UPDATE 1-RUSAL backs bigger Kremlin role at Norilsk

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By Dmitry Zhdannikov and Robin Paxton

MOSCOW, Nov 12 (Reuters) - United Company RUSAL is lobbying for the Kremlin to replace rival shareholder Vladimir Potanin as the power behind Norilsk Nickel (GMKN.MM), as the world's largest nickel miner prepares to elect a new board of directors.

UC RUSAL, a 25 percent shareholder in Norilsk, said on Wednesday it wanted four government officials to join the board at Norilsk, giving the state a bigger say in the running of the mining giant, whose value has crumbled in the last six months.

"It will ensure the company can overcome a crisis in management, improve its financial situation, business development and the rise in value of Norilsk in the interests of all shareholders," UC RUSAL Chairman Viktor Vekselberg said.

UC RUSAL, majority owned by billionaire Oleg Deripaska, is among the first beneficiaries of the Kremlin's $50 billion rescue package for Russian companies struggling to refinance Western loans during the acute global liquidity crunch.

The $4.5 billion loan it received from state bank VEB to repay debt accrued to help acquire its stake in Norilsk comes with a caveat -- UC RUSAL must use the shares as collateral and a government representative must join the board at Norilsk.

The company welcomed the idea on Nov. 5, saying it would weaken the position of Norilsk Chairman Vladimir Potanin. UC RUSAL and Interros, Potanin's company, have clashed over management since UC RUSAL bought its stake in Norilsk in April. Norilsk's Moscow-traded stock has plunged over 60 percent since peaking in May as falling nickel prices and the shareholder quarrel exacerbates the effects of the global financial crisis and investor flight from Russia.

NEW BOARD

Norilsk will elect an enlarged board on Dec. 26. UC RUSAL said it would vote for one government representative and would urge Interros to elect another. The company wants Norilsk to use the shares on the company balance sheet to elect a further two representatives.

"The strengthening of the state role in one of the biggest Russian companies during the period when the government is actively supporting large corporations with a range of economic measures is a logical and necessary decision," Vekselberg said.

Interros said: "RUSAL hasn't asked us yet to express our opinion on this subject".

UC RUSAL also said it wanted three representatives of its own on the enlarged board, along with three Interros representatives and three independent directors.

Analysts said Russia extended the loan to UC RUSAL as it did not want its lucrative stake in Norilsk, which also produces half the world's palladium from its mines above the Arctic Circle, to fall into foreign hands or the free market.

But they said it is too early to say whether the state would eventually take control of a stake in Norilsk. (Editing by Karen Foster)