The results produced by the meeting of the Supervisory Board of ALROSA held on March 16, which formulated the proposal to privatize the company to be submitted to the Russian Government, have encouraged analysts in investment companies and banks: their consensus forecast set the fair price for the diamond miner’s shares at 45 rubles (whereas currently they are traded at 31.85 rubles) with a recommendation to “buy.”
Such predictions, based on a positive trend in financial results posted by the company, as well as the assumption of an impending shortage of rough diamonds in the world market, look quite convincing. But none of them takes into account one factor which is specific to Russia: regardless of how the company's balance sheet looks like, the authorities can "send to it a doctor," after which stock quotes start doing entrechat, paranormal in terms of technical analysis. Meanwhile, the flow of "diamond" appeals to the main Russian sanitizing authority is increasing not only on the pages of "compromising" websites. As far as the author is aware, the usual in such cases channels are employed to send much more carefully reasoned requests of sanitary nature that can really have serious "medical" (in the political sense of this word) repercussions for a number of persons involved.
The make-up of this exciting thrust and parry is no secret. On the one hand, there is a group of former and current top-managers of ALROSA, conventionally referred to as the "republic” team based in the Republic of Sakha (Yakutia), while on the other hand there are representatives of the so-called "federal” team, also called the "Kudrin" team. No matter how bitterly they tussled over their interests, yet it must be admitted that the company’s development was altogether successful. One undeniable achievement of the “republic” group is that the company preserved its integrity and was successful in fending off numerous attempts to divide it into a "mining" unit and a "selling" unit, as well as that the company was able to make a breakthrough to Angola. The rescue of ALROSA during the recession in 2008-2009 and establishment of a modern distribution system, as well as the company’s record profits in 2011 is an equally indisputable achievement accomplished by the "Kudrin" team. As for the recriminations, resentments, accusations of inefficient, faulty and even criminal actions, it may be said that this kind of stuff has been accumulated over the years in an amount which may well exceed the disk space available on the “compromising” computer resources. Whatever it was, ALROSA reached its new stage of existence shaped as a sufficiently effective open joint stock corporation having really bright prospects in the market.
As in business, in politics it is not an uncommon situation when in case of a collision of interests between two players comparable in scale, the game is won by a third party successfully wedged in the process, especially at a time of conflict aggravation. Full-dress attempts of a "third force" to "enter" ALROSA has already been made (it’s enough to remember the story of Herman Kuznetsov), but were eliminated by joint efforts. Today, judging by the aggravation of mutual claims, it is out of the question to speak even about a short-term, tactical solidarity. Meanwhile, the proposal of the Supervisory Board concerning the equity privatization formula (7% + 7% from the stakes owned by the Republic of Sakha (Yakutia) and by the Russian Federation respectively) appears to be just wishful thinking. It is known that the attitude of people willing to take key positions in the new government to address this problem differs from the above proposal in a most fundamental way. The likely beneficiary, enjoying excellent relations with influential advocates of a total privatization of state-owned companies, is beginning to emerge quite clearly. And it must be admitted that under the current circumstances the odds of this beneficiary are very high. And they are increasing with each attempt undertaken by the traditional players to kindly send the "doctor" to each other. In this environment, the forecast made by Bloomberg about the return of Alexei Kudrin to the government as prime minister in 2013 is only able to speed things up.
Privatization a la russe, as well as nationalization a la russe is often so intricate that it is not possible to find any world analogues. From the loans-for-shares auctions to the "YUKOS affair" - this palette of options is able to satisfy the most demanding taste. It is premature to talk about nuances right now, but it is not difficult to assume that if the company falls into the hands of a competent ‘trimmer,’ it would be quite a logical strategy to divide it into profit making assets and everything else. And there is some reason to believe that the forthcoming beneficiary has already worked on this task in his characteristic manner – just remember how much talk there was about the benefits of switching over to a unified share, especially before privatization? Well, and ...?
And to help this beneficiary there is the “republic” team dismissed from ALROSA’s control levers, which seems willing to swear allegiance to anyone who will give them hope to regain the lost positions. And it's already a dangerous imbalance that can turn the idea of a national diamond industry giant into a trivial loans-for-shares auction.
As for the tough position of the acting president of Yakutia and the requirements of Yakutia’s legislation to preserve the blocking stake of the Republic of Sakha in ALROSA, it should be said that his predecessors took a no less stringent attitude. Until a certain time. And it is hardly necessary to overestimate the national factor – the light veil of democratic scenery just serves to underscore the age-old Russian principle, brilliantly articulated a good while ago by Kozma Prutkov and equally applicable to all our political and business realities: "How much contemptible are all the constitutions at the sight of faultless ammunition!"
Sergei Goryainov, Rough&Polished
