By John Helmer in Moscow

If you recall Enron executive Jeffrey Skilling’s Hypothetical Future Value (HFV) system of accounting, one might find some parallels in Polyus Gold’s share marketing program.

The man who invented the accounting system for promoting the value of a share today, for what it will be worth in the future, when he will have sold out, is well-known.

Jeffrey Skilling called the system Hypothetical Future Value (HFV). Skilling used to be the chief executive of Enron Corporation. He is serving a 24-year sentence in Minnesota for conviction on 19 counts of fraud and other crimes. He was fined $45 million, and he spent $40 million on his legal defense. His HFV for the year 2028, when he is eligible for release, is zero.
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by John Helmer - Tuesday, June 19th, 2007
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By John Helmer in Moscow

In a recent commentary on Iranian political thinking [A grand bargain Russia might just refuse, Jun 14] Kaveh L Afrasiabi takes seriously this proposal from the US academic Joseph Nye: “We should offer Russia a grand bargain: we delay our plans for missile defense in Eastern Europe, while the Russians agree to back stronger sanctions against Iran.” Nye was a colleague of mine, years ago, at Harvard. As Harvard professors go, his career has been less than successful. He never rose out of the junior ranks of government; he bombed nobody, but saved no one from being bombed. He committed no war crimes; he earned no peace prizes. From such a record Nye has made ineffectuality his calling card. Thus an undergraduate-level theory has come into being, with Nye’s name on it as author, called “soft power”. Apparently, it helps to know what this is, if you want to be hired as an assistant professor in some places. However, for Nye to step off the lecture podium, into the real world, and propose a “grand bargain” to the Russian leadership is nonsense. And the reason is obvious to everyone but Nye and the US foreign-policy establishment – the US cannot offer any bargains to anyone, because two terms of the Bush administration demonstrate that the US doesn’t honor its word – on anything, to anybody, anywhere. The implication of Nye’s proposal is a cynical choice between less US war against Russia in Europe in return for Russian backing for more US war against Iran and its allies in the Middle East. This isn’t a case of soft power, so much as a case of soft in the head.

by John Helmer - Friday, June 15th, 2007
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By John Helmer in Moscow

The modern history of making money the easy way — by taking it from people who didn’t know they had it, and couldn’t notice when it was gone — is founded on the most elegant of the irreducible fractions, one third.

According to a series of reports this month by David Leigh and Rob Evans of The Guardian in London, the influential Saudi Prince Bandar bin Sultan, has been on the receiving end of a quarterly payment of GBP30 million, every three months, for at least 10 years. A rough calculation of the accumulated total is GBP1.2 billion. This purports to be an arranging fee for a series of arms purchases by the Saudi Arabian government from the UK arms manufacturer, BAE Systems. So far, the transaction series has been worth about GBP43 billion. The money for Bandar was not characterised as commission, but as quasi-official fees for marketing services.

In short, about 2.8% of deal value. The sums look enormous, and they are. But the percentage is paltry . It hasn’t proved to be illegal in the UK (bribery, fraud, perjury, racketeering money laundering, etc.), because the Prime Ministry put a stop to prosecution. The US government is about to decide if it wants to go further.
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by John Helmer - Thursday, June 14th, 2007
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By John Helmer in Moscow

The only foreign-language sentence that managed to lodge itself correctly in the brain of Ronald Reagan, before he developed Alzheimer’s Disease, but after he became President of the United States, was “doveryai no proveryai”. As he never tired of explaining, that is Russian for “trust but verify.”

Reagan and his successors always meant to apply that to treaties on arms deployments and limitations; and a useful maxim it was then, and now. But the words have never managed to lodge in President George Bush’s brain at all, nor in the Anglo-American media. For the former has been blaming, and the latter reporting, a blockade by the Kremlin against the Baltic state of Estonia, robbing it of essential oil and coal cargoes; and then stupefying the Estonian government’s ability to react by crashing the state’s computers with a cyber-warfare blitz.
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by John Helmer - Friday, June 8th, 2007
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By John Helmer in Moscow

These days investors in gold-mining stocks are behaving like diners in fashionable restaurants, subject to the same fitful appetites. On Tuesday, for example, they sold Highland Gold (HGM:LN) down 21%. But on Wednesday, they bought it up by 20%. Highland is now trading at its all-time low since listing in 2002. No doubt, like watercress soup, a sour taste goes out of fashion from time to time.

Saki once reported the trick of conveying information intended to impress in up-market restaurants. “By insisting on having your bottle pointing to the north when the cork is being drawn, and calling the waiter Max,” he wrote, “you may induce an impression on your guests which hours of laboured boasting might be powerless to achieve. For this purpose, however, the guests must be chosen as carefully as the wine.”

When Highland Gold was chaired by an English peer of the horse, betting and Tory set, a cultivar of Roman Abramovich, who brought Highland Gold into the London market, it was a simpler matter for the company to invite investors than it is today. However, Lord Daresbury stepped down in December 2004, to be replaced by James Cross, a deputy governor of the South African Reserve Bank, when certain monies required for Highland’s treasury were dispatched by Harmony Gold at the say-so of its then chairman, Adam Fleming, and his protégé, Bernard Swanepoel. They did much to charm over concerns about the transfers, and into subsequent troubles Highland ran into with Russian assets it didn’t quite own, and an asset Abramovich sold to Highland at a premium for himself. Those stories can be found in old Mineweb menus:

Mineweb Menus – Link
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by John Helmer - Thursday, May 31st, 2007
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By John Helmer in Moscow

Coal mining in Russia is a dirty business, and mine company finances are a black box.

If the coal mines lose money, as they claim in recent financial reports, that could be because the coal is being priced for purchase by the steel company which consumes it, and also controls the capital of the mine, at a price which transfers profit downstream. The publicly available records make it impossible to know. What is now very well known, however, is that the imperative to produce more coal, at the lowest possible cost, has pressured mine managements and the miners themselves into creating unlawfully unsafe conditions in the mines. Diminishing wages, inadequate investment, and corrupt regulation combine to suppress the effectiveness of the mine safety systems that are in place, and would be protective — if they hadn’t been turned off.

This makes fatal accidents, especially methane gas explosions, inevitable. But what the proprietors of the Russian mines — the steel companies — do next is unusual.
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by John Helmer - Tuesday, May 29th, 2007
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By John Helmer in Moscow

One of the greatest of the English humourists, writing under the pen-name of Saki, once opened a tale of a disastrous horse-ride with the observation that one of the characters “was looking about as pale as a beetroot that has suddenly heard bad news”.

To aficionadoes of Saki, the wit is hilarious; but to the literal-minded, doubts arise – beetroots are purple, not pale; vegetables can’t hear bad news.

On the immediate occasion of last week’s ceremonial visit to Moscow of De Beers’ chief executive, Gareth Penny, not a word has been issued on the occasion by De Beers. Releases from the federal Ministry of Natural Resources, the Sakha regional administration, and Alrosa all confirm Penny’s passage. He met Mining Minister Yury Trutnev (not for the first time); Sakha President Vyacheslav Shtirov (not for the first time); and Alrosa’s new chief executive, Sergei Vybornov (debut). He also talked to with the Russian diamond sector’s supervisor, Finance Minister Alexei Kudrin, according to his ministry.

Why De Beers has been silent isn’t known, although there might be some apprehensive reddening on Charterhouse Street, if Penny could hear what the Russian diamond sector has been thinking in his wake. Like Saki’s beetroot, however, Penny can’t hear the bad news. (more…)

by John Helmer - Monday, May 28th, 2007
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By John Helmer in Moscow

Base metals – Twelve lines that may make Rusal’s Deripaska a poor man LONDON RULINGTwelve lines that may make Rusal’s Deripaska a poor man John HelmerDisclosure of the Chernoy-Deripaska agreement confirms US charge, and could put London share listing in doubt.MOSCOW

In twelve brief lines of less than impeccable Russian, dated March 10, 2001, Oleg Deripaska, contender to be the world’s dominant producer of aluminium, and the man who put him in business, Mikhail Chernoy, appear to have agreed on a formula that obliges Deripaska to share 20% of the value of Deripaska’s shares in Russian Aluminium (Rusal), when or if those shares are sold.

If Chernoy is able to enforce their payment agreement, Deripaska would owe him $6 billion – assuming Rusal meets its target capitalization of $30 billion. Rusal has recently upped the number of shares it proposes to sell – from 15% to 25% — but even on the high side, and again assuming the market values Rusal at the price Deripaska wants, he will draw just $5 billion from the share sale. In short, Deripaska will be short — $1 billion short of being able to pay Chernoy what he says he is owed for the trust their agreement created.
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by John Helmer - Tuesday, May 22nd, 2007
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By John Helmer in Moscow

Morgan Stanley has taken the plunge for its first-ever public investor offer of loan notes on behalf of a Russian maritime business — the Novorossiysk Commercial Sea Port. The bank is also touting for business as financial advisor to a possible initial public offering of shares for Russia’s two state owned shipping fleets, Sovcomflot and Novoship.

In the highly secretive world of Russian maritime business, public prospectuses, drafted to meet the disclosure standards of European or North American market regulators, have rarely been issued, and even less often disclosed. Volgotanker, the largest Russian tanker group until it was attacked by the Samara regional government in 2004 and ultimately destroyed, issued the first credit-linked notes for $120 million in financing, managed by Raffeisen Bank of Vienna. Security for that issue in July 2004 comprised Russian-flag vessels and shore assets — a first in a sector in which foreign banks have always insisted on foreign flagging for loan security. The Volgotanker prospectus was not made public, however.
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by John Helmer - Monday, May 21st, 2007
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By John Helmer

An out of court settlement has been reached between Oleg Deripaska and his Russian Aluminium (Rusal) group, and Avaz Nazarov and a group of firms associated with the Tajikistan Aluminium Plant (TadAZ).

The confidential deal was announced on Friday in London by law firm Clyde & Co, which has represented Nazarov and his group. The lawyers’ statement said: “Rusal and Ansol have reached a comprehensive settlement of all of their outstanding claims against one another without any admission of liability by either side. Both parties are content with the terms of the settlement and pleased that their disputes have now been resolved.”

Nazarov and his associates at Ansol are unavailable, and their law firm says there will be no comment. There has been no statement from Rusal. Rusal spokesman, Vera Kurochkina, refuses to answer questions.
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by John Helmer - Sunday, May 20th, 2007
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