Publication: Monitor Volume: 3 Issue: 82

One of the central figures in the struggle for control over Russia’s aluminum industry, Mikhail Cherny, has surfaced to give his first ever public interview. (Izvestiya, April 24) Cherny describes himself as an honest businessman who brought foreign capital into the metals industry in 1992 in order to save it from extinction. He denies that he had links to organized crime or government officials, and argues that his business rivals are trying to discredit him through an "information war" in the Russia media. Cherny, 45, became an Israeli citizen in 1994.

The battle for control over Russia’s aluminum industry has a long and at times bloody history. Russia earned $3.9 billion from aluminum exports in 1996. In 1991-92 the UK-based Trans World Metals began providing Russian mills with bauxite on credit in return for payments in finished metal ("tolling"). TWM later bought a controlling share in the Bryansk and Sayansk aluminum works and a third of the Krasnoyarsk plant, via a firm headed by the brothers Lev and Mikhail Cherny. In 1994 the Chernys were accused of using their connections with then First Deputy Prime Minister Oleg Soskovets to gain control of the plants. A series of investigate reports broadcast by NTV in December 1996 revived those rumors, and accused the Chernys of ties to organized crime. Interior Minister Anatoly Kulikov repeated the accusations in a speech to the Duma in February, although no criminal charges have been brought. TWM head David Reuben published an open letter in Western papers on March 7 denying the allegations. It is impossible to judge whether Mr. Cherny is, as he claims, an honest businessman. What is clear is that he has been the target of a concerted media campaign.

In February 1996 the conflict widened to include the giant Novolipetsk steel mill — the largest in Europe — in which a TWM subsidiary has a 35 percent holding. Two Western investors (Cambridge Capital Management and Sputnik), who together with Oneksimbank own 41 percent of the shares, are trying to get four seats on the nine man board, but are being blocked by the Novolipetsk management and the TWM group. (Financial Times, April 22, Finansovye izvestiya, April 22)

While these ownership battles continue, a more worrying trend is the erosion of the cost advantages formerly enjoyed by Russian producers. Some 40 percent of Russian iron and steel mills and 60 percent of non-ferrous metals plants are now running at a loss. (Itar Tass, April 23) Back in 1991, Russian mills had low debts and enjoyed cheap energy. Price increases mean that Russian industry now pays 20-25 percent more for electricity than their Western counterparts. Transport adds another 15 percent to Russian costs. (Izvestiya, April 24)

Presidents Sign Border Agreement.