Covert State Struggle Blamed For Possible $6.5 Million Loss

A new Russian financial-industrial group complained Monday that a covert struggle within the government over privatized property could end with the transfer of its $6.5 million stake in a fertilizer plant to a competitor.

Nikolai Kostin, director general of Interkhimprom, told a press conference Monday that a recent letter and draft decree from the head of the Federation Council, Yegor Stroyev, to President Boris Yeltsin urged the transfer the group's Kirovo-Cherepovets chemical combine to rival AO Akron.

"It's hard to explain for us why a company that voted to be part of our group, and in which we are the biggest shareholder after the state, should be imperatively transferred into ownership of a competitor, for free," he said.

If signed, the decree would order the government to "transfer the state's 38 percent stake in the company within 10 days into the property of AO Akron." The 38 percent voting stake equals a 51 percent controlling share for the state.

"It's not that this move just subverts the principles of market economy, but the budget will not get a ruble from this deal," Kostin said.

Interkhimprom, a group that unites ammonium producers, banks, rail companies and seaports, paid $6.5 million at an investment auction to acquire 29.5 percent of voting shares in the ammonium plant last year, giving the group a seat on the board of directors and the right to block decisions, Kostin said.

The case is reminiscent of the recent and widely publicized conflict between Russian oil majors Sidanko and Rosneft over Purneftegaz's oil-producing unit.

Sidanko lost two attempts to regain Purneftegaz from Rosneft after claiming that the State Property Committee, or GKI, had illegally stripped the company of its production unit. A 1994 decree awarded it to Sidanko, but a 1995 ruling shifted ownership to Rosneft.

Moscow arbitration court last month ordered Purneftegaz back to Sidanko, but the GKI has filed a counter suit.