Arctic nickel miners recall Soviet days fondly

By Robin Paxton

NORILSK, Russia (Reuters) - Underpaid and isolated from an increasingly affluent Russia, workers are steadily leaving the nickel operations of Norilsk, and some of those who remain look back fondly on Soviet days.

But Mikhail Prokhorov, one of the two men who have become billionaires since buying Norilsk Nickel for a song a decade ago, has a parting gift for Russia's northernmost city.

Prokhorov -- who announced in March that he is stepping down as chief executive as he divides his empire with partner Vladimir Potanin -- is raising wages and remodeling the city to halt the exodus of skilled workers and attract new ones.

Boosted by Chinese demand for metal, nickel prices are higher than ever. Starting this month, average monthly salaries rose at least 5 percent to more than 40,000 roubles ($1,538) -- nearly four times the national average.

Prokhorov, 41, says salaries should rise 16 to 18 percent annually to 2020 for Norilsk to regain its Soviet-era prestige, when it paid three times the national average for the sector.

Over 13 years, this could cost the company $2.3 billion.

"It's not such a large sum when the company's net profit is $5 billion a year," said Prokhorov, who is splitting his varied assets with Potanin to focus on building a new energy company.

More than a quarter of the 210,000 people living in and around the city work for Norilsk Nickel, a $38 billion company mining a fifth of the world's nickel and more than half of its palladium, a metal used in car exhausts and jewelry.

Norilsk has only 0.16 percent of Russia's population but generates 1.2 percent of the country's gross domestic product.

But 5,000 people are leaving every year. Until this month, workers hadn't had a pay rise in six years. Bus fares have risen six times and heating bills and food prices are also higher.

"They have pumped out all the city's resources. Practically none of the proceeds have come to the residents," said Vitaly Tolstov, editor of local newspaper Norilchanin.

Surrounded on three sides by smelters, the city is cloaked in sulfur dioxide no matter which way the wind blows.

"The city is quietly dying," said Sergei Tarakanovsky, owner of a chain of newspaper kiosks. "Before, Norilsk was a city for the young," he said of the days when the mines and smelters were owned by the government.

REINDEER STEAKS

The city was first settled by prisoners of Soviet dictator Josef Stalin, who were exiled in 1935 to exploit one of the world's great mineral deposits. There is still enough ore today for another century of mining.