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Putin Out to Destroy Mechel?

crash072408.jpgHe may not be president anymore, and perhaps there’s some uncertainty over what portfolios he covers as prime minister, but nobody doubts that Vladimir Putin can still crash the value of a company with a few swift words. That’s what has happened to the Russian mining and steel firm Mechel, whose shares have crashed 20% today in New York markets following public accusations from the former president that the company has illegally used artificially high prices. Traders have already started comparing the threat to the Yukos attack, but I would bet that Mechel owner Igor Zyuzin probably just stepped on the wrong person’s foot as his company grew so impressively in recent years (they do compete with Norilsk). As recently as last year the company was in good favor with the Kremlin, and was awarded a bid for the world’s largest coal mine (Elga, in Siberia), while Lakshmi Mittal’s company was prevented from bidding. This one should be watched closely as a rule of law barometer along with TNK-BP and the Khodorkovsky case.

“This (Mechel) was a benchmark stock for the sector, but now people are remembering what happens here when you come into conflict with the government,” said Pavel Koryshev, trader at East Kommerts investment group in Moscow. “The company could face corporate ramifications along the lines that we’ve seen before,” he said. A Moscow-based fund manager, who asked that he not be identified, said investors in Mechel were being scared off by Putin’s comments. “People are getting out of Russia. Putin had some very angry comments directed straight at the company and it is quite rare for Putin to specifically single out one company,” he said.