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. Last Updated: 07/27/2016

The State Is Ready to Help Business

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Last week the government finally got involved in the war for the Karabashmed company: Viktor Basargin, deputy presidential envoy for the Urals federal district, proposed that the company be transferred to the state.

Quoting him from "I said that if you want the state to participate directly in this conflict, transfer a part of the shares in Karabashmed that belongs to the Kyshtym factory, either to the subject of federation — that is the Chelyabinsk region — or into federal ownership."

So that's how it's done. And there we were thinking, like idiots, that state involvement in an economic dispute was when the question is resolved in a court, pursuant to the laws of the Russian Federation. But actually it's so much simpler — just like two businessmen arguing over who owns a kiosk: Whoever gave a share to the local racket is in the right.

To recap a little. Two companies were involved in the fight for Karabash: the Urals Mining and Metals company, which belongs to Iskander Makhmudov and Andrei Kozitsyn, and the Kyshtym copper plating plant owned by Alexander Volkhin. Kyshtym is the last copper principality to retain its independence from the Urals Mining and Metals empire, and Karabash is the sole source of crude copper for Kyshtym.

Three years ago the Karabash copper smelting plant was stopped for a reason as rare as a white whale: it was too filthy. The factory spat out annually 100,000 tons of anhydride sulphide, five tons of lead and so on, with the result that the area around Karabash looked like a moonscape and the town's residents were walking corpses.

The controlling stake in the Karabash smelting plant was owned by its general director Mr. Ogurtsov and his managers.

But then, after Kyshtym lost its other sources of raw materials, Karabash was started up again. Since the factory was burdened with colossal debts it would have been stupid to buy it. The plant's assets were moved into the Karabashmed company, while the debts stayed at the old smelting plant.

As for the plant's management, the owners of Kyshtym had promised to pay them about a million dollars for the shares. And they didn't pay. The management waited for the promised money long enough and then sold the shares to the Urals Metals and Mining company, along with documents revealing how the factory had been stripped of assets. The assets had been stripped so crudely that any remotely fair court would return them to the company.

What interests me most here is the thought process of the official who decided that whoever gives the government a share will be the winner in this situation. This idea is very much in the air in today's Russia. When the Urals Metals and Mining company decided to get a piece of the Magnitogorsk metal works last winter, the presidential representative's office came up with the idea of channeling its exports through a state-controlled offshore company.

The splendid plan fell through, perhaps due to the fact that the state, in the person of its finest representatives, had already partly taken control of Magnitogorsk metals. (Rumors keep naming deputy prime minister Viktor Khristenko.)

Basargin's idea is fully in keeping with the spirit of the time and undoubtedly we will hear it again. It only has one failing. If, in similar circumstances, a businessman gives his share to the racket, then at the end of the day the racket always tricks the businessman.

Yulia Latynina is a journalist with ORT.