Billionaire Mikhail Prokhorov

Billionaire Mikhail Prokhorov is close to getting into the presidential race after announcing that his campaign has gathered the necessary 2 million signatures to register with the Central Election Commission. Yet in spite of getting more campaign donations than Putin, his political prospects remain unclear.
The lanky businessman towered over supporters and journalists who crowded into his reception office Friday hoping for a chance to talk, but some people came away hoping for more certainty – did the oligarch even stand a chance against the far more popular Prime Minister Vladimir Putin, who has effectively been running the country since 2000?
“Prokhorov doesn’t have enough faith in himself,” Adam Kungayev, a pensioner who had signed up to support of Prokhorov’s campaign, told The Moscow News. “If he did, he could win the presidential race.”
Just 3 percent of respondents said they would vote for Prokhorov in a presidential election according to the latest Levada poll released Jan. 12, where Putin led with 42 percent.
But Prokhorov – who has a predominantly business-oriented middle-class support base and has even called for a longer working week in the past – can boast one area where he’s well ahead of Putin: Campaign donations.
In that arena, the billionaire beats the Prime Minister four to one – with over 400 million rubles ($13.3 million) collected against Putin’s 102.5 million ($3.4 million), Vedomosti reported Friday. If Prokhorov were campaigning in the U.S., that would give him a key edge. But in Russia, where state-owned television has been accused of leaning toward coverage of Putin and his United Russia party, that’s just not the case.
Prokhorov’s campaign managers dismissed the achievement. “That’s an exceedingly small sum for a campaign,” Anton Krasovsky, the TV anchor who heads Prokhorov’s campaign staff, said during Friday’s meeting.
Prokhorov was ousted as leader of the pro-business Right Cause party by pro-Kremlin forces in September, after just three months in the job, and is now determined to forge a successful party for Russia’s burgeoning middle class. Prokhorov, who accused other opposition leaders of being longtime “Kremlin agents” in a Monday article for RBC Daily, pledged to create an independent party when announcing his presidential bid on Dec. 12.
He may have some help from longtime Putin ally and former Finance Minister Alexei Kudrin, who posted on his Twitter page Friday that he was holding “consultations on joining democratic and liberal forces and creating a new party.”
Prokhorov’s staff confirmed that talks with Kudrin were taking place.“Especially since the raid on Right Cause, it is crucial to create a party that’s not run from Staraya Ploshchad,” Krasovsky said, referring to the address of the presidential administration and underlining the need for full independence
But so far Prokhorov, who is widely seen as having the Kremlin’s blessing to run, has avoided open criticism of his opponent, Vladimir Putin.
“I think the slogan ‘Fire Putin’ is too radical,” Prokhorov told Radio Liberty on Friday.
Last week, Prokhorov called for evolution rather revolution in a column in The Guardian. Commenting that the age of managed democracy was “over,” he vowed to make free elections a priority.
To accusers who claim that his campaign is a Kremlin project, Prokhorov cheekily replied that that the Kremlin is his project instead. “I believe I have two opponents, Putin and [Communist Party head Gennady] Zyuganov. I will fight for second place – and for a second round of elections,” he was quoted by Radio Liberty as saying Friday.
Asked about the negotiations with Kudrin, and Kudrin’s de facto status as a mediator between the government and the opposition, Krasovsky, Prokhorov’s campaign manager, suggested that Kudrin’s connections could only be an asset.
“Why should [Kudrin’s closeness to Putin] be a bad thing? I’m for continuity,” Krasovsky said.

Red Hot Chili Peppers booked for Abramovich NY party

Billionaire Roman Abramovich is spending more than 5 million pounds to provide entertainment for some 300 guests at his exclusive New Year’s Eve party on a Caribbean Island. Red Hot Chili Peppers are reportedly headlining the evening’s entertainment bill. The newspaper reported that the event is to be held in an estate previously owned by the Rockerfeller family. The dress code for the party, which is to run from 10 pm to 4 am, is describes as “island chic.

Prokhorov: 'I'm no Khodorkovsky'

ussian billionaire and head of the Pravoye Delo political party Mikhail Prokhorov does not fear succumbing to the same fate as Mikhail Khodorkovsky, gazeta.ru quoted Pokhorov as saying in an interview with the online publication.

“I publically quit business and headed a political party. I did this according to Russian law,” the head of Pravoye Delo said. “I have not done anything that is forbidden.”

And if former Yukos CEO, jailed since 2005 for economic crimes, had done the same, “the outcome would have been different.”

Khodorkovsky says the charges against him were politically motivated and revenge for his backing of Russia's opposition under then-president Vladimir Putin. These allegations have always been denied by Russian officials.

Prokhorov, however, criticized the decision to try Khodorkovsky and Lebedev a second time, saying that there had been "procedural violations" and "doubts" about its fairness and supported the businessmen’s so-far-unsuccessful appeals for early release.

Prokhorov angry about billboards

The dirty tricks of regional authorities have made Mikhail Prokhorov, Russian oligarch the newly promoted leader of fringe party Pravoye Delo, frown.

“It’s dementia and weakness!” he told journalists at a press-conference, Kommersant reported. “We’ll explain the laws to those governors who don’t know them.”

Over 400 Pravoye Delo adverts have been taken down in 13 Russian regions, according to the party, and it plans to set up a special website detailing every electoral violation against it.

The businessman plans to start his pre-election tour around the country in September.

Ukrainian Oligarch Takes To The Sky

KIEV, Ukraine -- Igor Kolomoisky, a multi-billionaire with roots in Ukraine’s lucrative industry and energy sectors, took a major step towards forming a new European airline on Friday.

Shareholders of Climber Sterling, the financially troubled Danish airline, approved a share issue that will bring Kolomoisky in as a strategic investor with a majority stake.

Kolomoisky is believed to have paid just over $30 million for majority control over the debt-laden airline.

In a statement to shareholders, Climber’s management said that Kolomoisky’s arrival as a shareholder through Mansvell Enterprises, his Cyprus-registered investment vehicle, was more than a step towards keeping the Danish airline up in the air.

The management at Climber Sterling wrote in a letter to shareholders ahead of the vote approving the decision that Kolomoisky plans “to use Climber Sterling as a platform for establishing a larger Nordic airline in collaboration with the two Swedish-based airlines, Skyways and City Airline, already taken over by Mansvell.”

Control over the three regional European airlines, which operate dozens of Embraer, Fokker and MD brand aircrafts, could be just the tip of the iceberg when it comes to Kolomoisky’s plans.

According to Climber, Kolomoisky also owns leading airlines whose routes stretch from Ukraine to other former Soviet countries, Europe and the Middle East.

“Igor Kolomoisky, who also holds interests in Ukrainian aviation through interests in companies such as Aerosvit and Dniproavia, … is also the principal shareholder of a number of Portuguese-based leasing companies,” Climber said its letter.

Aerosvit currently operates a fleet of 16 short-range Boeing 737 and seven longer-range Boeing 767 passenger aircraft.

Along with its smaller Ukrainian airline partners, including Dniproavia, the group also carries passengers on Airbus 320-class aircraft, Embraer 321, 145 and 195s, as well as Ukrainian An-148 planes.

But there could be yet more to this up-and-coming airline tycoon.

Earlier this month, a Latvian publication called NRA, reported that Kolomoisky could, after closing the Climber acquisition, be eyeing air Baltica.

Kolomoisky was not immediately available to comment on his plans. Calls to his mobile went unanswered.

And so, the question in the minds of many airline top managers is: could this Ukrainian known for having deep pockets have plans to consolidate all these regional carriers into one of Europe’s next big low-cost airline?

Mikhail Khodorkovsky 'sent to secret prison'

Former Russian oil tycoon and outspoken Kremlin critic Mikhail Khodorkovsky has been transferred to a secret prison, his lawyers have said.

They said they were informed on Friday that he had been moved from Moscow to an undisclosed location.

Lawyer Vadim Klyuvgant said he believed the transfer was intended to artificially delay his client's parole hearing.

His first bid for parole in 2008 was unsuccessful.

Mr Klyuvgant said it would be easier for authorities to reject Khodorkovsky's request for early release if the review was held far from Moscow, and from journalists who could scrutinise the procedure.


"It is clear that they are trying to prevent hearing the petition for parole in Moscow since there are no legitimate grounds for a denial," Mr Klyuvgant said in a statement, according to Reuters.

Khodorkovsky's business partner and associate Platon Lebedev, who was initially sent to a prison colony above the Arctic Circle, has also reportedly been transferred from the Russian capital.

In February 2009, ahead of his second trial, Khodorkovsky was transferred to Moscow from an eastern Siberian prison camp, near the border with China, where he was serving his first sentence.

Khodorkovsky's relatives - who have reportedly been prevented from meeting him ahead of the transfer - will be informed of his new location within 10 days, a source told Itar-tass state news agency.

Khodorkovsky has been convicted in two separate trials since his 2003 arrest, and can apply for parole having served more than half of his 13-year sentence.

In May, a Moscow appeals court upheld his fraud conviction, but cut his sentence by a year.

The former head of the former oil giant Yukos and once Russia's richest man, Khordorkovsky is currently due for release in 2016.

He was once seen as a potential challenger to Vladimir Putin, Russia's president at the time of his arrest, and now the country's prime minister.

The European Court of Human Rights ruled last week that Russia violated Khodorkovsky's rights during his 2003 arrest and imprisonment on charges of fraud and tax evasion.

It ordered Moscow to pay him 24,500 euros ($35,300) but failed to find firm proof that the case against him was politically motivated.

Embattled Tycoon to Invest $800M in Sochi

Telman Ismailov the tycoon who fell from favor after building a $1.5 billion hotel in Turkey, will invest $800 million into two Sochi hotels,Olimstro said Thursday.

The price tag is double what Ismailov had been expected to invest in the construction of hotels in the host city of the 2014 Winter Games, and analysts called the deal loss-making.

But what Ismailov might lose on the properties, he apparently hopes to make up with the Russian authorities, who closed his Cherkizovsky Market in Moscow last June after Prime Minister Vladimir Putin complained of smuggling.

Observers have linked the crackdown on Cherkizovsky, Europe's biggest market, to government anger that Ismailov had built the luxury hotel in Turkey instead of investing the money at home.

Olimpstroi, the state corporation overseeing construction for the Sochi games, said Thursday that Ismailov's AST Group had signed an agreement to develop 4,000 rooms and that the two sides were negotiating the hotels' design and concept.

AST will construct a 150-room, five-star hotel on the Black Sea shore in a new project that will be added to the Olympic program, Olimpstroi said.

The remaining 3,850 will be of three- and four-star quality and be part of the 5,500-room Sodruzhestvo hotel complex, which is currently listed in the official program without an investor, Olimpstroi said.

Sodruzhestvo, which will cover 24.9 hectares, will be the closest hotel to the main Olympic venues and will be located about 700 meters from the beach, according to Olimpstroi's map.

The sum of $800 million is a standard price for developing 4,000 four-star rooms, but the investment is dubious, analysts said.

"Even with beach access, such a hotel would take 10 years to break even," said Konstantin Romanov, a partner with Knight Frank.

Building a similar hotel in Turkey would make more sense because labor would be cheaper and the tourist season lasts 4 1/2 months, six weeks longer than in Sochi, he said.

The proposed site for the hotel in the Imeretinskaya lowland area could add to construction costs because of its difficult geology, but a large project like Sodruzhestvo has some room for cost-cutting, said Olga Shirokova, director of the consulting department at Blackwood.

“The Olympics are not enough to make this project profitable," she said, adding that it might make sense to build it in such a way to convert it to housing.

Four thousand hotel rooms can be converted into about 1,000 apartments, she said. Demand for such housing will depend on the cost, but "converting four-star hotel rooms into affordable housing is not optimal," she said.
Apartments in the Sochi area can fetch up to 80,000 rubles ($2,600) per square meter, but there is little demand, Romanov said.
"Local demand is practically zero, and demand for vacation homes among residents of other regions is very low," he said.

A secretary in Ismailov's office said nobody was available to comment Thursday.

But Ismailov might have more on his mind than the economics of the Sochi hotels. The businessman drew gasps and frowns last May when he opened Mardan Palace, a five-star wonder on the Antalian coast that is the most expensive hotel in Europe. The 560-room hotel is named after Ismailov's father and filled with extravagancies like gondola rides in a pool full of sparkling water.

Ismailov's fall from grace was swift after he gave such a blatant display of wealth during the economic crisis. Putin complained in early June that the seizure of $2 billion in contraband goods sold at Cherkizovsky Market had not resulted in convictions and, taking the hint, the authorities closed the market at the end of the month.

After Ismailov made Turkey his temporary home, Putin said in December that investors like Ismailov should focus on Russia, "for example in building hotels in Sochi."

Now, barely six month later, Ismailov's fortunes appear to be improving again. RBC Daily reported last week that Ismailov had purchased 36 hectares southwest of Moscow, not far from the Mega-Tyoply Stan shopping center, and was likely to recreate Cherkizovsky Market there.

The International Olympic Committee needs 24,400 hotel rooms ranging from three to five stars for tourists, officials, journalists, athletes and other Olympic guests. In addition, 38,000 rooms are needed for tourists, Olimpstroi said.

Binding investment agreements have been signed for three hotels in Imeretinskaya, including Sodruzhestvo, according to a program that Olimpstroi provided to The Moscow Times. Investors also have been found to build eight hotels with a total of 5,400 rooms in the area, although no deals have been signed yet. No investors have been found for two four-star hotels with 1,120 rooms.

London calling as Chichvarkin speaks out

Exiled telecoms tycoon Yevgeny Chichvarkin ramped up the intrigue this week as he claimed that his former business partner, Boris Levin, could be the next to die in jail from inadequate medical attention.

In an Alexei Dymovsky-style video appeal posted on his blog on the Snob website, Chichvarkin piled the pressure on President Dmitry Medvedev, urging him to intervene in Levin's case.

Chichvarkin also accused a raft of officials of harassing his company and plotting a hostile takeover of Yevroset, the mobile firm he founded. Although the fate of Dymovsky's YouTube appeal does not bode well for Chichvarkin, he may have timed it to perfection.

A suited Chichvarkin appeared stern in the video against the sombre backdrop of London's Houses of Parliament and the River Thames.

Chichvarkin, who fled to the British capital in late 2008, urged Medvedev to look into his case, reiterating claims that Yevroset, along with six other companies, had been targeted in corporate raids by a gang of 11 officials operating out of the Interior Ministry's Department K.

After accusing generals Konstantin Machabel and Boris Miroshnikov of leading the "gang", Chichvarkin accused members of the department of stealing confiscated state property amounting to billions of dollars, as well as inducing the deaths of people close to him.

Chichvarkin is wanted in Russia over the 2003 abduction of Andrei Vlaskin, Yevroset's freight transport agent, and violently extorting money from him after he had stolen handsets from the company. Moscow filed an extradition request for Chichvarkin last June, but British prosecutors have delayed a decision until August.

Levin, Yevroset's vice president, is currently being detained for the abduction of Vlaskin, but both Chichvarkin and Levin deny the allegations and say the case against them is "fabricated".
Chichvarkin claims that Levin, who has contracted hepatitis while in pre-trial detention, is being denied necessary medical attention, effectively holding him "hostage".

Chichvarkin claimed that Levin would suffer the same fate as Hermitage lawyer Sergei Magnitsky, who died in jail last November, unless he is administered the right treatment. Prison deaths leapt back into the public eye last week when businesswoman Vera Trifonova died because her kidney condition and general poor health were allegedly deliberately ignored to coerce her into false testimony.

The appeal does seem to have got the ball rolling, if only with Levin's case. The Prosecutor General's Office confirmed it was investigating media statements "about the poor health of ...Levin," RIA Novosti reported.

Marat Faizullin, Levin's lawyer, confirmed to Kommersant that his client needed medical attention.

But Yuri Gervis, Chichvarkin's laywer, said he still doubts that any progress will be made. "It's a question of what's going to be checked out and what conclusions they arrive at. That is to say it's a question of whether they do an all-encompassing investigation, or whether it's just a formal one."

According to Chichvarkin, his case is at the nexus of a host of prominent scandals. Writing in Novaya Gazeta in March, Chichvarkin claimed that the reason that police superintendent Denis Yevsyukov went on his shooting rampage in a Moscow supermarket last year was connected to his own case.

Just before his drunken killing spree, Yevsyukov, so goes the version, received a phone call informing him he was being investigated for corruption against Chichvarkin.
Apparently this was the last straw.

Chichvarkin made no mention of this in this week's video, noted Alexei Mukhin, head of the Centre for Political Information, but agreed it was timed to follow the death of Trifonova. "After the death of Magnitsky and Trifonova, a third death would be a fateful blow to the president's credentials as a liberal," said Mukhin.

Recently two exiled businessmen, Mikhail Gutseriyev and Telman Ismailov, have returned to Russia, but both on Putin's orders.

Rehabilitating Chichvarkin would help Medvedev to salvage his liberal reputation, which has been undermined by the Mikhail Khodorkovsky case. But doing so is far from easy because Chichvarkin has become even more "persona non grata" after he named the various officials implicated in hostile takeovers, meaning that Medvedev would have to personally take him under his wing, said Mukhin.

"The moment of truth has arrived for Medvedev. If he really does want to [stand] in 2012, then he has to take up Chichvarkin's offer. This will be a very elucidating step for the whole country: it will reveal Medvedev's political orientation."

Putin’s electric shock for oligarchs

Not since he threw a pen at Oleg Deripaska has Vladimir Putin so publicly berated the country's richest billionaires.

The prime minister, who last year scolded the Rusal CEO over wage arrears and the year before promised to send a doctor to sort out another metals baron, Igor Zyuzin, on Wednesday named and shamed four of the country's top investors - Vladimir Potanin, Mikhail Prokhorov, Viktor Vekselberg and Leonid Lebedev - for "eating" government funds and not investing in the country's electricity sector.

"Economically, he's doing well," he said of Prokhorov, who topped the Forbes Russia rich list in 2009. "As they say, he cashed out. So now he is visiting different offices, he dropped by to see me the other day. I have very good relations with him. He is looking where to invest his funds. But he must fulfil his [power investment] obligations."
Putin was speaking at an electricity industry meeting after re-launching one of 10 hydro-electric units at the giant Sayano-Shushenskaya hydroelectric plant in Khakasia, Siberia, where an accident last August killed 75 workers and crippled electricity supplies in the region. The plant is scheduled to resume full operations only by 2014.
Putin threatened heavy fines and even prosecution for those oligarchs who failed to invest.
Analysts said there was an unwritten agreement by which businessmen would spend billions of dollars to buy up the constituent parts of Unified Energy System, the state's electricity monopoly, in exchange for market liberalisation and a framework for a viable capacity market.
The government, Putin said, had held up its end of the bargain by passing a decree on Wednesday stipulating the rules for the long-term capacity market. Businessmen who didn't honour their commitments should feel free to "go back to the old system of tariff regulation", Putin said.
"This was the exact opposite of the Mechel situation," said Derek Weaving, an electricity analyst at Renaissance Capital, referring to Putin's 2008 attack against Mechel, a leading metals and coal firm, which caused its stock to plunge 38 per cent in a day. "If Putin's remarks are to have any effect, it will be to push share prices higher. ... That [he] has so publicly and directly addressed [corporate governance] will ease these concerns."

Flanked by Igor Sechin, the influential deputy prime minister who oversees the energy sector, Putin first praised the 6.4 billion-rouble ($210 million) repair job carried out at the Sayano-Shushenskaya plant.
As for energy investment programmes in general, "this is not as positive as we wished it would be," Putin warned. "And I must tell you, ladies and gentlemen, some not very pleasant things."
Praising state and foreign companies, Putin proceeded to read off the names of domestic investors that had "not done what they promised to do, after getting state money."
Among the dozen companies Putin named were OGK-3, controlled by Vladimir Potanin's Norilsk Nickel, and TGK-4, controlled by Mikhail Prokhorov's Onexim.
After criticising Prokhorov, Putin turned to Potanin, Prokhorov's former long-time business partner.
"He took giant assets for free," Putin said of Potanin. "But nothing has been done as far as his investment programme is concerned. He bought [OGK-3] for 81.7 billion roubles. And he got 81.7 billion in state [handouts]. Essentially, he got a huge asset for free. Alright, so he got a huge asset for free. But there are obligations regarding investment problems. And nothing is being done."
In all, Putin said, 66 billion roubles ($2.2 billion) out of the 450 billion roubles raised by the electricity selloff had been used for "speculation".
Electricity stocks declined slightly soon after Putin's statements, with shares of Potanin-controlled OGK-3 slipping 1.3 per cent. Most power stocks closed on Wednesday broadly flat or slightly higher after a correction.

Even if it was harsh, electricity experts generally welcomed the speech as spurring investment in desperately-needed new generation capacity.The government's proposals on the long-term capacity market, spelling out how much generation companies will be paid for new capacity, give incentives to invest, said Weaving, of Renaissance, which is 49 per cent owned by Prokhorov.
"We've been waiting for a long time for this document, and its purpose is to give long-term security to investors that they will get paid at least a certain price for their capacity," Weaving said in an e-mail, adding that Putin's comments would help to funnel more private capital into the energy sector and clean up the rules of the game. "The message to the oligarchs is that, whatever else may be tolerated in Russia's immature business environment, the Putin government is determined that power sector reform will be played out according to the rules," Weaving said.
It was unlikely that power assets would be taken away from private investors, Weaving said. The only way that would happen is if proprietors "prove to be utterly inept in managing them," he said.
"The government has shown... it can use both the stick and the carrot to motivate investors," said Igor Goncharov, electricity analyst at UBS. No "significant direct monetary penalties or re-privatization" are likely, Goncharov said, adding that instead, the "non-behaving investors we be punished by getting less carrot."
VTB called the approval of the long-term capacity market "a positive move and an important milestone for [generating companies] as it might improve profitability."
Some experts said the government was partly to blame for the lack of investment, as it had dragged its feet on capacity market rules.
"Generators postponed investments because the government delayed adoption of the long-term capacity market rules," said Dmitry Bulgakov, an electricity analyst at Deutsche Bank in Moscow. "Gencos need visibility when they invest billions of dollars into new equipment."
Private investors would probably need to see more details of Putin's plan before making new commitments, Bulgakov added.

Abramovich Stocks Up on Art for Luxury Yacht

Russian billionaire Roman Abramovich bought 35 contemporary artworks for his luxury yacht, Eclipse, an art dealer revealed.
The purchases came through Terence Disdale, who designs the interiors of Abramovich’s yachts, according to Joseph Clarke, director of Millennium, which has its gallery in southwest England.
Abramovich, owner of the Chelsea soccer club, doesn’t talk about his art purchases. His collecting, with his partner Dasha Zhukova, has boosted prices at some sales — and renewed buying could help market confidence, dealers said.
“Among the major collectors, he’s on the quieter side,” London-based art and design dealer Kenny Schachter said. “Any time a collector with that magnitude of resources enters the market, it’s good news for everyone.”
The Millennium transactions are so far worth 200,000 pounds ($326,000), bought over six months, Clarke said. Terence Disdale Design Ltd. does not comment on specific artworks bought for projects, said Fiona Diamond, the company’s public-relations spokeswoman. When contacted by Bloomberg News, John Mann, head of public relations at Millhouse LLC, who responds to press enquiries on behalf of Abramovich, declined to comment.
Abramovich, whose wealth was valued at 7 billion pounds by the Sunday Times’ Rich List 2009, owns three other superyachts. The 116-meter “Pelorus,” the previous pride of his fleet, is listed among commissions on Disdale Design’s web site.
Abramovich was the buyer of Francis Bacon’s 1976 “Triptych” for $86.3 million and Lucian Freud’s 1995 “Benefits Supervisor Sleeping” for $33.6 million at auctions in New York in May 2008, dealers said. The prices set records for a postwar work of art and a work by a living artist, respectively.
Abramovich’s 13,000-metric ton yacht Eclipse is about 560 feet long and is the world’s biggest private yacht. It was built by Blohm + Voss of Hamburg, launched on June 12, 2009, and is due to be delivered this year. The yacht is protected by armor plating and a missile-defense system. Snooping snappers will be deterred by an anti-paparazzi laser shield that fires bolts of light at cameras to obliterate photographs.
The Bermuda-registered vessel, with a full-time crew of 70, boasts two helicopter pads, 11 guest cabins, a disco hall and at least one minisubmarine, the Live Yachting web site said. The total cost of Eclipse, which has taken four years to build, isn’t known, Live Yachting said. The final bill may approach $1.2 billion, Charlie Sorrel said on Wired.com in September 2009.
Sculptures by Millennium’s Simon Allen — who produces gilded wall reliefs resembling oversized jewelry, priced at 5,000 pounds to 18,000 pounds — and minimalist abstract paintings by Trevor Bell, which cost as much as 25,000 pounds, will displayed on the yacht, Clarke said.
Abramovich’s purchases illustrate how luxury interior-design projects have thrown a lifeline to galleries representing decorative artists who aren’t regarded as “cutting edge.”
“There’s a lot of activity at the moment for stylish, affordable pieces that appeal to interior designers,” said Anthony McNerney, the London-based head of the contemporary art department at Phillips de Pury & Co. “Often they aren’t the sort of things you’d see in our auctions.”
London designer Oliver Laws has selected further pieces from Millennium (valued at 200,000 pounds by Clarke) for the refurbishment of the Connaught hotel in Mayfair, said Paula Fitzherbert, head of public relations at the Maybourne Hotel Group.
“These works aren’t trendy,” said Clarke, whose gallery in St. Ives, Cornwall, shows a stable of Cornish-based painters and sculptors. “They’re made by the artists themselves, not assistants. No one’s trying to pull the wool over anyone’s eyes. They’re coming from a place with a long artistic tradition.”
Ben Nicholson, Barbara Hepworth, Bernard Leach and Patrick Heron were among artists who settled in St. Ives last century. The Tate Gallery now has a branch in the port.

Prokhorov Gets OK for Budget Car

Billionaire Mikhail Prokhorov's Onexim Group has received Prime Minister Vladimir Putin's backing to begin production of a budget car, government spokesman Dmitry Peskov said Tuesday.
"Prokhorov has discussed the project to launch production of a low-budget city car using a fundamentally new design and cutting-edge technology," Dmitry Peskov said, Interfax reported. "Prokhorov met Putin on Tuesday and told him about plans to develop his companies. Putin expressed hope that the project would be quickly approved in the relevant ministries and government agencies," Peskov said.
Onexim spokesman Igor Petrov said the company "is not ready to give any details yet." The group currently has assets in mining, aluminum and gold production, power generation, insurance, media and banking.
In 2008, Onexim said it would partner with the city government of Megion, in the Khanty-Mansiisk autonomous district, to create Megion Hydrogen Partnership, a company that would introduce a fleet of hydrogen cars and hydrogen fueling stations in the city.

Prokhorov May Fund NBA Stadium

Mikhail Prokhorov may help fund the construction of an arena for the New Jersey Nets, a spokesman for the billionaire’s holding company said Thursday.
Prokhorov, Russia’s wealthiest man and an avid basketball fan, is considering funding the stadium after being approached by someone involved in building Barclays Center, which is planned to go up in Brooklyn, Onexim spokesman Igor Petrov told The Moscow Times.
“The possibility exists” that Prokhorov will participate in the project, Petrov said, declining to say how much he would contribute.
Though Barclays has never disclosed the cost of the project, reports have said the stadium’s construction will cost around $800 million.
Prokhorov was rumored to have been in talks with Nets management in July to acquire a piece of the franchise.
The Newark Star-Ledger reported in July that Nets owner Bruce Ratner flew to Moscow to discuss the possibility of the billionaire taking a stake in the team. Sports Illustrated quoted an unnamed source as saying Prokhorov would pass the league’s vetting process for owners.
The billionaire’s interest in the team has not waned, an unnamed source told Reuters.
“This is a business story. The growth potential of the arena and the club is very high,” the source said.
Forbes estimated the value of the Nets to be about $295 million and ranks them 26th out of 30 NBA franchises in terms of market value.
Another source told Reuters that Prokhorov was getting a stake in the team as payment for a debt.
Prokhorov would get a noncontrolling stake in the club in return for funding the arena, a source close to the billionaire said, Vedomosti reported.
Petrov would not comment on reports of Prokhorov buying a stake in the team. Barclays declined to comment on the story. A New Jersey Nets representative did not reply to e-mailed questions.
Prokhorov, who stands 2.06 meters tall and is an avid basketball fan, also funded Euroleague champions CSKA Moscow through his company Norilsk Nickel, until selling his 25 percent stake in the mining giant last year.
While no Russian businessman has ever owned a piece of a major American sports franchise, several have become owners or shareholders in major football teams.
Roman Abramovich owns Chelsea, while Metalloinvest owner Alisher Usmanov is the second-largest shareholder in Arsenal.
Arkady Gaidamak, a Soviet emigrant who now lives in Israel, is the owner of Israeli football club Beitar Jerusalem.

Prokhorov Pulls His Charity Out of Norilsk

Billionaire Mikhail Prokhorov said Monday that his charitable foundation was forced to leave the city of Norilsk because of threats to its employees, and a source close to the foundation said the management of Norilsk Nickel was behind the intimidation.
“Prokhorov’s business was the target,” the source told The Moscow Times, declining to elaborate. “People employed by the foundation have been receiving threats for some time now, and we decided to move to Krasnoyarsk to protect them.”
Norilsk, the world’s largest nickel and palladium miner, was at the center of a heated and protracted asset split between Prokhorov and his former business partner, Vladimir Potanin. Last year, Prokhorov sold his 25 percent stake to metals giant United Company RusAl, a move opposed by Potanin.
In an emotional statement posted on the charity’s web site, Prokhorov wrote that threats over the past year and a half were the result of a business conflict. He blamed the “personal ambitions of ‘new feudal lords’” in the region, calling them “people from the ‘Club of Travelers,’ inspired by a charitable shareholder.”
The gibe could be seen as a reference to Norilsk chief executive Vladimir Strzhalkovsky, a former KGB officer and head of the Federal Tourism Agency who joined the company in August 2008. Industry analysts suggested at the time that Strzhalkovsky, who had no prior metals-industry experience, was brought into Norilsk to keep bickering shareholders from hurting the state’s interest in the company.
Norilsk Nickel declined to comment on the issue. A spokesman for Prokhorov’s Onexim Group directed comments to the foundation, which declined to elaborate on its official statements.
The Mikhail Prokhorov Foundation made headlines in May when Prokhorov, a former CEO of Norilsk Nickel, wrote on his blog that unidentified people had insulted his sister, Irina Prokhorova, a co-founder of the charity.
The foundation, which has about 20 employees, will relocate to Krasnoyarsk, Prokhorova said in a separate statement on the web site. Those willing to leave the Arctic Circle city for Krasnoyarsk, about 1,500 kilometers south, will be given the opportunity to do so, while the rest will be paid a year’s salary, she said.
“It’s a real pity for me that we have to leave Norilsk,” she said. “I don’t want to name specific people who drove us out of Norilsk — I believe it’s humiliating to make things personal.”
Created in 2004, the charity started out with cultural investments in the city of Norilsk, frequently listed among the world’s most polluted cities. Prokhorov, 44, said the foundation could continue to help Norilsk and that he “intends to deal with those who are trying to prevent us from bringing good to this dear city and its residents. I’ll do everything possible so that we can return.”
He wrote in May on his LiveJournal blog that an organized group of young people attempted to sabotage the opening of a modern culture festival in Norilsk, waving signs with slogans critical of his business and personally insulting to his sister.
“One of the participants insulted my sister, and this is something I am not going to allow anyone to do,” he wrote. “I know who is behind the provocation, just as you do. … If these two gentlemen who ordered the campaign don’t apologize to me and my sister in the next three weeks, I’ll do what any normal person would do. I’ll smash their faces in. And you know I can do it. “
The following month, Prokhorov, a kickboxing enthusiast, wrote that the issue was resolved and that those behind the provocation called his sister to apologize.
Until 2006, the foundation worked exclusively on cultural programs in Norilsk, but it has since taken on science, education and health projects in Krasnoyarsk and in the Urals, Siberian and Far East federal districts. It had a budget of 260 million rubles ($8.4 million) last year, up from 29 million rubles in its first year.
According to its web site, the foundation has spent more than 420 million rubles ($13.6 million) in its five years.
Prokhorov, billed this year by Forbes magazine as Russia’s richest person, and Potanin became the owners of Norilsk Nickel in the 1990s, and Prokhorov served as the company’s chief executive and chairman from 2001 until 2007. Analysts credited him with turning the gulag-era enterprise into a more efficient company.
In 2008, he sold a blocking stake in Norilsk to RusAl, controlled by Oleg Deripaska. As part of the deal, Prokhorov obtained 14 percent of the aluminum giant, through which he continues to have an interest in Norilsk Nickel. Potanin owns around 30 percent of the miner.
Dmitry Smolin, a metals analyst at UralSib, said he thought Prokhorov’s decision to remove his foundation was more psychological than economically justified.
“Prokhorov has little to do with Norilsk Nickel now and wants to tear his ties with the city of Norilsk,” he added. “He has already registered himself in Eruda, a small village in Krasnoyarsk region, where his major assets are, so now he’s withdrawing his foundation.”
Eruda is home to a Polyus Gold’s Olimpiadinsky mine. In July, Polyus said Prokhorov had a 26.35 percent stake, while billionaire Suleiman Kerimov controlled 36.9 percent.

Saving Oleg Deripaska

GAZ, the auto arm of Oleg Deripaska's crumbling industrial empire, received yet another bailout last week as the government continues to prop up the ailing car industry and the beleaguered oligarch.
This latest 5.6 billion-rouble handout is in addition to the government's backing for a deal that would see Sberbank and Magna International take 27.5 per cent of GM's European arm allowing GAZ to produce Opel cars.
"The role of GAZ Group in the project would potentially consist of organising the manufacturing of passenger cars," GAZ spokeswoman Natalia Anisimova said by e-mail.
GAZ's passenger vehicle section is close to collapse after the failure of its Volga Siber to capture the market. Output has fallen to a third of its pre-crisis level as workers have been put on temporary leave and production lines ground to a halt.
The company is dealing with a 55 per cent drop in car sales according to a PricewaterhouseCoopers survey published last week, but domestic producers struggled even in the boom years.
"The Russian car industry is extremely outdated," said Elena Sakhnova, a transport analyst at VTB Capital. "In the last 15 years there has been practically no investment."
The deal hinges on GAZ being able to use Opel's technology, which would allow it to compete domestically with foreign producers.
"It is a transfer of technology, at least that is what Russian officials hope," said Andrei Yakovlev, of the Higher School of Economics. "For GAZ it could also be access to new markets but only after significant improvements in mass production."
The issue of intellectual capital, however, is likely to hold up the deal, with GM wanting to expand Chevrolet into the potentially lucrative Russian market.
AvtoVAZ, Russia's largest domestic producer, has already teamed up with Renault giving it access to foreign technology and if the deal doesn't go through Deripaska's firm could be left behind.
"Without this project they will totally close their passenger car division and will not produce them anymore," said Sakhnova, adding that this was not their main department.
The company has already taken 1,200 people off of production of the unpopular Volga Sedan and plans to cut 5,800 workers as of August 1.
These deals add a timely boost to an ailing company but it remains uncertain how GAZ will survive in the short term with debts reportedly of 45 billion roubles as of March.
"I think this deal is a more mid-term project, while the key issues of GAZ and Deripaska's other companies relate to short-term problems with debt," said Kirill Tachennikov, an analyst at Otkritie, a financial company.
The PwC report warned that the auto industry needed further government intervention to protect it from collapse and that incentives to encourage car buyers had been insufficient.
"In many markets the role of the state has increased," said the PwC analysts. "Therefore the short term dynamics will depend to a large extent on government stimulus."
The 5.6 billion rouble handout will be used to build a new plant to produce 40,000 to 50,000 diesel engines a year. Like the Opel deal this seems more focused on the medium term future of GAZ, though it will also provide a timely injection into the local economy.
In the longer term GAZ will be looking to step up from using its facilities to put together Opel cars to producing its own internationally competitive brands.
"In five years time it can probably be Russian-branded cars based on Opel technologies but before that it'll just be assembly," said Sakhnova.
While the state support might ease the financial pressure on Deripaska, it could be backing him into a corner politically as he becomes reliant on government handouts.
Last month he incurred the wrath of Prime Minister Vladimir Putin over the protests in Pikalyovo where Deripaska, along with other factory owners, was forced to restart production and pay workers.
These deals, however, appear to target long-term success in the auto industry, rather than keeping people in employment.
"The government's interest is more related to capital expansion abroad than to social unrest," said Tachennikov.
GAZ has already received 20 billion roubles in state guarantees for its loans and it appears its vulnerable position has made it the beneficiary of the government's desire to protect the industry.
"The government is trying to bailout the industry somehow, to improve it to allow it to survive," said Sakhnova. "[Deripaska's] company is in the most difficult situation with a debt of $1 billion that they cannot service."
Sberbank and Magna's main competition for GM's Opel division is from Belgian firm RHJ International, who are also having a bid considered by the US firm and German government.
GM's chief negotiator John Smith said that the automaker had "agreed to continued detailed talks with Magna and RHJI to secure Opel's future" in a statement released by the firm.
It was thought that the Beijing Automotive Industry Corporation had also tabled a bid, but they were not mentioned in the text of GM's latest statement.
The Chinese company later announced they had withdrawn.
Sberbank and its partner would both receive 27.5 per cent of Opel, its workers would gain 10 per cent, while GM would retain 35 per cent if the consortium's 500 million euro bid is successful.
Full details of RHJ's bid have not been released but the BBC is reporting that they will pay 275 million euros for a 50.1 per cent stake.
At the moment it appears that Magna is favourite, with German Chancellor Angela Merkel quoted on the Kremlin website saying it offered "very promising ways of improving Opel's markets" and "of building a strategic partnership with Russia."
The Magna bid also has the support of German trade union IG Metall, which believes it will protect more jobs than the Belgian bid.
"IG Metall is still prepared to take part in a future-oriented Opel concept," AP reported union official Berthold Huber saying, adding the group would not support "short-term shareholder interests like RHJ."
The Deripaska connection
Oleg Deripaska, a businessman with diverse interests, has several links to the bid, not least his ownership of GAZ, which would win the right to produce Opel vehicles.
He used to hold a 42 per cent stake in Magna but was forced to sell it as he became over leveraged as the financial crisis escalated and still retains good relations with the firm.
"Given that Deripaska sold his shares due to problems with a margin call, his relationship with Magna wasn't spoiled," said Tachennikov.
The billionaire owner of Basic Element is considered to have a good relationship with Putin, who owns a 1956 GAZ Volga, despite being chastised over unpaid workers in Pikalyovo last month.
The government has lent its support to the deal, with President Medvedev saying that they "are viewing this project with interest and optimism," when speaking about the Opel deal after talks with German Chancellor Angela Merkel.
British Business Secretary Peter Mandelson, a self-proclaimed friend of the oligarch, is also likely to have a say in the decision as the winner will take control of British-based carmaker Vauxhall. The two became embroiled in a scandal last year, after a party on the Russian's yacht led to accusations the politician's impartiality over a bailout for van maker LDV had been compromised.
Mandelson was forced to allow a junior minister to decide whether LDV, which was then owned by Deripaska, would receive government support.
In a recent BBC interview Deripaska insisted the two remained friends but categorically denied that this influenced any business decisions.
Recently Deripaska has been drawn into a series of legal disputes with his creditors as well as one with former business partner Michael Cherney over his stake in metals firm RusAl.
Israel-based Cherney is demanding a 20 per cent share in the aluminium firm based on a claim that he signed an agreement on ownership with Deripaska in 2001. Deripaska is currently challenging a ruling from a London court that the case should be heard in Britain.
Deripaska also lost a recent case against VTB, with the creditor winning $66 million from Deripaska's building arm Glavstroi. A unit of the construction firm, Glavmosstroi, is also facing three bankruptcy suits.
Meanwhile, RusAl is involved in negotiations to restructure $7.3 billion worth of loans from foreign lenders.

Goodbye Cote d’Azur, hello Yeruda

It must seem a world away from a luxurious villa in the south of France. Russia's richest man, Mikhail Prokhorov, is moving to a remote Krasnoyarsk village - well, for philanthropic tax purposes, anyway.
From being linked to the world's most expensive villa, to a tiny village in the depths of Siberia - Russia's richest man has become the 89th resident of the little-known settlement of Yeruda.
But far from being a wily tax dodge or a first step to political stardom, Mikhail Prokhorov's relocation to Central Siberia is being painted as a philanthropic gesture.
The mining tycoon accrued much of his according-to-Forbes $9.5 billion fortune from the region's nickel and gold reserves.
And the tiny hamlet of Yeruda, which produces 80 per cent of the region's gold, will now reap a tax windfall as Prokhorov's 1.6 billion rouble tax returns are paid into the coffers of the Krasnoyarsk region.
The decision has some echoes of fellow billionaire Roman Abramovich, who registered his business interests in remote Chukotka when he was governor of the Far Eastern province.
But unlike Abramovich, who played an active political role on the region's behalf, Prokhorov's people say there is no plan to get involved with the regional authorities.
"Mikhail has always said that he is interested in business, not in politics," said a spokesman for his Onexim holding company, who declined to be identified.
The spokesman insisted that there was no change in Prokhorov's or Onexim's tax liabilities if he registered as a resident of Yeruda, Moscow or anywhere else in Russia.
But the decision to move his registration is seen as a further gesture of support for workers at the main mine owned by Polyus Gold, one of Prokhorov's biggest earners.
"Moreover, for a period of five years Mikhail Prokhorov has been financing a charity fund which operates there," the spokesman said.
It's unlikely that the 43-year-old, often dubbed Russia's most eligible bachelor, will be taking up permanent residence in the village, which is a tortuous 13-hour, 700 kilometer road journey from the regional capital Krasnoyarsk.
In practical terms his spokesman says the move is a simple question of paperwork, and there is no requirement to give up his current home in Moscow, a further 4,400 kilometres from Krasnoyarsk.
But Donat Podnyek, a senior manager in the tax division of KPMG in Moscow, warned that "technically" any individual should be living in their place of registered residence "permanently or primarily".
However the billionaire has bought a flat in Yeruda and has already stayed there while visiting the Polyus site, according to Onexim.
Prokhorov's reputation as a bon viveur has travelled from Moscow to exclusive alpine ski resorts - but the Krasnoyarsk region may struggle to compete with these attractions.
The major attractions of the region are outdoors - hunting and fishing are popular in the vast Siberian wilderness. But skiing is less of a glitzy leisure pursuit and more an essential mode of transport during the long, cold winters.
Heading for the Siberian wilderness is a far cry from the tycoon's last headline-grabbing property deal.
Prokhorov was reportedly behind a 500 million-euro bid for Villa Leopolda, the famous mansion built for Belgium's King Leopold II on the Cote d'Azur, between Nice and Monaco, last summer.
Prokhorov denied bidding for the villa. Had the deal gone through it would have been the most expensive house purchase ever.
However, the economic slump made a record-breakingly expensive villa look like a duff deal and reports in February said the plan had been sunk after he failed to negotiate a better price.
Flats in the town of Lesosibirsk, 200 kilometres from Yeruda, start at around 2.5 million roubles ($64,000) - similar to the costs of a cheap apartment on the edge of the Moscow region - meaning his new home will be a much cheaper investment.

Billionaires Reluctant to Give Up Their Toys

For most of the decade, the country's billionaires spent hundreds of millions of dollars on boats, jets, expensive art and the occasional football team. But, despite strained bank accounts and public outrage, the tycoons have been loath to part with their expensive trinkets, choosing instead to hunker down and wait for better days. To be sure, these are not happy days for the country's superrich. In Forbes magazine's latest ranking of the world's wealthiest people, Russia's billionaires had an estimated collective loss of $369 billion last year, and two-thirds fell from the list altogether. Moscow, which had 74 billionaires a year ago, more than any other city in the world, now finds itself with only 27. Even those who have managed to hang on have not had an easy time of it. Oleg Deripaska, owner of RusAl, the world's largest aluminum company, has seen his net worth tumble from $40 billion to about $4 billion, and he ceded his spot as Russia's richest man to investor Mikhail Prokhorov, who himself is worth half of what he was in 2008. The country's tabloids, trade unions and politicians have expressed outrage that the billionaires have been so reluctant to part with personal assets, especially as jobs and wages are being cut. Deripaska's companies, for example, have received billions of dollars in government bailout money, but the metals magnate has not been in any rush to sell the Queen K, his 73-meter, $117 million megayacht. He did, however, agree to cede stakes in builder Hochtief and auto-parts maker Magna International to banks last year to help him hang on to his core assets. Another boat lover, Roman Abramovich, has sold none of his four yachts, which have been collectively dubbed the "Abramovich navy," and he has said work continues on the fifth: the 168-meter, $290 million Eclipse, which reportedly will have a missile detection system and a detachable submarine to carry the billionaire to safety in case of attack. Abramovich, who owns a large stake in the Evraz Group steelmaker that got an $800 million loan from state bank VEB to refinance short-term debt in December, has also said he remains fully committed to what is perhaps his best-known toy: the Chelsea football club, which he bought in 2003 for ?140 million (now $205 million). And while Portsmouth owner Alexander Gaidamak, the son of Russian-Israeli billionaire Arkady Gaidamak, said he was in the market to sell his football team if the price were right, other football club owners are doing more than holding on. Metalloinvest owner Alisher Usmanov has been quietly building up the 15 percent stake he bought in Arsenal last year and became the team's largest shareholder in February, with a 25 percent blocking stake. Uzbek-born billionaire Lev Leviev, whose Africa Israel Investments holding company has been badly hurt by its exposure to the Russian and U.S. real estate markets, did sell his private Bombardier jet -- reportedly for about $50 million, or $10 million less than he paid for it. A company representative, while not confirming the price, said the sale had less to do with liquidity than market timing. "The market for private jets is falling, and [Leviev] simply wanted to sell it so he could buy it back at a better price," said company spokesperson Natalya Ivanova. She said the price being quoted in the media was "quite small" when considering the scale of the company's global operations. "The shopping center we're building on Tverskaya Ulitsa alone costs $250 million, and that's just one of many projects," she said. Leviev is not the only billionaire you might now spot in an airport VIP lounge. Alexander Lebedev, a banking and property mogul who also owns about 30 percent of Aeroflot, sold his private jet and an Italian villa before buying London's Evening Standard newspaper in January for a nominal fee. While the English daily could hardly be considered a toy, the maintenance costs aren't unlike that of a yacht or plane. The Times has reported that the paper is losing ?1 million per month. Some of Russia's wealthiest had also been showing a growing taste for more highbrow pursuits, turning Moscow into a hot spot for the world's top auction houses. When he wasn't busy with his fleet or football club last year, Abramovich was brushing up on his knowledge of contemporary art -- the tycoon was widely reported to be the mystery buyer behind a $120 million splurge at Sotheby's and Christie's in New York last May. The new interest could have been motivated by girlfriend Daria Zhukova, who in September opened the Garage Center for Contemporary Culture in Moscow, Russia's largest exhibition of contemporary art. In September, a Sotheby's exhibition of work by British artist Damien Hirst drew several big-name buyers from Russia and the CIS, including property magnate Vladimir Doronin and Kazakh mining tycoon Alexander Machkevich, who acquired two diamond cabinets, three butterfly paintings and a gold spot canvas for a total of ?11.7 million, The Economist reported. Another buyer at the auction was Ukrainian steel mogul Viktor Pinchuk, whose eponymous art center in Kiev is scheduled to show a Hirst retrospective featuring 100 works by the artist next month. Sotheby's declined to comment on the auction. Despite the strain on their businesses and bank accounts, art collectors are not exactly stampeding for the exits, said Maria Baibakova, a curator at the Krasny Oktabr Chocolate Factory gallery who also collects art with her father, Oleg, president of Prokhorov's Onexim-Development. Baibakova, who estimates that there are about 30 "serious collectors" in the country, said a recent 25 percent drop in the art market was caused by a dearth of buyers, rather than a rush to sell. "Most collectors do not collect as a business, and art is not their primary asset, so they do not need to sell into a low market," she said. But while the country's elite are not selling their toys, the lavish purchases of the last few years have been curtailed, said Ellen Verbeek, editorial director of Robb Report Russia, a lifestyle magazine for jet-setters. "Nobody's selling, and nobody's buying," she said. "Everyone is just trying to spend less. [Thriftiness] is even becoming fashionable, although nobody would ever have imagined that six months ago." Perhaps in keeping with this trend, Prokhorov in February denied a report in The London Times that he backed out of a deal to buy the world's most expensive property, a French Riviera mansion that reportedly cost $633 million, leaving his lawyers to seek the return of a 39 million euro deposit. Prokhorov's representatives have repeatedly said he will not invest in France until the government apologizes for arresting him in 2007 on suspicion of flying in a plane full of prostitutes for a party in Courchevel. At least one prominent businessman appears conflicted about what to do with his personal assets. In January, Mirax Group chairman Sergei Polonsky wrote in his LiveJournal blog that he was selling his yachts, a mansion on the Cote d'Azure and his Sungate Port Royal Hotel in Turkey and putting the money into his struggling developer, which like other big Moscow builders has been having trouble selling apartments and paying down debt. When contacted by The Moscow Times, however, a Mirax representative said Polonsky still owned the Sungate Port Hotel and had never owned a yacht or a house on the Cote d'Azure.

Prokhorov Ups RusAl Stake to 18.5%

Mikhail Prokhorov's Onexim Group has agreed to increase its stake in United Company RusAl to 18.5 percent as part of a restructuring of $2.8 billion owed by the aluminum giant, the companies said in a joint statement Sunday. The terms of the deal appeared to be extremely generous for RusAl, whose controlling shareholder Oleg Deripaska has been struggling to make payments on billions of dollars of debt incurred while adding holdings to his Basic Element conglomerate .Of RusAl's debt to Onexim, $2 billion will be converted into shares, while the remaining $800 million will be restructured, according to the statement, which was posted on RusAl's web site. "It values RusAl at $40 billion to $45 billion, which is extremely high," said Michael Kavanagh, metals and mining analyst at UralSib. He said RusAl was not worth 20 percent of that implied value. The sides seem to have agreed on using RusAl's value from April 2008, when Prokhorov sold a Norilsk Nickel stake to Deripaska for a combination of cash and 14 percent of RusAl, as well as an option to sell back the RusAl shares at a fixed price. It was not immediately clear, however, why Prokhorov would agree to such terms. Aluminum prices have fallen from about $3,000 per ton at the time of the deal to about $1,400 on the London Metals Exchange. As part of Sunday's deal, Prokhorov agreed not to use his put options on RusAl shares -- which Vedomosti has reported as being worth $7.3 billion -- for as long as a standstill agreement between RusAl and its creditors is active. Prokhorov has previously said he was not planning to use the option. RusAl had been considering using this general scenario to take care of some of its accrued debt. RusAl chairman Viktor Vekselberg said in January that the company might convert some of its debt to Prokhorov into shares, although he did not comment on the possible size of the conversion. The deal, together with the standstill agreement and RusAl's "program for increasing production efficiency," will "let the company successfully overcome the consequences of the world economic downturn," the statement said. Earlier this month, RusAl announced a standstill deal with more than 70 banks to delay repayment of $7.4 billion for two months with a possibility to extend the standstill for another month. President Dmitry Medvedev last week warned unnamed banks not to be too aggressive in trying to recover their debts, comments widely seen as directed at Mikhail Fridman's Alfa Bank, which is also a RusAl creditor. Basic Element units have accused Alfa of being uncooperative in the standstill talks. "Perhaps someone from the government told Prokhorov: 'This is how it's going to be,'" Kavanagh said. "There is obviously something more to the deal, because in the context of the market right now there are a lot more things he could do with the $2 billion than buying a 4.5 percent stake in RusAl." In April, Prokhorov sold his blocking stake of 25 percent in Norilsk, valued at the time at about $8.7 billion, to Deripaska, who took out $4.5 billion from a syndicate of foreign banks to clinch the deal. First Deputy Prime Minister Igor Shuvalov said Friday that the government had no intention of nationalizing RusAl, despite its heavy debts to state lenders. RusAl owes $4.5 billion to state development bank VEB, which in November helped RusAl repay the foreign banks and now holds the Norilsk stake as collateral. The loan is due this fall, and Shuvalov said he was against giving RusAl more time to repay, although he said he hoped that commercial banks or new shareholders would step in. Kavanagh said it was unlikely that private banks would take over the VEB loan, although state-run lenders such as Sberbank or VTB might open a credit line to RusAl. The deal announced Sunday will dilute the stakes of RusAl's shareholders proportionately, the statement said. EN+, the Basic Element unit that controls Deripaska's stake, will hold 53.8 percent, from about 57 percent. SUAL shareholders will own 18 percent, from 18.9, and Glencore's interest will fall to 9.7 percent, from 10.3 percent