By John Helmer in Moscow

The Russian Federation’s decade of rampant economic growth has been a boon to maritime activity and ports on the Black Sea. But the good times are coming to an end, writes John Helmer

Russia has been aiming to develop dry cargo movements, both export and import, as the preferred direction for Russian oil exports shifts eastward towards China, and from Arctic oilfields in the north westwards into northern Europe. Of course, that was before the global financial crisis intensified earlier in the autumn.

But the signs of trouble were there to be seen as early as July. Container volumes into Novorossiysk, Russia’s leading Black Sea outlet, had been booming on the back of growth in Russian incomes and consumer demand – up 42% in the first five months of the year, compared to 2007. By July, however, the turndown was already on the horizon. Novorossiysk reported for the month that container volume had slipped 10%, compared to June, and by 33% compared to July 2007. Reefer volumes fell in parallel by 84% and 63%, respectively. Steel, scrap, sugar, timber, and non-ferrous metals also fell sharply in the month, compared to the same period of last year. Crude oil, the mainstay of Novorossiysk, remained flat, both June to July and year-on-year.

The gloom had also started to descend on the Azov Sea ports, as the export of steel, aluminium, copper, and scrap began to suffer from falling global prices and falling export demand. In their place, there was the Turkish cement boom, which began in January this year, after Moscow had eliminated the import duty and encouraged Turkish imports to supply the burgeoning demand, especially in southwest Russia, along the Black Sea coast, for construction materials. Import volumes of mineral construction materials (MCM) also skyrocketed. Reports from the regional North Caucasus Railroad indicate a 30% jump in MCM tonnage transported, compared to the first half of 2007. Cement more than doubled to about 1.5M tonnes in the same period.
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by John Helmer - Saturday, November 29th, 2008
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By John Helmer in Moscow

In a stunning repudiation of Tajikistan’s President Emomali Rahmon, lawyers for the Tajikistan Aluminium Plant (Talco) agreed overnight to halt their High Court case in London. They have settled with Avaz Nazarov, the Ansol company, a former manager and traders of the aluminium plant, whom Rahmon and his cronies ousted in December 2004, in a scheme that has diverted more than half a billion dollars in aluminium export profits to safe haven in the British Virgin Islands.

Details of the settlement have not been made public; Nazarov and the others decline to comment. But the ramifications of their victory have only started to be counted — in Dushanbe, at Rahmon’s presidential palace, and in the board rooms of several international organizations, whose executives have been implicated in the frauds alleged in the court testimony, and documented in the evidence presented so far. The overnight agreement by the lawyers puts a stop to further disclosures in London, but the evidence remains for possible prosecution in Oslo, and internal investigations at the European Bank for Reconstruction and Development (EBRD), the World Bank, and the International Monetary Fund (IMF), who have been backing Rahmon in the litigation that has now failed.

Although noone is saying, the confidential settlement appears to include reimbursement by Talco of the multi-million pound costs incurred by the targets of the court case, one of the most costly ever recorded in the UK courts.
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by John Helmer - Thursday, November 27th, 2008
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The news has just been received from London of the capitulation overnight of President Emomali Rahmon and the Tajikistan Aluminium Plant in their court case against Avaz Nazarov and a group of former managers and traders of the aluminium plant. The terms of the settlement, and details of the circumstances, which put a stop to one of the most costly court cases ever litigated in London, will follow shortly.

One of the key documents in evidence is an agreement involving Hydro Aluminium of Norway, the European Bank for Reconstruction and Development, and the World Bank, implicating their senior officials in what has been described in court as a racketeering scheme to divert hundreds of millions of dollars of profit out of Tajikistan.

Settlement Agreement between Norsk Hydro and TadAZ, Dec 20, 2006

by John Helmer - Thursday, November 27th, 2008
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By John Helmer in Moscow

In a contest of bargaining power reminiscent of the 2005 battle between Alisher Usmanov of Metalloinvest and Victor Rashnikov, owner of Magnitogorsk Metallurgical Combine (MMK), MMK is demanding that Metalloinvest lower its iron-ore price, and is refusing to pay for previous deliveries. Metalloinvest says it has cut production at its two iron-ore mines, Mikhailovsky and Lebedinsky, by 35% since October 1, and that it is demanding Russian mill buyers pay up on arrears of Rb10 billion ($357 million).

Olga Paleva, spokesman for Metalloinvest, told CRU Steel News, “the company doesn’t want to name the buyers who owe Metalloinvest.” Lev Chesalov, steel analyst at Rusmet, said the only major Russian steelmaker which buys from Metalloinvest is MMK.

On Friday [21 November], MMK posted an announcement on its website withdetails of its crisis management programme. The company said it has agreed with its coking coal suppliers — Raspadskaya (an Evraz unit), Mechel, and Belon (part-owned by MMK) — to reduce the price of their deliveries by 30%, starting on December 1. Rashnikov’s mill has already announced a 70% price cut for scrap — supplied by a company run by Rashnikov’s brother — and a 30% reduction for ferroalloys. Rashnikov is cited as claiming that the plant can respond to a revival of demand by boosting output by 1 million tonnes per month, if the market conditions warrant. But the company announcement omitted to say what target cut in the iron-ore price it is seeking.
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by John Helmer - Tuesday, November 25th, 2008
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By John Helmer in Moscow

After six months of negotiations have failed to resolve investment and spending conditions, Victor Vekselberg’s Renova group and United Manganese of Kalahari (UMK), its South African partner, have been unable to agree on whether the project is dead, on care and maintenance, or life-support.

One result is that the Russian government appears to have downgraded its interest in the SA-Russia inter-governmental committee on trade and economic cooperation (ITEC). A session of the committee was held in Durban on Tuesday [November 25]. South Africa’s Foreign Minister, Nkosazana Dlamini-Zuma, chaired for the SA side. Yury Trutnev, the Russian Minister of Natural Resources, is usually the co-chairman, and he is attending the Durban meeting, between stops in Guinea and Namibia. Trustnev’s office told Business Day it has no information on the Kalahari manganese mine dispute.

“I don’t think anything is happening there,” a Russian analyst of Africa said of South Africa.

Vekselberg, who has a seat on the SA President’s International Investment Council, and attended its last meeting in October, refuses to answer questions about his investment promises and problems in SA. Instead, his spokesman referred to Mark Buzuk and Alexander Belokrys of Renova, who are responsible for the African operations of the group. They too refused to say what they have invested in the Kalahari manganese project, and what has happened to their conflict with Pretoria over investment terms, first reported last May.
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by John Helmer - Monday, November 24th, 2008
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By John Helmer in Moscow

Russian state development bank Vnesheconombank (VEB), chaired by Prime Minister Vladimir Putin, is reported to have approved a US$1.8 billion loan for steel and mining giant Evraz Group, whose major shareholders include Roman Abramovich, following a board session of the board last Friday.

Evraz sources decline to confirm the loan, reported by a Moscow newspaper. VEB issues no confirmations of its loans.

The group had announced earlier, on November 13, that it had secured a loan of 10 billion rubles (US$360 million) from the Russian state-controlled VTB bank to cover tax payment obligations of two of its domestic mills, Nizhny Tagil and Zabsib.

Details of how VEB will secure the new loan against US assets in the Evraz Group, such as Oregon Steel Mills (Oregon and Colorado), Claymont Steel (Delaware), and the IPSCO pipemaking units in Canada – Regina, Surrey, Red Deer, Camrose, and Calgary – have not been disclosed by the bank, and Evraz refuses to say.
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by John Helmer - Monday, November 24th, 2008
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By John Helmer in Moscow

Uralkali, Russia’s dominant potash exporter, has made an offer to compensate the costs of the state-owned Russian Railways Company (RZD) to build the bypass around the Berezinki sink-hole and mine subsidence. The offer was reported in a Moscow newspaper, and confirmed by a company source. The offer was contained in letters to Deputy Prime minister Igor Sechin, and the Minister for Natural Resources, Yury Trutnev.

Sources close to Uralkali told Fertilizer Week that Uralkali understands that the purpose of the newly appointed commission of inquiry into the Berezniki problems — ordered by Sechin October 29 — is to calculate how the rail costs should be apportioned between users of the new line. The commission has begun deliberations, and is due to issue its report next month. However, Uralkali believes it would be unfair for it to shoulder the rail costs alone, when several other major exporters, including potash producer Silvinit and titanium exporter VSMPO also use the rail-line. Other commercial users include ammonia and urea producer, Berezniki Azot, a unit of Uralchem.

RZD spokesman Dmitry Pertsev told FW that RZD has already financed on its own account the first 800-metre bypass built in 2006; then a 6-km line, costing Rb 450 million ($17 million); and “now we’ve planned a bypass line of 53-km.” He estimated that to date, the rail company has spent Rb50 million ($2 million) on the new bypass, and will require “another Rb9 to 11 billion [$333-$407 million]”.
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by John Helmer - Sunday, November 23rd, 2008
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By John Helmer in Moscow

The Russian government agency responsible for negotiating the terms of DeBeers’s new Grib diamond mine project in the Arkhangelsk region of northwestern Russia has agreed to extend a deal deadline, which fell on November 15.

At that point, and in the week that followed, De Beers and its affiliate Archangel Diamond Corporation (ADC), have continued talks with the Federal Antimonopoly Service (FAS) in Moscow on terms for domestic cutting and polishing of the project’s mined rough. These terms, in a vaguely worded “ancillary agreement”, are the precondition for the Russian government’s approval of the joint venture between DeBeers and LUKoil, which respectively own ADC and Arkhangelskgeoldobycha (AGD), the project operators. Prime Minister Vladimir Putin chaired the Control Commission for Foreign Investment, which gave its conditional approval, on October 10.

Putin then delayed signing the protocol of the meeting for a fortnight, before ADC acknowledged receiving it, along with the draft of the approval conditions. FAS told PolishedPrices.com that November 15 was the deadline by which DeBeers should reply and agree, or allow the approval, and the deal, to lapse. Tom Beardmore-Grey, ADC’s chief executive and a DeBeers veteran, refuses to answer questions, as speculation grows that the senior management of DeBeers in London has become so diffident about its long-term Russian prospects, and so reluctant to commit to new project conditions, it is considering the option of abandoning the Grib project altogether.
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by John Helmer - Thursday, November 20th, 2008
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By John Helmer in Moscow

Russia’s Black Sea strategy has been aiming to develop dry-cargo movements, both export and import, as the preferred direction for Russian oil exportsshifts eastward towards China, and from Arctic oilfields in the north, westwards into northern Europe. That was before theglobal financial crisis intensified in the autumn.

But the signs of trouble were already darkening by July. Container volumes into Novorossiysk, Russia’s leading Black Sea outlet, had been booming on the growth of Russian incomes and consumer demand; up 42% in the first five months of the year, compared to 2007. In July, however, the turndown was already visible. Novorossiysk reported for that month that container volume had slipped 10%, compared to the month of June; and by 33%, compared to July of 2007. Reefer volumes fell in parallel by 84% and 63%, respectively. Steel scrap, sugar, timber, and non-ferrous metals also fell sharply in the month, compared to the same period of last year. Crude oil, the mainstay of Novorossiysk, remained flat, June to July, and year on year.

The gloom had also started to descend on the Azov Sea ports, as the export of steel, aluminium, copper, and scrap began to suffer from falling global prices and falling export demand.
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by John Helmer - Tuesday, November 18th, 2008
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By John Helmer in Moscow

Market reports that Smolensk Kristall refused last month to buy rough from Alrosa have been denied by Alrosa.

According to sources in Alrosa, the Russian state diamond company, Kristall proposed a 20% discount on purchases of Alrosa’s current rough price. Alrosa refused to supply, claiming that its pricing is in line with levels reported by De Beers in September transactions.

Instead of a price discount, Alrosa said that Kristall, along with other buyers, may exercise the option not to take 20% of an assortment, if they are unprofitable to cut.

Alrosa also told PolishedPrices that Kristall’s pricing would be loss making for Alrosa.
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by John Helmer - Friday, November 14th, 2008
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