Rosoboronexport Stands Special Services in Good Stead
// By Creating Government Company for Producing Weapons-Grade Steel
Rosoboronexport, the government's middleman for the export of arms and military technology, which already manufactures weapons, automobiles, and titanium, has begun the process of forming a state holding company to produce weapons-grade steel. This company, Russpetsstal, will be headed by Sergei Nosov, Alexander Abramov's former partner in Evraz Group. For the time being, Mr. Nosov has only one asset to manage: the Volgograd Krasny Oktyabr factory, in which Russpetsstal bought a 100% stake from Midland Steel Industries Ltd on January 30. However, Kommersant has learned that the company has much more ambitious plans, which include creating a government monopoly in the military-industrial market for weapons-grade steel and acquiring the Chelyabinsk Metallurgical Plant.
Officially, Rosoboronexport owns only a 25.3% stake in Russpetsstal through the company Promimpeks, but the five spots on the new company's board of directors include two representatives of Rosoboronexport: general director Sergei Chemezov and his deputy Alexei Aleshin. The board also includes Troika Dialog head Ruben Vardanyan, Krasny Oktyabr co-owner Edward Shifrin, and VTB deputy chairman Igor Zavyalov.
The new company's goal, according to a statement from Rosoboronexport, is to "create a metallurgy holding via the consolidation and development of assets that produce weapons-grade steels and alloys." A source in the presidential administration told Kommersant that Sergei Chemezov sent a letter to several federal agencies last summer in which he suggested creating a weapons-grade steel company. "Mr. Chemezov pointed out a serious problem that Rosoboronexport has been encountering as the sole exporter of Russian arms, namely, the low quality of the special steel that is used in the manufacture of military technology," said the source.
The Krasny Oktyabr plant manufactures approximately 700,000 tons of steel a year and turns a profit of around $500 million. The British company Midland Group also owns the Ukrainian factory Zaporozhstal. Krasny Oktyabr's former co-owner Edward Shifrin joined the Russpetsstal board of directors by exchanging approximately 25% of his shares in the factory for a stake in the new company, which Rosoboronexport is touting as a demonstration of how magnates controlling assets in the steel industry that are of interest to Rosoboronexport have the chance not only to sell them but also to enter into a partnership with the government. Mr. Shifrin declined to comment. For his part, Ruben Vardanyan told Kommersant that Troika Dialog received an unspecified share in the company as payment for arranging the deal and in expectation of attracting future investment in Russpetsstal. VTB financed the deal, but the bank refused to discuss details of the agreement. Sources told Kommersant, however, that Rosoboronexport's unofficial share in Russpetsstal is "less than 75%."
Rosoboronexport's ambitious plans for the new company include appropriation of the Kulebaksky plant and the metallurgy company Stupinskaya, which are co-owned by Aviatekhnologia, a partner of Rosoboronexport. The company also plans to acquire the Barrikady plant and the Moscow Metallurgical Factory, which belongs to the Moscow city government (around 20,000 tons of weapons-grade steel per year), as well as the Chelyabinsk Metallurgical Plant, which it is hoped will be the linchpin of Russpetsstal's assets. In 2006 the factory produced 80,000 tons of weapons-grade steel, making it the acknowledged leader of the market in Russia. Yesterday, however, a spokesperson at the company Mechel, the plant's current owner, said that they "had not yet received any offers to sell the plant."
Elena Kiseleva, Maria Cherkassova; Elena Pashutinskaya (Volgograd)
All the Article in Russian as of Feb. 09, 2007
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