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. Last Updated: 07/27/2016

Nickel Town Unsure of New Governor's Mettle

DUDINKA, Far North — Far above the Arctic Circle in Russia's northernmost region, a group of Moscow entrepreneurs has just staged a takeover. The effort, however, was aimed not at a company, but at the regional government.

The group is led by Alexander Khloponin, a 35-year-old former banker who came here four years ago from Moscow to overhaul a giant metals company called Norilsk Nickel. He was sent by his politically connected boss, Vladimir Potanin, who had snapped up Norilsk, one of Russia's economic crown jewels, when the government was selling off state businesses.

Flushed with success at revamping the company, Khloponin decided to try his hand at government. He was elected governor of the Taimyr Autonomous District, a sparsely populated northern territory rich with natural resources but little else.

As Russia's most powerful businessmen gradually lose their influence over government in Moscow, some have moved into local politics. Khloponin's victory follows a win by Russia's aluminum tycoon, Roman Abramovich, in the region of Chukotka in the country's far northeast corner. And Sergei Sobyanin, widely reported to have close ties to top oil producer LUKoil, was elected governor of another natural resource-rich area, the Tyumen region.

Locals are asking if wealthy corporate leaders will simply start fresh rounds of grabbing state property for further enrichment — a repeat of what happened in Moscow in the early 1990s — or if the businessmen will truly try to jump-start the impoverished economies.

Khloponin, born in Sri Lanka to a diplomatic family, began his career by selling blue jeans, and after meeting Potanin moved on to lead a bank he controlled. In 1996, Khloponin began running Norilsk, which controls vast deposits of copper, nickel and palladium, a precious metal more than twice as valuable as gold.

When Khloponin and his team arrived at Norilsk, years of mismanagement had run the company into the ground. Wages had not been paid in months, taxes were long overdue and workers were striking.

The new managers wrested control of the factory from the Soviet-era director, reduced the company's work force and untangled its finances. Then came the devaluation of the ruble in 1998. Almost overnight, the value of the company's sales abroad quadrupled and labor costs plummeted. Khloponin and his colleagues managed to turn a profit.

Now old equipment is gradually being replaced, and investment is growing. The local hotel is bustling with employees of German and Finnish equipment makers helping with installations.

But managing a company is not the same as managing a region, even one as small as Taimyr, home to only 43,000 people. Apart from the Norilsk factory, Taimyr is typical of Russia's north, where the collapse of Soviet industry has reduced jobs. Ancient tribes of deer herders and fishermen make up about a fifth of the region's population. Forced by the Soviets in the 1930s to abandon their nomadic ways and settle on farms, these people are the region's poorest. Most do not live beyond 48 years.

"It's a disaster," said Olga Busovikova, director of the Red Cross in Dudinka, the region's capital. She said the breakdown of the Soviet collective farming system has plunged many into poverty. Poor conditions and malnutrition have led to population declines in the villages.

The main question is whether Khloponin will be able to leave business behind after he takes office. He has resigned from the company. However, he is unlikely to sever his ties to the big business that helped him get there, and the temptation will be great for him to use it to further his business interests.

Undoubtedly, Norilsk Nickel and its managers stand to benefit from Khloponin's control over the government. For one thing, Khloponin and his team now control the rights to the region's oil, gas and diamond deposits. Also, it could be easier to unload some of the company's staggering social costs like day care and apartments onto the regional government.

"Maybe he's come to put all these minerals in his own pockets — that's not out of the question," said Alexander Klyukin, a State Duma deputy who ran against a Norilsk Nickel-backed candidate in 1999 elections. "But I think he may have come with a bigger goal to create a system that works here."

To jump-start growth, Khloponin intends to lure companies to develop the oil and mineral reserves, something the former governor, Gennady Nedelin, failed to do.

That worked well in Norilsk, where some of the mineral wealth has trickled down to the residents. Plant workers earn about $670 a month, far more than the Russian average of $86. The city, which elected a Norilsk Nickel manager as mayor last month, has been refurbished. Heated indoor bus stops dot the streets, and shiny glass kiosks display bright yellow bananas in the arctic cold.

Middle-class Norilsk contrasts sharply with Dudinka, a short two-hour drive to the northwest. Darker and shabbier, Dudinka lives off the port, the point from which Norilsk's metal is shipped, behind giant ice-breaking vessels.

"We want to have some chances for jobs," said Lyudmila Antonova, 22, an unemployed college graduate, sitting in a dimly lit corridor at a computer center in Dudinka. "Now there are no opportunities."