Deripaska, Mitvol Face Off Over Baikal

BloombergA worker piling up timber outside the Baikalsk paper and pulp plant, which is 51 percent owned by Oleg Deripaska.
BAIKALSK, Irkutsk Region -- Yury hoists a net caked with brown sludge from the waters of Lake Baikal and curses the pulp plant he blames for killing the omul fish he relies on to make a living.

"Two or three times a week I come home empty-handed," said the 44-year-old fisherman, who asked that his full name not be used because he fears reprisals from the owners of the factory. "It's wrong to go against nature."

The pulp mill is at the center of a battle between the state and plant owner Oleg Deripaska, the country's richest man. The Natural Resources Ministry has sued Deripaska's company, demanding that the plant be shut down and pay a 4.2 billion ruble ($178 million) fine for polluting Baikal, which contains 20 percent of the world's unfrozen fresh water.

The suit is a test of pledges by President Vladimir Putin and his successor, Dmitry Medvedev, to clean up Soviet-era industry, said Igor Chestin, director of the Russian branch of WWF, previously known as the World Wildlife Fund.

"If they close the plant, it will show that environmental issues are being taken seriously at last," he said. "It is very rare that industry takes responsibility for environmental damage."

The factory, controlled by Deripaska through his Basic Element holding since 2002, produces wood pulp for paper and cellulose for industrial fibers. It pumps water from the lake, mixes it with chemicals during processing, and then filters treated wastewater back into Baikal.

Leonid Sirotkin, head of environmental policy at Deripaska's Continental Management, which owns 51 percent of the pulp mill, said the ministry had no case and was trying to force the company to pay for Soviet-era damage. The federal government owns the rest.

"This is all in the realm of imagination, not facts," Sirotkin said. "Where is the proof that we have harmed the lake, that we have poisoned the fish?"

Government tests carried out last year in water near the pulp mill found that non-sulfate chemicals exceeded permitted levels by 7.6 times, phenol by 5 times and chlorine by 2.2 times, according to the ministry.

Sirotkin said the government standards were too high and that the plant's wastewater was as safe to drink as Moscow tap water. In September, the factory plans to introduce technology that will stop discharges into Baikal.

Dmitry Beliakov / Bloomberg
A staff member showing a sample of treated waste water from a reservoir.

Baikal, a UNESCO World Heritage site, is the world's deepest lake. It covers around 31,600 square kilometers, roughly the size of Belgium, and is home to 57 species of fish, including the omul, a member of the salmon family.

The decision to build the mill on the southern shore of the lake dates back to 1954, when Soviet authorities needed cord for aircraft tires. After the plant was built in the 1960s, the pollution led to public opposition.

Putin, due to become prime minister next month, and Medvedev have promised to reverse decades of Soviet-era pollution. More than 40 percent of people in Russia live in areas with poor environmental conditions, according to the United Nations.

"Protection of the environment should become a systematic and daily responsibility at all levels of government," Putin told the State Council on Jan. 30. Medvedev said the government would impose tough penalties on companies guilty of pollution.

Critics like Chestin at WWF say that so far the government has only relaxed environmental controls to speed economic growth.

Activists have found an ally in Oleg Mitvol, deputy head of the Federal Service for the Inspection of Natural Resources Use, the Natural Resources Ministry's environmental watchdog.

In December, Mitvol filed two lawsuits in Irkutsk regional arbitration court demanding that the plant be closed until it stops polluting Baikal. The action also seeks fines and challenges the unsafe storage of 400,000 tons of chemical waste near the lake.

The ministry said Tuesday that the plant's drainage system was leaking into the lake and that stored waste was seeping into the groundwater. Halting flows of the treated wastewater "won't resolve this problem," the ministry said.

Mitvol expects Putin and Medvedev to honor their pledges. In 2006, Putin ordered that a planned oil pipeline across eastern Siberia be rerouted away from Baikal.

"Putin has already acted once to save Lake Baikal, and it would be logical for him to do the same thing again," said Mitvol. "This is the largest reservoir of fresh water on the planet and our children will regret what we do today."

Earlier this month, then-Irkutsk Governor Alexander Tishanin demanded the relocation of the plant, proposing that it be moved elsewhere in the region at the government's expense. Four days later, on April 15, Putin accepted Tishanin's resignation in connection with the merger of his region with an adjacent one in January.

Other proposals, including selling the mill to Coca-Cola Hellenic Bottling for conversion into a water-bottling plant, have made equally little headway.

Baikalsk, the collection of gray, concrete buildings that grew up around the pulp mill, is home to 17,000 people who live with sulfurous odors from the plant.

Mill director Viktor Voronovich said air pollution was being reduced and that soon "we will become one of Russia's cleanest plants."

Without the plant, which supplies Baikalsk with heat and water, contributes three-quarters of its tax revenue and employs 2,300 people, the town would die, he said.

At the wooden hut where Yury sleeps on a dirty blanket next to empty vodka bottles piled on the floor, the fisherman points to the surrounding trees he says are being yellowed by fumes from the plant, almost 50 kilometers away.

"They shouldn't be doing this to Baikal," he said.