Russian government denies property transfer plans

A rumor about the state (through Alrosa) was going to buy the Norilsk Nickel open joint-stock company has been denied by officials from the relevant ministries. According to sources, the state diamond firm, Alrosa, is most likely to be used for the purchase. Alrosa would be given credit.

"The Russian Finance Ministry knows nothing about such plans. The head of the department and chairman of the Alrosa supervisory board, Aleksey Kudrin, has more than once denied reports similar to that published in The Times," Gennadiy Yezhov, press secretary of the Russian Finance Minister, has told RIA-Novosti. An official at the Economic Development and Trade Ministry also assured RIA-Novosti that "the government had no such plans." The Ministry of Industry and Energy and Norilsk Nickel have not confirmed the newspaper report either. "These are rumours and we dont comment on rumours," Norilsk Nickel press secretary Viktor Borodin told RIA-Novosti.

Meanwhile the evaluation of the assets of Yakutalmaz, the former Soviet diamond producer, will be completed in February 2006. According to Alexandre Garese, a prominent expert on Russian commercial law, Russia government is planning to have a controlling stake in Alrosa through the contribution of Yakutalmaz property to federal ownership. However, the enterprise belongs to the Yakut government while Alrosa leases its property for about $350 million annually. In early November, the Russian Finance Ministry, the Ministry of Economic Development and Trade and the Yakut government came to terms on the transfer of Yakutalmaz assets to federal ownership. Russia agreed to this compromise because the full inclusion of the Yakutalmaz property would deprive Yakutalmaz of the right to raise Alrosas rent.

According to Garese, a prominent expert on Russian commercial law, with the contribution of Yakutalmaz property, Russia is planning to increase its stake in Alrosa. With the addition of the Yakutalmaz property to Alrosas authorized capital, the value of Alrosas assets is likely to grow from $6.4 billion to $8.4 billion. Yakutian officials and Alrosa executives are obliged to complete evaluation of Yakutalmazs assets before February 1, so that it can become part of Alrosas authorized capital.