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. Last Updated: 07/27/2016

INSIDE RUSSIA: Trans-World Can't Defend Metals Empire

A special stockholders meeting will be held Tuesday at the Novolipetsk Metallurgy Combine. The company's major shareholder, the Reform group, which includes Cambridge Capital Management, Crawford Holdings and MFK Renaissance, will be taking a seat on the board of directors.

For two years, Novolipetsk has fortified itself against its legal owners and been masterfully driving them out. Of MFK's 15 percent stake in the company, which was obtained through a loans-for-shares scheme, 5 percent has been turned into nonvoting stocks. Then, when Reform's lawyers showed up at the combine's offices to add its name to the list of candidates for the board of directors, the employees there were quick to tell the lawyers to "Go around the corner and take a right." After doing so and finding nothing, the lawyers returned to discover the office doors sealed tight.

The plant's defenses were devised by Vladimir Lisin, the behind-the-scenes leader of the Trans-World Group and member of the boards of directors at Novolipetsk, Magnitogorsk and many other plants. Uneximbank had been trying for a long time to find a common language with Lisin. But no matter how much money the bank promised this manager, Lisin would not come to an agreement. Trans-World saw his negotiations with Uneximbank as treason and transformed Lisin from a metallurgy empire vizier into a manager of a single plant.

After hearing about negotiations between the besieged fortress and its attacking stockholders, Trans-World Group stopped paying for the metal shipments it had already received. But weakened empires should not declare war on lords who are increasing in strength. The struggling combine borrowed $100 million from Rossiissky Kredit and began exporting metals through another trader, Worslade, instead of Trans-World.

Novolipetsk's example was immediately followed and revolt spread through all of Trans-World's empire. Shipments ceased from the Sayansk and Bratsk aluminum plants, and the Kazakhstan-Sokolovo Sorbaisky mineral enrichment plant, the Pavlodarsk clay plant and the Kazkhrom plant all went on strike.

Trans-World was a great feudal empire. It had its hand in government, its own security forces, a name it used for receiving credits in the West and its own vassal directors. Even the relationship between plants and traders was vassal-like, not market-based. After the dismissal of former presidential bodyguard Alexander Korzhakov, Trans-World's position was weakened and the discord between the metals magnates, the Chorny brothers, was another blow.

The revolts were less severe where Trans-World's holdings were smaller, such as at Lipetsk or Sayany, and more serious at Bratsk, where Trans-World has a 66 percent controlling share of stock. But what is more important is that the company was a nuisance to the government, and grounds for getting rid of it could always be found.

Trans-World resembles a state more than a company. It was held tightly together more by the right of force than by financial mechanisms. But now that the Novolipetsk Metals Combine has gone on strike, Trans-World has decided to take Worslade to court. This probably signals the end of the empire. It certainly won't take its rebellious vassals to court.

Yulia Latynina is a staff writer for Izvestia.