MOSCOW - When Charles (Chip) Goodyear of BHP Billiton made the first-ever official visit to Moscow for a chief executive of his company this week, he received a limp handshake from a demoted minister, and a warning not to think of investing in Russia unless he comes back with a strategic partnership arranged with a Russian company. Twenty-four hours later at Goodyear's front office in London, executives and spokesmen were still having trouble finding out whom their boss had met, and what he had discussed with them.
Goodyear met on Monday with Victor Khristenko, who currently holds the Industry and Energy portfolio in the Russian government, after losing his deputy prime ministership in President Vladimir Putin's March cabinet reshuffle. Khristenko's spokesman Vasily Asmakov told The Russia Journal "the meeting had a get-acquainted character. Mainly, Mr. Goodyear was asking for recommendations on how it's better for a foreign company to do business in Russia."
Asked who else Goodyear may have met in Moscow, BHPB spokesman Mark Lidiard first said "we wouldn't comment on that." On checking with Goodyear's delegation in Moscow, he said "we have met a number of ministers appropriate to our business interests," indicating there had been more than one minister. He refused to disclose the other identity.
Russian officials in charge of mining and diamonds were blunt that they had not been on Goodyear's itinerary. A spokesman for the Minister of Natural Resources, Yury Trutnev, said that "Trutnev was not at that meeting [with Khristenko], because it was not announced to us." Nor was Trutnev expecting to meet Goodyear this time. The spokesman commented politely, but with a subtle warning to Goodyear to get his bureaucratic ducks in order: "Hopefully there will be another meeting of Charles Goodyear with Trutnev if they are really interested in natural resources investment." Trutnev is in charge of licencing all mineral, oil and gas extraction projects.
BHP Billiton is currently selling alumina to Russia, and describes the second aluminium producer in the country, Siberian Ural Aluminum (SUAL) as a client. SUAL's international arm is now headed by Brian Gilbertson, Goodyear's predecessor as chief executive of BHP Billiton. Neither BHP Billiton nor SUAL would say if they have been in negotiation to fill Alcoa's place as a strategic partner in SUAL's development of an alumina refinery and aluminum smelter in the Komi region, near SUAL's expanding Middle Timan bauxite mine. SUAL announced Alcoa's withdrawal a few days ago.
Bill Spears of SUAL said "it's not our policy to disclose the identity of those participating in business meetings with us. Regarding Komi, I can only confirm that SUAL is in active discussion with leading global firms, that are potential partners for the Komi project." He added that "given the costs involved of shipping alumina to Russia, there is clearly an advantage to sourcing supplies locally." But he also noted that SUAL's smelter expansion plans could consume much of the projected capacity for alumina to be refined at Komi.
BHP's diamond division, based in Antwerp, has been trying for several years now to develop a relationship with Russia's dominant diamond miner Alrosa, and according to Khristenko's office, Goodyear mentioned his company's interest in diamonds. However, the CEO of Alrosa Alexander Nichiporuk did not meet Goodyear. Late Tuesday, Alrosa told The Russia Journal there had been no sign from BHP Billiton of wanting to meet during Goodyear's visit.
De Beers, the global diamond-mining leader, preceded BHP Billiton into Moscow late last week, and Managing Director Gary Ralfe met with Prime Minister Mikhail Fradkov, as well as with the Alrosa leadership, for talks on investment in the mining sector.
It is possible that BHP's corporate memory retains a jaundiced view of the Russian diamond-mining sector, in which the company wrote off about $5 million exploring the Snegourochka ("Snow Girl") property in the Arkhangelsk region in the early 1990s. Another unhappy experience at that time was the pre-feasibility study BHP did of the Udokan copper deposit in the Chita region, the licence for which went to an ill-equipped Russian rival, who eventually lost it for lacking the capital or expertise to build a mine. Then there was the $35 million BHP's Hamilton Oil subsidiary lost in the mid-1990s at an abortive offshore oil and gas project at Prirazlomnoye, above the Arctic Circle. A study of coal-mining in the fareastern region of Sakha was relatively modest in cost, but it too went nowhere. Little wonder then that BHP closed down its Moscow representative office several years ago, and that apart from the diamond probes, the company has kept its distance from Russia.
According to a statement issued today by BHP Billiton in London, Goodyear went to Moscow on a 'fact-finding mission", to assess Russia "as both a market for our product where we currently sell bauxite and alumina, and potentially as a future resource base." In Khristenko's statement, Goodyear was reported as mentioning "the prospects of participation of BHP Billiton in Russian projects in the oil and gas, metallurgical, and coal sectors, and also in extraction of diamonds."
A BHP billiton source revealed that diamonds were not one of Goodyear's priorities. Iron-ore and coking coal for Russia's booming steel industry may be more important.
Goodyear was also reported by the Russians as having "expressed interest in investment of significant means in natural resources development in the territory of the Russian Federation and asked the minister to designate the basic steps which are necessary to be taken into account by foreign companies for lodging investments in Russia."
Khristenko reportedly told Goodyear "there should be a precise understanding of the existing legislation and the basic directions of its reform." In addition, Khristenko recommended that Goodyear conclude "a strategic partnership with Russian companies...[to] allow [BHP Billiton] to exploit advantages at reforming the legislation, to lower risks, and to receive the best representation about features of interesting sectors." In case Goodyear didn't quite get the message, Khristenko repeated his emphasis, saying "strategic partnership with Russian companies opens opportunities for cooperation between the [Australian and Russian] companies in third countries." As he was winding up the meeting, Khristenko reportedly added: "Strategic partnerships serve the improvement of positions of Russian companies both on the international commodity market, and on stock markets."
Norilsk Nickel, Russia's leading mining company, with interests in nickel, copper, platinum group metals, and gold, said it had not met with Goodyear.
According to Lidiard, "Mr Goodyear is not in Russia to discuss any specific projects or investment opportunities." Khristenko's spokesman told The Russia Journal that the minister had said "that when BHP Billiton will choose a precise project, they could meet again and discuss everything regarding the concrete example."