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Putin signs decree on precious metals


									         THE RUSSIA JOURNAL
         JULY 6 - 12, 2001                                                                                                       BUSINESS / METALS 17

                                              Putin signs decree on precious metals
                                              By JOHN HELMER
                                              The Russia Journal

                                                      new presidential decree
                                                      on the export of precious
                                                      metals, promised by mid-
      VLADIMIR POTANIN                        summer, has been signed by
                                              President      Vladimir      Putin.

Interros halts                                However, it has not yet been
                                                 According to officials who
 Novolipetsk                                  have read the text, it makes
                                              none of the changes that had
                                              been rumored in the terms of
 share issue                                  trade of Russia's platinum group
                                              metals (pgm). Norilsk Nickel
                                              officials claim the text holds out
By JOHN HELMER                                the possibility of a multi-year
The Russia Journal                            export authorization for plat-
                                              inum, which the company has
         ovolipetsk Metal Com-                spent years unsuccessfully lob-

N        bine’s annual general
         shareholders’ meeting was
disrupted when the Interros
                                              bying the Kremlin to grant.
                                                 "The decree doesn't change
                                              anything in terms of the pgm
group, a 34 percent shareholder in            trade," Dmitry Ignatiev, the
the firm, blocked a plan to finance           pgm           specialist         at
plant modernization through a                 Vneshtorgbank, said. "It only

new share issue.                              changes the terms for exports
   The management and majority                and imports of gold and silver,
shareholders of Novolipetsk —                 jewelry and gemstones."
Russia’s third largest steelmaker                The latest decree is one of sev-   GOLDMINING OPERATIONS like this one in Krasnoyarsk will soon be able to sell directly to foreign buyers.
— then retaliated by voting down              eral that are known to be wend-
all of Interros’ proposals.                   ing their way through the gov-        Ignatiev claimed that deregula-        inum. "There is no market for          agree. "It makes more sense to
   The Interros group is con-                 ernment bureaucracy and the           tion of sales channels "will estab-    platinum inside Russia compa-          abolish the export duty alto-
trolled by Vladimir Potanin. It               Kremlin staff.                        lish additional problems for buy-      rable to the domestic market for       gether," Ignatiev said, "since it
acquired its 34 percent stake in                 One source, who has seen ear-      ers of gold. Exports through           gold, and since platinum is main-      does not produce any significant
Novolipetsk a year ago from                   lier versions of the latest decree,   banks, which care about their          ly metal for export, it is best to     fiscal effect."
David and Simon Reuben, own-                  says the Kremlin appears to           reputation, are safe in terms of       keep it under proper control," he         But there is an important
ers of the London-based Trans                 have decided to implement the         the origins of the metal that is       said. "That's my understanding         breakthrough in the new policy
World group. The acquisition                  least controversial provisions,       exported. Banks do not deal with       of the government's reasoning."        document, according to Ignatiev.
was part of a hostile takeover                leaving the ministries and indus-     stolen gold or gold produced in          In his decree, Putin instructed      "It enables jewelry producers to
engineered by Boris Jordan, a                 try lobbyists to continue arguing     the shadows. In this respect, the      the government to negotiate            export their products, which are
Moscow-based              American            over the rest.                        decree may help to further             with Russia's neighbors, such as       of good quality," he said. "The
financier who had fallen out                     The new document, according        develop the shadow sector."            Belarus, the Ukraine, and              decree offers protection of the
with Vladimir Lisin, chairman                 to Ignatiev, will allow gold and         Experts on Russian bank deal-       Uzbekistan, to introduce parallel      interests of domestic jewelry
of the Novolipetsk board.                     silver producers to sidestep the      ings in bullion say comments like      duties on exports of precious          producers. They have been suf-
Potanin paid a premium of $30                 Russian banking system, receive       this are self-serving. They claim      metals to prevent Russian              fering from a prohibition on
million to outbid Lisin’s bid for             export quotas from the govern-        that at least 10 percent of            exporters shipping bullion             export, and unfair competition
the stake.                                    ment, and contract to export          Russia's annual mined gold pro-        through the customs-free zone          from low quality jewelry, which
   ING Bank was authorized to                 their metal directly to buyers        duction of 145 tons circulates on      and avoiding Russia's 6.5 percent      is brought to Russia through
represent Interros at the June 30             abroad.                               the black market, and passes           export duty.                           shadow channels."
shareholders’        meeting     in              Freeing the miners has made        through the commercial bank-             Ignatiev and other bankers              Most of the gold jewelry
Lipetsk. As expected, it voted                the banks unhappy, and reflect-       ing system as well.                    said that vested interests in the      smuggled into Russia comes
against the share emission plan               ing a campaign by the Moscow             Ignatiev said the Kremlin had       cross-border trade make it             from Turkey and the United
that was designed to raise part of            banks to oppose this measure,         also reached a decision on plat-       unlikely these countries will          Arab Emirates.
the $1.1 billion estimated for the
plant’s upgrade to production of
higher-value, higher-quality
steel products. For the plan to be
implemented, a 75 percent vote
                                                Scrap-metal looting kills 834 in two years
by shareholders is required.
   In an uncontested vote, Ivan                By VLADIMIR KITOV                       According to UES, losses            security or to try to influence the   offences warrant up to five
Frantsenyuk was elected gener-                 The Russia Journal                    from “wire thieves” have              situation on a legal front.”          years in jail.
al director of the plant.                                                            reached 3 billion rubles ($103.4         Many observers say that scrap        “This punishment does not

   Novolipetsk spokesmen said                          ussians are dying for         million) over the last two years,     yard owners are often to blame        correspond with the damage
they would not disclose results                        metal:        non-ferrous     with 43,660 criminal incidents        as they take suspicious items         these thefts do to the economy,”
of the meeting and the voting                          metal, to be precise. In      officially reported. The sum is       without asking where they came        said Vladimir Shchurov, director
for several days. A press report               the last two years, 834 people        the equivalent of the invest-         from. There are more than 150 of      of Moscow’s Sheriff security
that Lisin, the chairman of the                have died while attempting to         ment UES made into construct-         these yards in Moscow and its         agency, which is helping Mos-
board, had proposed to raise                   steal wire, cable and metal           ing its Northwestern Power            region alone, receiving thou-         energo to tackle the problem.
$200 million in bank financing                 devices used in high-voltage          Station.                              sands of tons of scrap metal each       “A person might cut off some
for the modernization program                  power lines and other facilities        “The situation is catastrophic,     year, according to the Moscow         3-4 km of power lines — which
was denied by Valentin                         belonging to regional power           given that not only transformers      Government Committee on               will bring him several thousand
Shapko,         spokesman       for            operators, a report from electric-    or power stations are being           Natural Resources.                    rubles — but that is not the final
Interros. He also said there                   ity grid operator RAO UES has         robbed, but dangerous or deadly          Experts say that if the yard       count,” Shchurov said, adding
have been no direct negotia-                   revealed.                             objects under high voltage as         owners followed the letter of the     that every case brings substan-
tions between Lisin and the                       Meanwhile, police say they         well,” the report said. “Last year,   law, some 60 percent of the           tial collateral damage, including
Interros group since the                       have lost track of the number of      the number of thefts went down,       waste metal taken to their facili-    large enterprises being forced to
takeover took place a year ago.                monuments and signs pilfered          partly due to increased security      ties would be reported to the         stop work or lighting being cut
   Shapko said: “It is likely                  from streets and squares              measures that included air            police because of its dubious ori-    off in residential buildings. “I
Interros managed to block the                  throughout the country.               patrolling of potentially vulnera-    gin. The yard owners remain           would suggest that courts take
share emission of Novolipetsk,                    For many thieves, the business     ble sections.”                        tight-lipped on the subject, how-     into consideration collateral
while the majority shareholders                has become so serious that              Such expensive security mea-        ever, and several refused to talk     damages of this kind and tighten
blocked proposals made by                      reports of some incidents recall      sures may end up having a nega-       to The Russia Journal this week.      sentences,” Shchurov said.
Interros.” He claimed that his                 scenes from cop movies. In            tive impact on UES’ tariff policy,       A law calling for tighter            He added that there are at
group’s proposals included one                 February, for example, five           experts say. “The [UES] compa-        licensing for scrap metal deal-       least four organized groups in
to change the charter of the                   masked men broke into Nizhny          ny controls tens of thousands of      ers and tougher punishment for        the region that make a good liv-
company so as to limit adoption                Tagil’s power station, beat and       kilometers of power wires, and it     thieves remains to be properly        ing by cutting power lines.
of strategic decisions to a vote of            tied up the guard and carried off     certainly cannot place guards         enforced. Only five cases of this     “Wires, cables, cars and other
not less than 75 percent of share-             two rolls of aluminum wire.           under each line,” said Kakha          type made it to the Moscow            metal-containing devices bring
holders. Another proposal by                      Other thefts are almost comic.     Kihnavelidze, an energy and           courts last year, according to        steady profits for thieves and
Interros to bring the structure of             Last year, a 12-meter high Ferris     metal analyst with Troika Dialog      Vitaly Naumov, spokesman for          scrap yard owners who then
the board of directors to a share-             wheel was dismantled in               brokerage. “But as long as the        Mosenergo,       UES’       largest   resell the scrap metal abroad and
holder vote, instead of a vote by              Vladimir and reportedly sold in       problem exists, UES must decide       regional branch. Under the            make 100-200 percent profit on
the directors themselves, was                  parts to local scrap yards.           whether to lay on more intense        Russian Criminal Code, these          each sale.”
also defeated.

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