Russia and Russian Business Gets a Taste of Its Own Expropriation Medicine

Russia, and Oleg Deripaska’s RusAl, is getting a taste of its own medicine of expropriation. The government of the African country of Guinea voided the sale to RusAl of a large alumina smelter there. And Russia is none too happy about it:

“Guinean authorities have made an attempt to expropriate UC RUSAL’s property in court,” the Russian Foreign Ministry said in a strongly worded statement.

The ministry said it hoped Guinea would take responsibility for the “possible consequences of such actions for the general climate of traditionally constructive Russian-Guinean relations, as well as for the social-economic situation in the country.”

Given the cast of characters involved in this on all sides, it’s hard to tell whom to believe. It could well be that Guinea is treating Russians like, well, the Russians are wont to treat folks whose assets they covet. It could be that Deripaska cut a corrupt deal with Guinea’s late ruler. Maybe both. Who knows?

Regardless of culpability, however, the Russian foreign ministry’s umbrage is beyond rich. Hypocrisy is seldom found in such pure, unadulterated form.

In other Deripaska-related news, contrary to some reporting and my conjecture that GM’s extreme reluctance to partner up with Deripaska would scupper the Magna (MGA)-Sberbank/Gaz deal for Opel, the American (taxpayer) auto company has opted to sell to the Canadian-Russian bidder. Apparently German government money was too good to pass up. I’ve also read that details of the deal haven’t been released, but that the sale contract runs 1000+ pages, and took some very hard bargaining to complete. Perhaps GM was able to negotiate enough contractual safeguards to feel immune from Deripaska depredations. We’ll see.

One of the more interesting–and disturbing–things about the deal is the lengths to which Germany and Merkel were willing to go to ensure that a big piece of Opel went to a Russian buyer. According to the WSJ, Merkel deliberately chose Russia over the US:

If completed, it would represent the biggest Russian investment in Western European manufacturing industry to date, adding a significant economic tie with Russia that until now has been largely based on banking and energy transfers.

“It would mark a milestone in Germany’s de facto disengagement from the U.S. and its strategic shift eastwards,” said Douglas Busvine, an analyst at policy research firm Medley Global Advisors.

And Merkel’s “fellow” Europeans are not too happy either:

The deal to sell General Motors’ European business to a Canadian-Russian consortium raised sparks around Europe yesterday.

Belgium accused Berlin of reverting to protectionism, and the deal was criticised by opponents of Angela Merkel, the German chancellor, and by officials in the UK and Spain.

Didier Reynders, Belgium’s finance minister, said he wanted the European Commission to investigate state aid given by Germany to Magna International, the lead investor.

. . . .

Elena Salgado, Spain’s economy minister and deputy prime minister, said any plan for Opel must recognise that its plant in Zaragoza was GM’s most productive in Europe. Magna plans to shift some production to Eisenach, Germany. Talks are due to be held in Berlin next week on how the government aid needed to finance the spin-off will be shared among the countries where Opel and Vauxhall have plants.

There’s also this suggestion that it may not be over after all:

In Germany, Guido Westerwelle, head of the opposition Liberal party, said Ms Merkel’s government had struck a deal designed to help it in the September 27 federal elections.

“If you ask for the small print, nothing has been fixed yet,” he said. “I dread that after the elections there will be hell to pay.”

Maybe. Maybe not. But even if Westerwelle is right, there still remains the question of why Merkel was so intent to save a few thousand jobs and please Putin, even at the cost of alienating a major ally and her alleged European “partners.” If Deripaska and Russia are experiencing bad Karma (cue Warren Zevon) in Guinea, Angela Merkel should worry indeed about a Karmic rebound from snubbing longtime friends and allies to favor the ruthless and trustworthy lot to her east.

Comments

[dparkins3:]

What property has russia expropriated? If paying 7bn for kovykta is expropriation then please let Shell know they have been swindled as they were ecstatic to sell the field to Gazprom. Prior to GM bankruptcy they were engaged in negotions with Gaz(Deripaska) to produce GM cars, so they must not have been worried about any depradations. Do you have anything truthful or insightful to say?

Sep 14 08:52 AM

[dparkins3:]

MOSCOW, Sept 14 (Reuters) -Norway's StatoilHydro STO.OL is looking for new business opportunities in the Russian Arctic and says the investment climate in Russia is "acceptable" for new projects, the company's country head said on Monday.

"We regard the possibilities for doing business in Russia as acceptable from StatoilHydro's point of view," Bengt Lie Hansen, president for StatoilHydro Russia, told the Reuters Russia Investment Summit.

Apparently Statoil is not too concerned about being treated unfairly.

Sep 14 08:55 AM

[Alan von Al...:]

Shell was ecstatic. Good one. Russian humor.

Sep 14 02:09 PM

[Say What?:]

“It would mark a milestone in Germany’s de facto disengagement from the U.S. and its strategic shift eastwards,”

Can you blame Germany after the outrageous way the Bush administration treated it over Iraq, and the less-than-friendly way Obama has to date? The USA will still be one of Germany's most important partners, but it has clearly demonstrated itself not to be a reliable friend.

Sep 14 11:29 PM

[Say What?:]

Craig,

>Angela Merkel should worry indeed about a Karmic rebound from snubbing longtime friends and allies to favor the ruthless and trustworthy lot to her east<

Apparently you weren't paying attention to what happened during the fall of the Berlin wall. It has all been re-released last week courtesy of the British Government in honor of 20 years

Germany's "longtime friends and allies"? Only as long as they get what they want first - a quiet, unassertive and compliant Germany that subsidizes them.

Sep 14 11:37 PM