London Brawl Between Pro-Putin Tycoons Tests Kremlin’s Patience

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They’re two of Russia’s most powerful tycoons, each with a reach that extends into Vladimir Putin’s inner sanctum, and now their fight over one of the country’s most lucrative assets is flaring anew.
The dispute between the billionaires—Vladimir Potanin and Oleg Deripaska—runs from Arctic mines to the High Court in London.
The legal proceedings provide a glimpse into the rules, written and not, that govern the vast fortunes that exist at the pleasure of the newly re-elected president.
As a British judge prepares to rule on small ownership changes that may have a big impact on Siberian metals titan Norilsk Nickel, initial signs from Kremlin insiders suggest one longtime Putin ally may have an edge over the other.
Putin is displeased when leading business figures opt to resolve feuds publicly abroad, as Deripaska is doing, instead of privately, one senior official said.
The issue is particularly sensitive now that Britain is blaming Russia for the nerve-agent attack in an English park on a turncoat spy.
Both parties need to understand this isn’t a good time for a fight, he said.
Deripaska has also irritated senior officials for what two other people close to the Kremlin called a string of missteps.
They cited his publicized connections to former Trump campaign manager Paul Manafort and a sex scandal that’s become a media sensation.
All three people said Putin prefers not to get involved in business conflicts, though he has before in the case of Nornickel, even hinting at possible nationalization.
“Putin likes Potanin because he’s a former official and a billionaire who was never affiliated with any alternative group other than Putin’s,” says Valery Solovei at the Institute for International Relations in Moscow.
“Deripaska is also loyal, but he never served the state.
” At the center of the tussle is Nornickel, one of the world’s largest suppliers of not only the high-grade nickel that helps power iPhones and Teslas, but also palladium, platinum and cobalt, three metals the U.
just declared vital to national security.
Both men hold sizable stakes—and opposing views about how to deploy the torrent of cash the company spins off.
Nornickel has paid about 680 billion rubles ($12 billion) in dividends over the past five years.
QuicktakeOligarchs’ Feud With key provisions of a 2012 shareholder agreement expiring, Deripaska, 50, wants Nornickel to pay out at least $2 billion annually—a figure almost equal to the company’s entire profit for last year—while Potanin, 57 and now chief executive officer, favors more spending on upgrades and expansion.
Deripaska’s press service declined to comment, while Potanin’s spokeswoman didn’t answer messages seeking comment.
Putin’s spokesman, Dmitry Peskov, also didn’t reply to requests for comment.
The feud dates back a decade to when Deripaska acquired 25 percent of Nornickel from Potanin’s former partner, Mikhail Prokhorov, for what was initially said to be $15 billion in cash and stock in his aluminum giant Rusal.
The deal closed in April 2008, just as the global credit crunch was about to slash Deripaska’s fortune to $2 billion from $28 billion.
With Rusal drowning in debt and Deripaska demanding more cash from Nornickel, an old KGB colleague of Putin’s was installed as CEO to make sure the mining company continued to function and its 80,000 workers kept getting paid.
Putin then approved a $4.
5 billion emergency loan that helped Rusal keep its stake.
What’s changed about the feud, aside from the economic backdrop, is Putin, who’s since become the country’s longest-serving leader since Josef Stalin.
“Putin is different now,” says Gleb Pavlovsky, a Kremlin adviser during Putin’s first two terms.
“He values owners who solve their own problems and pursue agendas useful to the country.
He’s not interested in business conflicts.
” Even so, Norilsk holds a place in Russian history that makes whatever happens to the city and the company a matter of political significance.
Stalin’s secret police established a forced-labor colony in the remote region in 1935 to exploit the rich and varied deposits that formed after a mass-extinction event known as the Great Dying some 250 million years ago.
More than 1 million prisoners may have perished in Norilsk and other “islands” in the “Gulag Archipelago,” a tragedy largely unknown to the public until freed dissident Aleksandr Solzhenitsyn published a book by that name in the West in 1973.
Putin has repeatedly said he doesn’t care how Nornickel is divvied up as long as its owners meet their commitments, particularly to a $2 billion project to clean up decades of toxic discharges that have turned the city of 178,000 people 1,800 miles northeast of Moscow into one of the dirtiest places on Earth.
The animosity between Potanin and Deripaska, who went almost 18 months without even meeting to discuss Nornickel, according to court testimony, has spilled into the open in the past, a rarity for two businessmen so close to the president.
Before the 2012 bargain was struck, Potanin mocked Deripaska for not knowing how to lose and Deripaska accused Potanin of being a petty thief.
Complicating matters for the Russian leader, who prides himself on—and demands—loyalty, are the unique and deep ties both billionaires have to late President Boris Yeltsin, who essentially crowned Putin czar when he resigned at the turn of the millennium.
Potanin formed one of capitalist Russia’s first banking empires and was a driving force behind Yeltsin’s infamous loans-for-shares scheme through which he gained a dominant stake in Nornickel for just $171 million in 1995.
A year later, he helped fund Yeltsin’s surprise re-election victory over a resurgent Communist and then befriended Putin as the newly arrived bureaucrat began his rapid climb to the top.
The two Vladimirs still play hockey together.
Deripaska, a former Red Army conscript with a physics degree, built his fortune by scooping up newly issued worker shares in smelters and emerged from the bloody and gangster-ridden aluminum wars of the 1990s victorious.
He cemented his place among the elite by marrying into the Yeltsin family in 2001, a year after Putin became president and granted his predecessor immunity.
Now he heads a state council on trade and often travels with Putin abroad.
The Yeltsin connections are key to the Nornickel truce that Putin helped broker in 2012 and go to the heart of the current wrangling.
As part of that deal, Roman Abramovich, an early Putin backer who reportedly had an apartment inside Yeltsin’s Kremlin, and Valentin Yumashev, Yeltsin’s son-in-law and the father of Deripaska’s estranged wife Polina, became mediators.
Potanin and Deripaska each sold about 2.
5 percent of Nornickel to Abramovich and handed him their voting rights to another 7.
Abramovich agreed to a five-year lock-up period for his own shares, but that ended in December and now he’s looking to cash out, prompting Deripaska to file suit in London to preserve the status quo.
A judge ruled this month that Abramovich can sell about two-thirds of his 6.
4 percent stake to both Nornickel owners on a pro rata basis, provided the transactions are upheld at a hearing in May.
Potanin closed his part of the deal Thursday, lifting his stake to almost 33 percent.
Deripaska’s acquisition, if completed, will keep his stake just below the 30 percent threshold that would trigger a mandatory offer to other shareholders, a move his creditors would vigorously oppose, people familiar with the matter said.
And there’s another provision in the 2012 pact that Deripaska, whose relationship with a self-described sexpert is making international headlines, is seeking to avoid.
If Abramovich’s stake drops below 1 percent then Yumashev, grandfather to Deripaska’s two kids, may become the sole arbiter of the dispute.
A high-end escort who claims to have been Deripaska’s lover published a tell-all book titled, “How to Seduce a Billionaire.
” The woman even posted photos on social media of what appears to be Deripaska and a top Putin aide on a yacht she says she was hired to work on in 2016.
She also claims to have audio recordings of the men that prove Russia meddled in the U.
Given the multiple headaches, it would be in Deripaska’s interest to strike a compromise or risk a revolt by powerful shareholders within his own company, Rusal, including fellow billionaire Viktor Vekselberg, according to Kirill Chuyko, head of research at BCS Global Markets in Moscow.
“Without a new deal, this conflict may lead not only to a change in the shareholder structure of Norilsk, but likely even Rusal itself,” Chuyko said.
And lurking in the background, as always, is Putin, whose involvement doesn’t come cheap.
When the KGB veteran who was seconded to Nornickel during the crisis stepped down, Potanin and Deripaska agreed to pay him the richest golden parachute in Russian history—$100 million, with 10 percent going to a charity for widows and orphans of intelligence officers.
— With assistance by Patricia Suzara.

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