes a lucrative business of buying the names of dead serfs from local census rolls in order to cut the tax liabilities of landowners, accumulate fake collateral against which he intends to borrow, and then retire in wealth. In the more up to date case of the state-funded aluminium monopoly, United Company Rusal, the business is to keep filling the names on the employment rolls while disposing of their jobs and eliminating the unsellable surplus of their production.

The idea of Oleg Deripaska (right), Rusal’s chief executive and trustee for the state owners of the company, is that if the souls protest their loss of work and income, they won’t be convincing to the Kremlin so long as Rusal claims to be paying them for work no longer done. Rusal’s published rationale for what is happening is that until international demand for aluminium raises the price of the metal in trade, it must cut supply to the market. That’s problematic because of the large accumulation of unsold aluminium in uncounted warehouse inventories. That story can be read here.
(more…)

by John Helmer - Wednesday, September 11th, 2013
No Comments »

By John Helmer, Moscow

To the disability of being unable to speak his mind in public Suleiman Kerimov has the added handicap of being unable to accept how short his arms are, particularly when handling money from state banks. In overreaching himself Kerimov has provided a case study of how President Vladimir Putin expects the Russian oligarchy to conduct its business when state interests are at stake; and also of the continuing importance of former deputy prime minister Igor Sechin, now chief executive of the Rosneft oil company.

In July Kerimov got too big for his boots when he believed he had Kremlin support for upsetting the potash cartel known as the Belarusian Potash Company (BPC), directly threatening President Alexander Lukashenko of Belarus. The BPC, headquartered in Minsk since 2005, was a Russian creation — successor to a line of trading organizations for the concealment of potash sale profits with names like Ferchimex (Belgium), Bermont (Switzerland), Fertexim (Cyprus), and Uralkali Trading (Switzerland). All of them were the creation of the fertilizer, I mean fertile, mind of Dmitry Rybolovlev, whom Sechin drove out of the potash business in 2010, replacing him with Kerimov. Sechin failed to oust Rybolovlev’s trader, Oleg Petrov, who stayed on to teach Kerimov the tricks of the trade.
(more…)

by John Helmer - Tuesday, September 10th, 2013
No Comments »

By John Helmer, Moscow

Nothing so reveals the character of the men on the commanding heights of the Russian economy than a lawsuit in an international court initiated by their wives against one of their tradesmen.

In the case which recently came to light, Aleksandra Melnichenko (nee Nikolic), wife of the fertilizer oligarch Andrei Melnichenko, sued a New York art dealer for more than €5 million, including triple punitive damages, for putting the wrong thing in her garden. This beats the record for a backyard claim previously set in a Washington, DC, court by Elena Pinchuk – daughter of the ex-President of Ukraine, Leonid Kuchma, and current wife of Victor Pinchuk.

The New York case turned on Mrs Melnichenko’s claim that she had ordered her sculpture to be 220 centimetres in height, but she got only 120 centimetres. The missing 100 centimetres, she claimed, was not only an aesthetic violation and a lapse of taste, but also a breach of contract, and worse, a case of fraud. Hence the triple damages.
(more…)

by John Helmer - Monday, September 9th, 2013
No Comments »

By John Helmer, Moscow

As larger cargo volumes and more international vessels move through Arctic waters, or the Northern Sea Route as the passage is generally called in Russian (SMP is the cyrillic acronym, NSR in English), the Kremlin’s strategy is to fund the construction of the most powerful nuclear icebreakers in the world, and ensure they dominate future navigation and convoys. These vessels are very expensive to build and to operate, however. So costly that just a few days of extra time navigating the icepack could eliminate the cost advantage which the Northern Sea Route is currently advertising over the Suez Canal alternative.

Because of the lack of ports along the Arctic shores, and tight beam and draught limits for vessels to navigate the eastern Laptev and Sannikov narrows, ten new Russian navigational and emergency centres will be installed over the next decade to bring the new traffic under Russian supervision and regulation. But there are technical problems with the maintenance of hundreds of strontium-90 powered navigational beacons installed along the coast line. Customs, coast guard, and special forces units are also being reinforced and tested to give the Russian regulatory authorities teeth to react to what the Kremlin considers foreign territorial or commercial threats. Ironically, according to one Moscow source, the satellite imaging used by the Russians to identify and navigate around thick ice concentrations is Canadian, not Russian.
(more…)

by John Helmer - Thursday, September 5th, 2013
No Comments »

By John Helmer, Moscow

Evraz, the steelmaking group owned by Roman Abramovich and Alexander Abramov, has revealed that it cannot complete the sale of its South African steel subsidiary, Highveld Steel & Vanadium, on time, and that the South Africans are the reason for the fresh delay.

At the same time, Russian Foreign Minister Sergei Lavrov told his South African counterpart, Maite Nkoana-Mashabane, in Moscow on Monday that the Kremlin wants to see less delay, more commitment from President Jacob Zuma on buying nuclear power reactors from Rosatom. Zuma, who has now arrived in St. Petersburg for the G-20 summit meeting, has met President Vladimir Putin twice already this year – in Durban in March, and in Sochi in May – and on each occasion the official communiques have pledged the same thing. Lavrov repeated this on Monday when at a press conference with Nkoana-Mashabane, he said Russia’s priority in its bilateral relationship with South Africa is the billion-dollar sale and purchase of reactors. “Russia is ready to assist in the creation in the Republic of South Africa of nuclear power,” Lavrov said. This, Lavrov emphasized, is the priority in “the complex of bilateral ties…further steps for implementation of these major arrangements…[and] the activization of investment cooperation.”
(more…)

by John Helmer - Thursday, September 5th, 2013
No Comments »

By John Helmer, Moscow

Sovcomflot, the state-owned Russian tanker company, has reported that its vessel operating profit collapsed from $101.7 million to just $31.7 million in the six months to June 30, while on the bottom-line the company reported a net loss of $14.5 million; this compares with a profit of just $2 million in the first quarter, and a profit of $51 million in the first half of 2012. This is the first loss ever booked in Sovcomflot’s audited reports.
(more…)

by John Helmer - Tuesday, September 3rd, 2013
No Comments »

By John Helmer, Moscow

After months of delay, Victor Pinchuk’s Interpipe group revealed in its financial report for last year — issued at the start of August but given a release date of May 23 – how much financial trouble the Ukrainian pipe and steelmaker is now facing. The impact of this on the international art market is about to be felt in art auctions scheduled for later this month and in October in London and New York. That’s because Pinchuk’s record-priced acquisitions of two artists, Englishman Damien Hirst and American Jeff Koons, have created an overhang of their works in the market place. According to speculation by London and New York art dealing sources, these works may be forced into sale at a heftier discount than Hirst and Koons have already been taking.

Art market reports show that sales by Hirst have dropped from $45.8m in 2008 to $18.3m in 2012 – and that doesn’t count the volume of works failing to sell at all. Since then, according to the New York Times, Hirst works are fetching 60% less than was originally paid for them. To reduce the supply, Hirst’s production company Science Ltd. has issued a catalogue itemizing one line of purportedly authentic works and inviting owners to apply to Hirst for an authenticity check.
(more…)

by John Helmer - Monday, September 2nd, 2013
No Comments »

By John Helmer, Moscow

On December 7, 2012, Andrei Melnichenko (image right, right) told prospective buyers of $750 million in loan participation notes that he was gung-ho on the future of the potash business of his Eurochem group. For Eurochem — 92% owned by board chairman Melnichenko; 8% by chief executive Dmitry Strezhnev – potash was, still is, a brand-new line of business. But in a decade or so, Melnichenko told investors, he aimed to be number-1 for potash in Russia and in Europe; and for potash, nitrogen and phosphate fertilizers combined, close to number-1 in the world.

Apparently nothing stood in his way – not Uralkali, Russia’s current potash monopoly producer; nor Suleiman Kerimov (left, left), the control shareholder of Uralkali. Not Belaruskali, the state-owned potash monopoly of Belarus, nor Belarus President Alexander Lukashenko. Those four names don’t appear in the risk or strategy sections of Melnichenko’s investment prospectus, a copy of which has just fallen from a Eurochem truck. How he proposed to defeat such rivals the Eurochem prospectus didn’t even acknowledge as a problem. Can Melnichenko have been so unthinking as to expect his rivals to surrender their market positions and profits without a fight? Did Melnichenko take his bond buyers for dolts and boobies?
(more…)

by John Helmer - Sunday, September 1st, 2013
No Comments »

by John Helmer - Sunday, September 1st, 2013
No Comments »