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Picasso was late for dinner at Gertrude Stein’s in Paris in 1907, when Alice B. Toklas said to him, after the painter had been seated beside her, that she liked his portrait of Stein on the wall above them very much. To which Picasso famously replied: “Everybody says that she does not look like it. But that does not make any difference. She will.”

Oleg Deripaska is like that. The Russian oligarch, who owns most of Russian Aluminium (Rusal), and the Basic Element holding, in which he has placed his paper and pulp assets; car and bus factories; an aircraft production line; more than one electricity plant; a bank, an insurance company, and stakes in a steelmill and regional media, is very sensitive about how his business operations and acumen are reported. Accordingly, he retains a large staff of PR men and lawyers to paint the portraits he prefers of himself, as well as of the financial condition of his companies. The job of this staff is also to issue complaints and threats whenever Deripaska does not look like the pictures others draw. He is currently litigating against Le Monde in Paris, and Frankfurter Allgemeine Zeitung in Frankfurt, claiming defamation. In the United States, he has engaged a former US attorney general and state governor to launder his reputation. In Moscow, he has frequently sued, or threatened to sue, newspapers and their writers,including The Russia Journal. But as Picasso warned, time will decide. None of Deripaska’s efforts will make much difference if President Vladimir Putin means to include him in his list of five, seven or ten Russian oligarchs, whose empires, Putin announced before Christmas, face dismantling.

Speaking fairly, Deripaska did not accumulate his most valuable assets through rigging privatization of state assets, at least not if his acquisition of the alumna refinery at Nikolaev is excluded, because it is across the border in the Ukraine. It is currently up to a Ukrainian court, and then the Ukrainian government, to decide that question. In Moscow, the only legal challenge Deripaska’s assets currently face is aimed at his takeover of the Ingosstrakh insurance company, Avtobank, and the Nosta steel company, which federal prosecutors have been investigating, at the behest of the former proprietor, for several years now. Elsewhere in Russia, there are legal challenges to Deripaska’s paper and pulp acquisition strategy, but these are private, and so far they do not involve state prosecutors. A recent negotiation between Deripaska and Ilim Pulp has ended without agreement on the size of the payment Deripaska would take for lifting his siege.

Deripaska’s prime asset, and the source of most of his cash, is Rusal, which after Alcoa, is the largest producer of primary aluminum in the world. It comprises four smelters, two alumna refineries, the world’s largest aluminum rolling mill, and various other metal fabricating plants. Rights to mine bauxite in Guinea are also part of the group’s assets.

Deripaska bought them in partnership with others, the most obvious of whom was Roman Abramovich. Deripaska claims he bought the least reputable of his partners out some time ago. Last September, he agreed to pay Abramovich $2 billion in installments for a 25% shareholding in Rusal, raising his stake to 75%. The cash to fund that acquisition is coming from Rusal. And therein lies a problem that Deripaska and his financial advisors have been wrestling with for months. He would like to acquire 100% of Rusal assets as soon as possible, just as he would like to consolidate the many shareholdings that comprise the Rusal group into a single, tradable, bankable stock. Among the oligarchs, Deripaska stands out as the slowest to reorganize the assets he controls into the form in which he could start selling it off to Western investors, at a premium price. For the time being, even if he wanted to cash out, he cannot sell a large stake of Russia’s aluminum resource to a foreigner like Alcoa or Alcan-Pechine. He even trails behind his much smaller aluminum competitor, Victor Vexelberg’s Siberian Ural Aluminum (SUAL), in being able to float on the international market (despite his promise, Vexelberg has yet to achieve that for SUAL). Ironically, these disadvantages are a form of protection Deripaska may presently enjoy from the Kremlin’s promised policy to secure domestic natural resources from their disposal by the oligarchs. Deripaska may be starting to have problems with the Kremlin’s new tax policy. But he can continue playing the Russian national card. It is to his advantage that he is not half as welcome in Washington or London as the other oligarchs.

Understandably, Deripaska feels this as a personal slight, and also as an added cost on his borrowing bill. But, if Rusal’s reputation is to grow, and its debt servicing charges to drop, Deripaska must provide more financial transparency than Rusal has done to date. At all costs, he must avoid the impression that Rusal is the cash cow, which the holding company Basic Element milks, whenever it is thirsty. On the other hand, the system of internal and offshore pricing on which Rusal and its producing and trading units has been built, makes transparency a difficult objective to achieve. Following last year’s deep freeze that paralyzed St. Petersburg’s port, aluminum shipments, including Rusal exports, to the United States, China, and other destinations were redirected away from St. Petersburg, according to metal traders and port records. In all, export shipments of nonferrous metals, including aluminum, through St. Petersburg have fallen year on year by more than 20%. At the same time, the State Statistics Committee has reported that production of primary aluminum rose about 4%. Much of that increase appears to have been exported, because production of aluminum rolled products has reportedly fallen during 2003 by about 3%. Rusal’s official website has not released comprehensive production or trade data since 2002. Rusal executives have attempted to suppress reporting of metal movements by claiming the details are commercial secrets, threatening anyone who discusses them. But the campaign of intimidation has turned out to be more revealing than the information itself. In the past, Deripaska has had reason to rue what his PR men have said on his behalf. He probably does not realize the damage they continue to do to him.

In the months ahead, the oligarchs who will survive Putin’s five, seven or ten threat will be the ones who can lie low most effectively. Deripaska understands how much the Kremlin already knows about his business. He can be confident that almost nothing that has been reported in the domestic or foreign media to date matches the scope of what President Putin already knows, or could call up with a telephone call to a subordinate. On the scale of demonstrable threats to the economic security of the state, Deripaska ought to be trying to convince his detractors, inside the Kremlin and out, that Basic Element and Rusal are not to be compared with the Yukos group, Sibneft and Millhouse, or Interros and Norilsk Nickel. Instead, he has inspired his subordinates to play a cat-and-mouse game abroad that threatens the very survival assets, that Deripaska will need at home.

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