By John Helmer, Moscow

The Fitch ratings agency today issued a warning that growing debt at Magnitogorsk Metallurgical Combine (MMK), owned by Victor Rashnikov, is at a “higher level than previously expected”. With prices for MMK’s products falling, the company’s free cashflow is under pressure, the Fitch report claims, as it downgraded its outlook forecast for MMK from stable to negative. The agency said also that it has made no changes to MMK’s long-term and short-term issuer default ratings, which are BB+ and B, respectively. It may issue a downgrade of those, the agency adds, if the negative cashflow persists.

MMK’s version of the Fitch warning attempts a cosmetic makeover. That is as convincing to investors as French silicone is to breasts.
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by John Helmer - Thursday, May 17th, 2012
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By John Helmer, Moscow

In Russia, and at sea aboard Russian ships, it’s common for crews not to be paid; the shipowners usually get away with it, at least as far as the General Prosecutor, Yury Chaika, is concerned.. The tale of the Lyubov Orlova, whose two Russian owners abandoned the cruise ship at a Canadian port, defaulted on their port, agent and fuel debts, and marooned the crew without salary or food, is a salutary example.

Not paying Russian seamen, and forcing them to work without pay, forcibly preventing them from leaving the ship, denying them medical treatment if they are injured, and locking them up to die – well, Chaika’s Vladivostok bureau for prosecuting transport offences has decided to bring charges under Article 127, Part 2, of the Russian Criminal Code. This follows the deaths of two Russian mariners aboard the Russian-owned, Tuvalu-flagged motor ship, SS Ross. It is the first time in living memory that illegal deprivation of an individual’s freedom for the purpose of compelling him to work – slave labour – has ever been charged in a Russian court.
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by John Helmer - Tuesday, May 15th, 2012
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By John Helmer, Moscow

By all accounts, particularly his own, Alexander Lebedev, aged 52, has been one of those clever KGB agents whose training inculcated the Protestant work ethic, and whose tour of duty in London the wits, to enable him to make a fortune without stealing from anyone; without bribery or administrative resources; without even being on favourable terms with President Vladimir Putin, Moscow Mayor Yury Luzhkov, or indeed anyone of significance in post-communist Russia. A private bank belonging originally to Gazprom, and Aeroflot, the state airline, are said to be the hidden hands by which Lebedev helped himself to his plenitude.
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by John Helmer - Thursday, May 10th, 2012
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By John Helmer, Moscow

In the Kremlin corridors under the new management, it is generally acknowledged that one of the stupidest things former President Dmitry Medvedev ever did was to order Russia’s representative on the UN Security Council to abstain from the vote and veto of the no-fly zone resolution aimed at the Muammar Qaddafi regime in Libya. That was on March 17, 2010. The Russian intelligence services already knew that US and British submarines were in place under the surface of the Mediterranean, ready to fire missiles to start a war that was intended to end in Qaddafi’s death. It did.
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by John Helmer - Sunday, May 6th, 2012
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By John Helmer, Moscow

Whoever Elena Egorova may be, she and Victor Rashnikov, owner of Magnitogorsk Metallurgical Combine (MMK), share exactly the same desire for personal anonymity and business secrecy as the Chelyabinsk court case against MMK’s half-billion dollar purchase of an Australian iron-ore mining project reaches its climax later this month. This is their story so far.

If anyone imagined that MMK is a public shareholding company with conventional accountability and corporate governance standards for spending $9 billion in annual revenues and $16 billion in assets, the action by a purported shareholder, with a name, a share, and nothing else, to halt the offshore acquisition has exposed a total blackout of information by Rashnikov’s company, and the refusal of Rashnikov, with 86% of the company shares, to explain his decision-making to his co-shareholders. But from the court file released this week, it now appears the plaintiff shareholder is as keen as the defendant oligarch to keep the evidence and the proceedings secret.
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by John Helmer - Friday, May 4th, 2012
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By John Helmer, Moscow

Every competent gardener knows that horse shit makes valuable fertilizer, so long as you give it at least two months of airing and composting to get rid of the acidity which kills plant roots, and the seeds which grow weeds where you don’t want them. Chicken shit is more balanced, biochemically and horticulturally speaking, because fowls do all their excreting through a single hole. The same can’t be said of the Sunday Telegraph of London or their Russian heroes, Oleg Deripaska and Alexei Mordashov.

That’s because Deripaska and Mordashov pay PR men to place their droppings, all too fresh, in the newspaper; from where energetic reporters, Kamal Ahmed and Elaine Rowley, shovel the product straight on to the Sunday breakfast tables of judges and investors.
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by John Helmer - Tuesday, May 1st, 2012
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By John Helmer, Moscow

If you believe what RusPetro Plc says, this loss-making venture on a small oil patch in Khantiy-Mansiysk — a patch no major Russian oil company has wanted to bother with — is already worth a billion dollars, and is bound to be worth multiples of that. The reason, also according to RusPetro, is the brilliant technical performance of a group of American oilfield engineers. They can be trusted to manage the RusPetro miracle, they claim,because it’s a miracle they have pulled off at least once before – for Mikhail Khodorkovsky’s Yukos. The president of RusPetro doesn’t know much about oil wells, but he too comes from the miracle workers of Khodorkovsky’s Menatep Bank. And the spokesman for this company of miracle-makers is also part of the old Yukos team.

If not the ghost of Khodorkovsky, what makes the miracle believable? Sberbank has continued to lend more than $330 million to finance the dream — with collateral that sold for just $305 million, and despite breaches of loan covenants, violations of oilfield licence and concession terms, and the expiration of one of the licence terms within months.
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by John Helmer - Saturday, April 28th, 2012
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By John Helmer, Moscow

Judge Natalia Bulavintseva ruled yesterday in Chelyabinsk Arbitrazh court that the hearing she had previously fixed for argument by lawyers on the substance of the case against Magnitogorsk Metallurgical Combine’s (MMK) purchase of Flinders Mines will be delayed for another month. Instead of April 25, this hearing has now been set for May 24.

On April 12, when ruling to dismiss a motion by MMK to lift her injunction against proceeding with the deal, Bulavintseva had written: “The validity of [the plaintiff’s] arguments (abuse of discretion) can be verified in court when considering the merits of the case… the court considers [these] issues that should be ascertained when considering the merits of the case.”
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by John Helmer - Thursday, April 26th, 2012
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By John Helmer, Moscow

Oleg Deripaska has insulted another President of the Republic of Guinea as Rusal’s entire country position, including its bauxite mine concessions and the Friguia alumina refinery, is now under review by a presidential commission. More than 20% of Rusal’s worldwide mineral resources and the raw material base supplying its Russian smelters, is now under threat of revocation and nationalization by the government in Conakry.

Just how sharp the recent deterioration between Deripaska and Alpha Conde, Guinea’s president, has become, and how dangerous for Rusal’s ability to continue operating in the country, was signaled by the Russian Foreign Ministry on April 10. In an unprecedented attack on a domestic Guinean movement for higher wages and safer working conditions at Friguia, site of Rusal’s alumina refinery, the Russian ministry headed by Sergei Lavrov, warned against “illegal actions of a local trade union” and “extremist syndicalists.” According to the ministry, “a threat to the safety of Russian employees has been created; looting has begun of the equipment of the enterprise; and production is halted.”
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by John Helmer - Saturday, April 21st, 2012
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By John Helmer, Moscow

From the Bo Xilai case it can be inferred that at the senior level of the Chinese government, the only things done really fast there are taking bribes and poisoning squealers.

By contrast in Moscow, not having a Russian government for several months and not having capital punishment should be the kind of investor-friendly attributes of Russia which have been underrated and under-priced in emerging market trades.

But consider the costs of inertia and delay in the affair of Sergei Pugachev’s heist from the Central Bank of Russia, and one of the assets he left behind, Northern Shipyard of St. Petersburg. This yard is an asset of strategic importance because it supplies the Russian Navy (plus the Chinese and Indian navies) with its surface combatants. Because it absorbs such a large amount of state budget money, control of the cashflow has been fought over since it was first privatized by President Boris Yeltsin in favour of Boris Kuzyk, one of his defence industry advisors, backed by Vladimir Potanin.
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by John Helmer - Thursday, April 19th, 2012
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