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. Last Updated: 07/27/2016

Shareholder Showdown At Massive Ore Smelter

STARY OSKOL, Central Russia -- It was a bad day for the bankers from the big city.

Shouted down by blue-collar shareholders, shoved around by police and mocked by a tough-talking local boss named Kalashnikov, they were probably lucky to get out of town before sundown.

"Absurd," muttered Dmitry Lubinin, vice president of Moscow's Rossiisky Kredit bank, after what passed for a shareholders' meeting Wednesday at the Lebedinsky GOK iron ore plant's Palace of Culture.

Rossiisky Kredit came to town to press its claim to a piece of the iron-ore processor, and to suggest that all was not right with the way things were being run.

Instead, the bankers ran into a wall of fierce worker loyalty to a beloved Soviet-era boss who, while paying lip-service to capitalism, refuses to yield an ounce of control.

Similar scenes are being played out in company halls across Russia as newly arrived capitalism, often in the form of out-of-town shareholders, clashes with entrenched attitudes of the communist past. "We don't know what will happen if the bankers come," said Vitaly, 42, an engine driver who GOK is one of Russia's largest smelting companies, producing about 18 million tons of iron ore concentrate and 8.5 million tons of pellets from local deposits, according to the firm's press office.

Privatized in 1993, the company was an attractive target when 29 percent of its shares were offered for sale in January 1995. But the managers got nervous when they learned that Rossiisky Kredit and a group of its clients had acquired a 23.6 percent stake.

Acting on a complaint filed by Lebedinsky, an arbitration court in the Belgorod region, the plant's home, ruled last November that the acquisition violated anti-monopoly laws and froze the shares.

With Rossiisky Kredit and its clients unable to vote, an emergency shareholders' meeting approved a big capital increase and set up a closed joint-stock investment company, LebGOKInvest, which holds about 20 percent of the firm.

Rossiisky Kredit contends the move is illegal and effectively reduced the shares of the bank and its clients to less than 6 percent. The company's managers and workers hold most of the rest, with about 10 percent still held by the state. Though the arbitration court finally unfroze Rossiisky Kredit's shares, appeals and countersuits involving the legality of the company's actions remain unsettled.

Despite the stacked odds, Lubinin, another bank official and three other clients tried to have a say Wednesday in a hall crowded with 200 shareholders, mainly company workers and managers.

The out-of-towners did manage to get a proposal on the agenda to remove Kalashnikov as director. Instead, he was re-elected by noisy acclamation.

As Kalashnikov rushed through the agenda, the shareholders summarily approved a new charter and blocked Rossiisky Kredit from holding a seat on a new factory advisory panel.

"I think we are doing everything absolutely right," Kalashnikov proclaimed.

The company's stated financial condition, at least, would tend to support such assertions. The Russian Metallurgy Committee lists Lebedinsky among the most profitable ore smelters in Russia. The company reported a profit of 706 billion rubles ($147 million) last year, mainly from exports.