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. Last Updated: 07/27/2016

Tax Police Probe Major Metals Firms

The metals industry Thursday became the latest target in the government's cash hunt as the federal tax police opened criminal cases against three metal plants, accusing them of large-scale tax evasion.

Norilsk Nickel, Magnitogorsk Metallurgical Plant and Kachkanar Vanadium Mining Complex, Russia's only vanadium producer, are under investigation.

Oleg Stepanov, a top tax police official, announced the probes at a news conference, Prime-Tass reported. He refused to provide any further details.

The new investigations come just as the government has been demanding higher tax payments from oil companies.

President Vladimir Putin's economic adviser Andrei Illarionov said Wednesday that an investigation had shown that the oil industry had shortchanged the taxman by about $7.5 billion annually, Prime-Tass reported.

The management of Magnitogorsk Metallurgical Plant fired back at the tax police Thursday, saying no notification of a criminal case against the plant had been received, Interfax reported.

The draft 2001 federal budget has no provision for debt repayments that threaten to make a $6 billion hole in it. In 2001, Moscow is due to pay $3 billion to the Paris Club, $1.8 billion to the International Monetary Fund and $1.2 billion to the World Bank.

James Fenkner of the Troika Dialog brokerage, said the state aims to avoid spending the budget surplus on servicing foreign debt and instead wants to redirect the funds to internal needs.

"The question is how to get the money. And the tax police are knocking on the doors of people who have money," he said.

Extra budget revenues totaled 300 billion rubles ($10.8 billion) this year, a result of industrial growth of about 10 percent and skyrocketing revenues for oil and gas exports.

Damir Gareyev, a Kachkanar board member, said Thursday he didn't know of the investigation and could not say whether it was related to the activities of the plant's current management or the previous one that was overthrown in January.

Located in the ore-rich Sverdlovsk region in the Ural Mountains, the Kachkanar plant produces iron and vanadium worth $300 million a year. For the past 10 months, the plant has been entangled in a series of managers' disputes over the rights to run the business.

Gareyev had until recently sided with Kachkanar's former director, Dzholol Khaidarov.

A group headed by Andrei Kozitsyn, Kachkanar's current general director, dethroned Khaidarov in January. Gareyev said that the management wars were over at Kachkanar plant. He also said he had joined Kozitsyn's team.

Kachkanar plant is run by an external manager and is due to undergo bankruptcy procedures. Gareyev did not specify the size of the plant's debt, but said that bankruptcy was a step in the right direction that should allow the enterprise to return to profitability.

A Norilsk Nickel spokesman said the company had no knowledge of the probe and was unable to comment.