Norilsk Targeted in Environmental Suit

Norilsk Nickel was named in a 4.35 billion ruble ($178 million) pollution lawsuit filed by the Natural Resources Ministry's environmental watchdog on Wednesday in its largest-ever claim against a metals company.

Norilsk, the subject of rival merger proposals by billionaires Oleg Deripaska and Alisher Usmanov, denied the charges and said it would appeal.

Stemming from the alleged pollution of rivers in Siberia, the environmental watchdog said its deputy head, Oleg Mitvol, had lodged the claim with the Krasnoyarsk regional arbitration court.

Mitvol's previous comments have raised concern about growing state involvement in the country's natural resources sector and his role in enforcing Kremlin policy.

The outspoken official led a 2006 campaign against the Shell-led Sakhalin-2 oil and gas project. Pressure subsided after Shell and its Japanese partners agreed to sell control to Gazprom for $7.45 billion.

"I hope the court will make a balanced decision based on detailed studies of the material with which they are presented and oblige companies to uphold environmental law and stop the discharge of untreated waste into rivers," Mitvol said in a statement.

Mitvol said the government wanted to raise fines for environmental violations to international levels.

"We are continuing to take samples and the sum of the fine will be recalculated," he said by telephone.

Norilsk, 320 kilometers inside the Arctic Circle, is ranked among the world's 10 most polluted places by the New York-based Blacksmith Institute.

Norilsk Nickel has pledged a large portion of its $1 billion annual investment to 2011 will be invested in reducing sulfur dioxide emissions and other improvements.

The company disputed the agency's findings. "We are going to appeal," a company spokeswoman said.

Norilsk is currently the subject of two possible merger proposals as its two billionaire owners, Mikhail Prokhorov and Vladimir Potanin, split their assets in a public divorce.

United Company RusAl, majority-owned by Oleg Deripaska, has agreed to buy Prokhorov's stake. Norilsk is also studying a proposal to merge with the assets of iron and steel baron Usmanov.

Analysts said the case was probably not connected with these events, and that Norilsk would be able to pay any fine should the court uphold the charges.

"The total effect will be immaterial compared with Norilsk's current market capitalization of more than $50 billion," said Dmitry Smolin, mining analyst at UralSib.

Mitvol said the fine applied to tests carried out up to December 2007 at Norilsk's Taimyr division, where most of its production takes place.

He said the Baikal Pulp and Paper Mill had paid a fine of a similar size.

The watchdog also filed a 141 million-ruble ($5.8 million) river pollution claim against the Eurasian Energy Company, a subsidiary of steelmaker Evraz Group. Evraz declined to comment.

Norilsk's shares on the MICEX exchange fell 1.15 percent Wednesday to close at 7,197.72 rubles.