Though at least 80 percent of assets in the metals sector have de-facto owners, attempts to redivide the pie continue today. Management takeovers are not so effective anymore, and today, success goes to those who think up the most cunning tricks to reach victory over their rivals. The metals sector today attracts wily people and specialists in conflict psychology.

In the summer of 2001, the assets carve-up process at NOSTA, the last of the metals plants yet to have been divided up, reached its most intense phase so far. Last year, a consortium formed by Avtobank and the Stiltex trading company removed the previous management from NOSTA. This year, splits appeared in the consortium, and NOSTA is now being divided up between Alfa Group and Avtobank.

The conflict between Andrei Andreyev, a member of Avtobank’s supervisory board, and Stiltex owner Vladimir Savelyev began in April. The conflict was over politics – Andreyev backed current Orenburg governor Alexei Chernyshev in regional elections, while Savelyev was against him. It turned out that Andreyev had offered the regional administration 25 percent of NOSTA’s shares (as reported by news agencies) and Stiltex decided it had to take action.

As Stiltex was NOSTA’s main trader, the logical way to take over management from Andreyev, who controlled 60 percent of the company, seemed to have it declared bankrupt. This was when Alfa-Eko was brought into things. Alfa-Eko called on a well-known specialist in these sorts of proceedings, Alexander Volkov, head of the MINFIN group and a professor at the Higher School of Economics.

Volkov drew up bankruptcy plans. He later said that Alfa-Eko never paid him for his work and, annoyed with the situation, he passed the information on to the press. In response, Alfa-Eko announced that it had only a "theoretical interest" in NOSTA.

Two months later, theory became practice. On July 19, through the regional arbitration court, Stiltex obtained the introduction of external management at NOSTA. This was followed by the resignation of NOSTA General Director Andrei Velikanov. The external manager, Alexander Gorshkov, known for the bankruptcy of Chernogorneft in favor of Alfa-controlled Tyumen oil company, or TNK, removed his successor from his post.

By this time, analysts were saying that Gov. Chernyshev had made his choice in favor of Alfa. But if this is so, then he has a strong opponent. Just recently, the Federal Financial Recovery Agency lodged an appeal to overturn the decision introducing external management to NOSTA.

Now Avtobank has withdrawn from the game. Its head Natalya Rayevskaya couldn’t handle the fight for the plant and obviously wanted to avoid large-scale conflict with Alfa Bank. Now Andreyev is trying to sell 60 percent of now-worthless shares in NOSTA to Nafta-Moskva. It’s now clear why this oil-trading company would want these shares. One version has it that Nafta-Moskva will first play on Alfa’s nerves and then sell it the shares, and that Nafta-Moskva wants to split the Alfa-Stiltex alliance and make Stiltex’s owner its partner.

In mid-2001, a new name appeared on the list of Russian metals bosses. Igor Zyuzin, the owner of large Siberian coal deposits, has now acquired 20 percent of shares in Mechel (Chelyabinsk). Since Mechel’s current owner, Glencore, doesn’t hide that it wants to sell the 40 percent stake it currently holds, Zyuzin could soon become a full owner of the company.

Unofficially, people close to Zyuzin, the former general director of Koks, and its owner, a Duma Deputy Boris Zubitsky, say that Mechel is being sold to Koks and Yuzhny Kuzbass for $180 million, to be paid in installments over 1 1/2 years, and that Glencore will remain the company’s exclusive trader until the deal is closed.

Koks was very eager to expand its assets. In the second half of 2000, companies affiliated with Boris Zubitsky and his son, Yevgeny Zubitsky, joined hands with a RK-metal, a subsidiary of Rossiisky Kredit, to buy a controlling stake in Tulachermet from two brothers, Semyon and David Kislin, partners in Trans World Commodities. The holding, bringing together Tulachermet, Mechel, Koks and Yuzhny Kuzbass, looked to become one of the most promising groups in the business.

But the work on the holding faced some obstacles. On June 30, Mechel shareholders held a meeting. The Yuzhny Kuzbass representatives took their place on the board of directors, but representatives of Koks weren’t on the list. Alexei Ivanushkin, the head of Mechel, began making contradictory statements. After spending four years trying to find a strategic investor for Mechel, he suddenly announced that this deal wasn’t advantageous at present. Shortly thereafter, he said that Glencore wasn’t a shareholder in Mechel at all. Rumors surfaced that Glencore thought the price had become too low, and was no longer interested in the deal. Other alleged that relations between Boris Zubitsky and Igor Zyuzin were far from friendly, and that Iskander Makhmudov, the head of UGMK, had intervened.

There is probably some truth to the rumors about UGMK. It was precisely at this time that companies close to Makhmudov resumed attempts to get back their shares in Magnitogorsk steelworks. According to the information obtained by Kommersant, TWG sold 13.59 percent of its shares in Magnitogorsk to Igor Zyuzin’s companies. Rumors allege the control of these shares allows Magnitogorsk’s General Director Viktor Rashnikov, with the support of Deputy Prime Minister Viktor Khristenko, to hold off the attack from UGMK, which wants 30 percent of shares in Magnitogorsk. Although these reports are unconfirmed, it’s possible that Boris Zubitsky thought Igor Zyuzin would be at the center of too many events, and that it would be better to keep some distance from him.

It is not clear whether Zyuzin will succeed in becoming the new owner of Mechel before the end of the year. But what is clear is that there are people out there, whose names are not yet widely known, who want to climb their way to the metals-sector summit.

In the summer of 2001, news reports said the Interros Group was relinquishing control of NLMK. This meant that Vladimir Lisin, one of the best-known the metals bosses, could finally become the owner of NLMK.

The history of the tangled dipute between Potanin and Lisin’s goes back to 1994. In the spring of 2000, companies close to Lisin and his partner Vladimir Skorokhodov managed to consolidate 64 percent of shares in NLMK. They managed it through a highly complicated scheme, financing the purchase of shares from the Sputnik Fund, managed by Potanin’s partner Boris Jordan, and the Cambridge Capital Group by buying at a discount NLMK debts that had been turned into Vnesheconombank eurobonds in 1997. This meant that Lisin’s companies had to find $400 million between 1999 and 2001 to pay for the controlling stake. This was when Lisin proposed to shareholders, the largest of which was TWG Group (34 percent), to have an additional share issue.

Lisin still says today that the money obtained through the additional issue was to go to financing NLMK’s $1 billion reconstruction program. But it seems logical to assume that part of the money would have gone on paying for the controlling stake. Without this money, Lisin risked losing the control.

Just before the scheduled meeting, the sensational news came through that TWG had sold its shares in NLMK to Interros, including 9 percent that went to Norilsk Nickel. Rumor has it that Boris Jordan acted as consultant in the purchase of this 34 percent stake. Jordan allegedly explained to Potanin that it was possible to get back the 17 percent of NLMK shares the Sputnik Fund had already sold because Lisin hadn’t paid him part of the money for the deal. After this, NLMK’s new shareholders blocked the additional share issue.

A year went by before it became clear that this strategy wasn’t working. According to unofficial information, during the negotiations behind closed doors Lisin laid down an ultimatum for future cooperation – Interros can either invest in the plant, sell its stake for five times less than the purchasing price, or buy a controlling stake for $1 billion. None of these three proposals suited Interros, but it was also ineffective to hold on to a stake that wasn’t of any use.

Over the course of this year, Interros has tried repeatedly to undermine Lisin’s positions. It turned to the courts to challenge the sale of Stinol refrigerator plant, an NLMK subsidiary company, to an Italian partner Merloni, a move that nearly launched an international scandal. Lisin remained firm in his plans. Norilsk Nickel tried to use the stake in NLMK to take out part of its profits, but the nickel plant’s financial consultant, Deutsche Bank, protested. Lisin’s relations with Western creditors were expected to worsen, but this didn’t happen. And it proved impossible to return to Boris Jordan the 17 percent stake that had belonged to Sputnik. All of this meant that the 34 percent stake remained a dead weight on Interros’ accounts.

Another year passed before Lisin got a call from Interros. Interros, one of Russia’s largest industrial groups that controls 6 percent of Russian GDP, had finally agreed to invest, though not through an additional share issue, but through a loan of $200 million.

In mid-2001, Makhmudov was said to have had a hand in the affair over Severstal head Alexei Mordashov’s alimony payments. It might seem a trivial affair, but the scandal could cause Mordashov to lose his controlling stake in Severstal. Rumor has it that Makhmudov wants to get his hands on this stake.

Newspapers printed a statement signed by Lyudmila Mordashova, Mordashov’s former wife, in August 2001, accusing Mordashov of not paying alimony for his 15-year-old son. Moreover, she said that Mordashov had forced her into giving up her share of the assets acquired during the couple’s marriage. In Mordashova’s view, these assets include almost 80 percent of the shares in Severstal.

Severstal said that Mordashov obtained his shares in the company after his divorce, but Mordashova was still determined to get her hands on a third of Severstal’s capital. She filed a lawsuit, and had the court arrest 35 percent of Severstal’s shares. The court case risks hanging all of Mordashov’s dirty laundry out in public. That’s not a good thing for a man who only recently was being tapped for deputy prime minister.

Some sources say that one of the top managers at Russky Aluminy, who once had similar problems with his own wife, is behind the scandal. But the rumors that Makhmudov primed Mordashova for her court battle have been louder. Makhmudov could be trying to use the alimony affair as a means to make Mordashov more malleable in negotiations on handing over the controlling stake in Severstal to UGMK and Evrazholding.

This interest from UGMK and Evrazholding is more than just hypothetical. Severstal was already very worried when MDM Group bought the Kovdorsky mining and enrichment company, Severstal’s main supplier. Mordashov is one of the only people able to compete with the invisible consortium of UGMK, Evrazholding, MDM Group and Russky Aluminy in the metals sector. By buying the Zavolzhsky engine plant, Severstal is preventing Russky Aluminy from getting a complete hold on automobile maker GAZ, which Zavolzhsky supplies. Also, by creating an alliance – Alliance 1420 – with the United Metals Company, Severstal could leave Nizhny Tagil’s NTMK steelworks without state support in its project to manufacture large-diameter pipes for Gazprom.

Business wars are one thing, and family wars are quite another. The fact that Makhmudov’s name is linked to what is known as the first really dirty scandal in the Russian metals business shows that the war for assets in the sector is not over yet.