Some alarming news is coming from Pikalevo: Fosagro and Baseltsement-Pikalevo still cannot agree on the terms for the supply of raw materials, and Pikalevsky Tsement has announced that it is withdrawing from the production chain.
Vladimir Putin breathed new life into that same production chain during his emergency visit last June. Since that time the Federal Antimonopoly Service, the operational headquarters created with the express purpose of restoring the Pikalevo Production Complex and Deputy Industry Minister Denis Manturov have all been monitoring the situation to ensure that the enterprises of Baseltsement-Pikalevo (owned by Baseltsement), Pikalevsky Tsement (Eurocement), Apatit (Fosagro) and Metakhim (run by the management company Sevzapprom) supply raw materials to each other at the agreed prices and make all necessary payments. The members of the production chain have had great difficulty reaching short-term agreements, and even then only under heavy pressure. The agreements signed following the intervention of the prime minister expired on August 31. New agreements were signed only on September 2 and only for a period of two months. As the time approaches to sign a new agreement, Fosagro has alleged that Baseltsement-Pikalevo is not making payments for its raw materials and has threatened to terminate the agreement. Fosagro then put forward a new contract involving fines, but Baseltsement-Pikalevo has not confirmed that such a contract has been signed. Simultaneously Pikalevsky Tsement has announced that as of January 1, 2010 it will no longer use sludge from Baseltsement-Pikalevo, opting instead to use its own raw materials (Pikalevsky Tsement has been working on this plan since last year, after Basel released a plan to convert its aluminum plant into a cement plant).
Thus the Soviet-era Pikalevo production complex, which was kept alive by the June decisions, may grind to a halt, if not on November 1 then certainly by January 1.
The doctrine of "manual control" demands that the prime minister keep the situation under constant review: Denis Manturov and Igor Artemyev do not have the clout to force certain enterprises to operate at a loss in order to rescue other enterprises.
In June, news channels were replaying the public humiliation of Oleg Deripaska at a meeting with the prime minister. However, the meeting ultimately benefited Basel. Apatit had to agree to sell its raw materials below cost, while Metakhim had to agree to buy Baseltsement's products at a higher price.
The plan, which hinges on a rapid rise in oil prices (which would improve things all round), has been approved and the government is determined to make it work.
Recently Deripaska proposed that Putin reform the hydro energy sector by breaking up RusHydro into several companies and separating off the Sayano-Shushenskaya Hydroelectric Power Station (SSHPS), which UC Rusal would like to buy.
As shown by the accident at the SSHPS, the performance of RusHydro is far from perfect. As the main consumer of the electricity generated by SSHPS, UC Rusal could ensure closer supervision of its restoration and operation. True, UC Rusal is $16.8 billion in the red and is currently only able to obtain loans for the construction of the Boguchany Energy and Metallurgical Complex (including a power plant that could be operational before repairs are complete on the SSHPS). On the other hand, 40 billion roubles (from yet unspecified sources) will be put toward repairing the SSHPS. By contributing to the station's capital, UC Rusal could influence the rate it pays for energy.
Analysts say that Deripaska's proposal has no chance of being adopted. However, since it is in Deripaska's interest, the outcome is still far from clear.
News of Deripaska's letter to Putin came out at the same time as reports that Mikhail Fridman had visited Dmitry Medvedev. This is surely a coincidence. But it would be interesting to know what strategic solutions the oligarchs are proposing to the government (Medvedev had asked Fridman to analyze the exit strategy from the crisis). Deripaska has put his ideas on the table, and it will be interesting to see what Fridman proposes.