The Oligarchs' Kondratyev Crisis

Russia's business elite are getting all worked up that the country's largest metals and mining companies might merge, with First Deputy Prime Minister Igor Sechin leading the project. The companies include Vladimir Potanin's Norilsk Nickel, Alisher Usmanov's Metalloinvest, Igor Zyuzin's Mechel and Dmitry Rybolovlev's Uralkali.

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The real motive behind this project is that these metal and mining oligarchs want to create a structure in which they can get their hands on the state's money and privileges to keep their empires alive.

It is noteworthy that Oleg Deripaska is not taking part in this "great unification" project. This is because he has already received a fat sum of the government's bailout money. But Potanin, who suggested the idea for the merger, is in a completely different situation. In the mad scramble for Norilsk Nickel, he has practically lost control of the company.

And why is Usmanov so interested in the idea as well? When there was seemingly unlimited global demand for steel, his company, Metalloinvest, could dictate the price for steel pellets. But now Usmanov has his share of problems after the bottom has fallen out of the steel market.

Uralkali's Rybolovlev has his own unique problems. He owns Florida's most expensive house -- a mansion in Palm Beach that he bought from Donald Trump for $100 million in June. Meanwhile, in the middle of Bereznyaky, near Perm, where Uralkali has its chief operations, there is an enormous crater at the site of a former potash mine, and the whole town is sliding into it. It is the greatest ecological disaster in the former Soviet Union since Chernobyl. I don't know what it would cost to clean up the disaster, but if Rybolovlev sold his Palm Beach pied-a-terre, that would probably be enough to clean up the mess.

Rybolovlev had another problem. The Bereznyaky crater is located along the railroad that leads to VSMPO-Avisma, the world's largest titanium maker, which fell under siloviki control when it was folded into the state conglomerate Russian Technologies. When the surrounding land began sliding into the hole, it became clear that the railroad would have to be moved. The cost was estimated at $10 million to $15 million. Government officials led by Sechin demanded that Rybolovlev pick up part of the bill for this work, but Rybolovlev flatly refused. Then he had to pay for it all.

Despite all of the commotion surrounding the unification of metal and mining companies, it will probably never happen. It is more a way of milking the state cash cow while jockeying for position and influence with the political elite than it is a serious business proposal. You might think that getting into bed with the Kremlin is like playing cards with the devil, but Russia's oligarchs have long ago learned how to beat the devil at his own game.

More important, the troubles that these oligarchs are experiencing demonstrate a classic Kondratyev wave, named after Soviet economist Nikolai Kondratyev's famous theory that capitalist economies have a 50- or 60-year cycle of expansion followed by depression.

You could say that Russia's national metals and mining champions are now experiencing a "Kondratyev crisis." Norilsk Nickel is a classic example of a dying giant. The metals oligarchs are turning to the Kremlin for help because they are sinking fast on the downward slope of Kondratyev's cycle. And yes, the Kremlin might be able to keep them afloat for a time, but it looks like the crash brought on by the Kondratyev crisis will be no less severe than what we witnessed in the meltdown of 1991.

Yulia Latynina hosts a political talk show on Ekho Moskvy radio.