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By John Helmer in Moscow

South of the Sahara desert, the Kremlin doesn’t have a strategy so much as a checklist of commercial interests. These days it can ill afford even those. But when it was decided in the spring that President Dmitry Medvedev would make his first presidential visit to the region, he was assigned the two African countries, whose economic resources make them more valuable to Russian corporations than anywhere else in Africa.

They are Nigeria and Angola. Medvedev stopped in each for less than 24 hours last week.

Nigeria is much the more important, commercially, of these two, because Gazprom, Russia’s largest company and the world’s dominant producer and exporter of gas, wants to bring the Nigerians, with the 7th largest gas reserves in the world and a major exporter of gas to the US, in line with the marketing strategy being developed by the Gas Exporting Countries Forum (GECF), led by Russia, Iran, and Qatar.

Gazprom would have started working on the Nigerians much earlier, had it not been for an unpleasant hostage-taking in 2004 and 2005, when Nigerian officials were suspected by the Kremlin of aiming to profit from the ransom demand for 12 Russian seamen, taken off the Greek-owned oil tanker, African Pride.

By contrast, when Nigerian rebels and pirates stay clear of Russian nationals and aim instead at local oil installations, that turns out to be much better for Russian interests. Explosive attacks on oilfields and oil export pipelines in the Niger delta add $10 million per day to the coffers of Russian oil exporters for every dollar the disruption adds to the global price for oil.

Since Umuru Musa Yar’Adua was elected in April 2007 to replace Olusegun Obasanjo as Nigeria’s President, the reasonableness of negotiating new commercial deals has outweighed the risks, as the Kremlin has calculated them. President Vladimir Putin ignored and over-flew Nigeria when he went to South Africa and Morocco in 2006 (Putin also cancelled a stop in Angola at the last minute, without reason). Medvedev’s stopover on June 24 shows how the priorities have changed.

The official communiqués released by the two governments, and the press conference of Yar’Adua and Medvedev, report that it was Gazprom which left its footprint in Abuja, not Medvedev. An agreement on cooperation between Gazprom and the Nigerian National Petroleum Corporation (NNPC) was signed, creating a 50/50 joint venture called Nigas. The wording of the pact refers to “large-scale projects in hydrocarbon exploration, production and transportation; construction and engineering of an associated gas gathering and processing system and building of power generation facilities in Nigeria.” Background briefers from Gazprom suggested the two sides will invest up to $2.5 billion in a gas liquefication (LNG) refinery, as well as a pipeline to send gas across the Sahara for LNG conversion and tanker loading at a port on the Meditearrean coast. The first of the Nigas projects is reported to be a $400 million pipeline running from the Niger delta to a new power plant in northern Nigeria; construction is planned to start next year. Exactly when and how Gazprom will stump up the money, when it is slashing capital expenditure on projects at home, are questions noone asked in Abuja, and Gazprom prefers not to answer.

Medvedev has also kept silent about the attempt the Russians made to arrange a meeting between President Yar’Adua and Oleg Deripaska, owner of the Aluminium Smelter Company of Nigeria (Alscon). Deripaska is chief executive and controlling shareholder of United Company Rusal, Russia’s aluminium monopoly, and the only Russian investor in Nigeria for the time being.

The problem there is that Yar’Adua has given an undertaking to investigate whether Deripaska and Rusal violated Nigerian law, and broke their financial commitments, when they took over Alscon after a privatization auction in 2004 and two years of subsequent negotiations. That deal has been declared by the Nigerian House of Representatives to have been a “fraud and corruption against the nation”. The outcome of Rusal’s winning bid is also the target of court proceedings under way in the US and Nigeria to annul the award, and oust Rusal from Alscon. The Nigerian Supreme Court is due to rule any day now.

In parallel, a panel appointed by the government is due to report to the Executive Council, Yar’Adua’s cabinet, on Rusal’s management of the smelter, and its compliance with the production and investment terms of the takeover.

Rusal won’t answer direct questions about what happened to Deripaska when he went to Nigeria with Medvedev. A Kremlin source will say only that he was there, in the official delegation. Nigerian sources say that Deripaska asked Yar’Adua for a personal meeting. He also applied to see David Mark, the President of the Senate; and Bankole Dimeji, Speaker of the House of Representatives. He was turned down by all three, the Nigerian sources claim; Rusal refuses to say.

There is no mention of Rusal or Alscon in the official communiqués. According to the Nigerians, the Kremlin was told that since Rusal’s takeover of the smelter is the subject of ongoing litigation in Nigeria, and the cabinet review, the case is sub judice, and there could be no mention of Alscon in the inter-government talks.
If pledges count, Rusal is the largest Russian investor in Nigeria; but just how much money it has actually spent there is a sore point. According to the Rusal website, the planned investment budget for the aluminium works at Alscon is $300 million. Another $150 million in associated infrastructure spending is also promised. The company website doesn’t say how much of that remains to be spent.

The website version of what Deripaska did in Abuja reports that “as part of the Nigerian visit of the official Russian delegation chaired by RF President Dmitry Medvedev the head of RUSAL had a series of consultations with Nigerian government authorities and businessmen. During the visit to ALSCON, Oleg Deripaska checked the results of a large-scale modernisation programme that RUSAL launched immediately after the acquisition of the plant in 2007. RUSAL’s CEO toured the reduction cell area, cast house and anode rodding shop, as well as upgraded energy supply system.”

Rusal also reports that “during the consultations with Nigerian state authorities, Oleg Deripaska touched upon key issues vital for the stabilization of the smelter’s operations, including security and an uninterrupted gas supply. Nigerian officials expressed support for RUSAL’s active participation in social and economic development of the country through creating infrastructure, support of the small and medium businesses and social programmes, among others. They also offered reassurance that they will help to resolve all issues providing for the stable operations of ALSCON.”

If the Nigerians are preparing to impose new financial obligations on Rusal, as their price for retaining Alscon, then this will impact on Deripaska’s negotiations with international and Russian banks, to which he owes more money than any other Russian individual. Counting bank loan, trade contract, and shareholder obligations, all due this year, Deripaska and Rusal owe about $17 billion. Another $6 billion at least is the subject of a UK High Court claim against Deripaska by Michael Cherney (Mikhail Chernoy). The court documents indicate that it was Cherney, who first staked Deripaska in the aluminium business. It was also Cherney who first gave Deripaska his nickname, zaichik (“little hare”). If Deripaska loses the appeal to be argued in London on July 20, he faces his first-ever international trial.
In these circumstances, Deripaska needed all the reassurance Rusal says he was offered last week in Nigeria. What the Nigerians do next will make clear exactly what that was.

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