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The first Russian businessman to lose Ukrainian assets he acquired during ex-President Leonid Kuchma’s regime could be Oleg Deripaska, the Moscow oligarch who controls Russian Aluminium (Rusal), one of the world’s leading producers of aluminium. At stake is Rusal’s umbilical cord to the Nikolaev Alumina Refinery, in the Ukrainian port city of the same name.

The Ukrainian move to cut that cord also affects the rivalry among Russian, Chinese, American, and local groups to mine bauxite in the Republic of Guinea. If the ownership of the Nikolaev refinery is unravelled by the authorities in Kiev, that will rebound on the Rusal-controlled Guinean bauxite mines, which have supplied Nikolaev since the Soviet period.

Sources in Kiev claim that the Ukrainian prosecutor-general’s office has filed a high court claim accusing the former Ukrainian government of violating the law in allowing Deripaska to change the investment conditions he undertook, when he first acquired the state’s 30% stake in the refinery in the year 2000.


The privatisation auction which Deripaska won ended a bitterly contested tussle for control of the refinery with the Trans World metals and the Reuben brothers of London. The stake cost Deripaska about US$100mn. But the additional investment conditions obliged him to spend much, much more.

The latest action is not thought to be a direct attempt to invalidate the original privatisation. However, the latest action by the prosecutors could have a similar impact if the court rules that the previous government acted unlawfully to favour the Rusal group.

A spokesman for the prosecutor-general’s office claims that an order of the former Ukrainian government, no550p, issued on August 10, 2004, violated Ukrainian law. That order, they claim, unlawfully changed the financial terms which Deripaska’s acquisition of the Nikolaev refinery obliged him to meet.

Nikolaev produces more than 1.3mn tons of alumina per year, feeding Rusal’s four Russian smelters which, altogether, produced 3.1mn tons of primary aluminium last year.

Nikolaev’s output comprises more than a third of Rusal’s Russian smelter requirement.

Without it, Rusal’s pledges to build new smelters in Irkutsk and Khakassia and increase annual output of metal to 5mn tons, would be difficult to achieve, if not impossible.