Some of you may remember the quiet, creeping interest demonstrated by the Kremlin in expanding its patented state theft model from the oil and gas sector over into metals – last year they hassled Peter Hambro, then they put the squeeze on Norilsk Nickel, and now seem to be forcing Rusal’s parent company Basic Element to become a fence for other ill-gotten assets from Russneft. Let’s not forget that minerals represent another “strategic” sector. The latest news is that the Guardian is reporting on some aggressive comments made by Mitvol, calling upon the London Stock Exchange for tighter regulation of mining companies, especially the discrepancies between reported reserves data and state reserves data. Guardian:
“I think they [investors] are already duped or cheated. I don’t think we have to wait for a big crisis to occur in order to see this problem,” Mr Mitvol said. “When a proprietor-licensee has data which can be different from the state data, this is firstly abnormal and secondly a fraud. I can add that soon there will be results of our work with one company announcement which will significantly reduce reserves,” he said. … Mr Mitvol suggested there were ridiculous abuses. He said a gold-mining company that had held its licence for several years had done “only one thing since then – collecting money on the London exchange from foreign investors. The only other thing it does: it changes the deposit development time frames every two years.”
All this may just be dress rehearsal for another series of regulatory attacks, designed to orchestrate thinly veiled nationalizations of majority stakes in joint venture mining projects on behalf of the siloviki in the Kremlin (interesting how the regulatory issues seem to disappear once the state gets its taste). As the election year approaches, I think we will see an increase in these types of state intervention as some parties within the government may want to take advantage of these conditional property rights and politically obedient legal system. Irregardless of the eventual result of Mitvol’s new crusade against mining companies, having a Russian bureaucrat lecture London about transparency and regulation is like getting a tutorial on human rights and freedom of press from Kim Jong Il.