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Autos News

Oleg Deripaska, passenger on Russia's Opel journey

MOSCOW (Reuters) - Oleg Deripaska, a veteran of Russia’s aluminum wars and hardened political infighter, has found himself and his GAZ Group along for the ride with the Russian state’s policy ambitions in a bid for Opel.

Deripaska, whose GAZ Group GAZA.RTS is serving as the industrial partner in the winning bid for GM's GM.N European assets, appeared to relegate his automotive assets to the non-core category just over six months ago.

He handed over a 20 percent stake in Canadian auto parts maker Magna MGa.TO -- which led the winning bid for the GM Europe assets, chiefly Germany's Opel -- rather than sacrificing scarce cash resources to cover a margin call.

GAZ Group, maker of the Volga sedan and Gazelle light truck, threatened to drain more resources, failing to meet debt obligations, until state controlled Sberbank SBER03.MM, Magna's financial partner in the Opel bid, promised not to bankrupt it.

Now, GAZ appears to be part of a greater plan.

“The Russian government has a strategy to develop the auto industry and this deal we are talking about must be incorporated into the strategy to develop the auto industry,” Prime Minister Vladimir Putin told a ministerial meeting on Monday.

The combination of GAZ with a passenger car giant suggested that Deripaska was not the driving force behind a GAZ role in the deal because the Russian carmaker has had poor success in the segment, VTB Capital Managing Director Yelena Sakhnova said.

“It is my impression that it was the government who insisted, because Deripaska has had his fingers burned,” said Sakhnova, adding the deal was neutral to positive for GAZ, depending on a successful technology transfer and tight focus.

STATE DEPENDENT

Deripaska, 41, grew his empire from a small metals trading operation, using the profits to acquire shares in a Siberian aluminum smelter. He expanded his empire in the “aluminum wars” of the 1990s, the often-violent consolidation of the sector.

Last year Deripaska was at the top of his game, listed as Russia’s richest man by Forbes magazine with a fortune of $28.6 billion and rapidly expanding as cheap borrowings fueled the growth of his empire.

He was seen as the ultimate insider, married to the daughter of a senior official in President Boris Yeltsin’s Kremlin, who managed to expand his fortunes even when Yeltsin handed power to Putin, a feat managed by only a few tycoons.

His fortunes have grown closer to the state in the crisis, which knocked him back to 10th place, with $3.5 billion.

UC Rusal, the world’s largest aluminum producer, in which Deripaska is the largest shareholder, received the largest payout from a $15 billion state bailout intended to save Russian industrial assets from Western lenders’ margin calls.

He is also locked in difficult restructuring talks with Western creditors on $7.4 billion in loans to RUSAL, which are closely linked to talks with domestic creditors.

The Opel deal, eased by a phone call from U.S. President Barack Obama to German Chancellor Angela Merkel, puts Deripaska in unlikely political company.

He may have been a rumoured buyer of GM’s Hummer, a symbol of brash wealth eagerly adopted in Russia, but said last year the United States was the last place he would invest because the government’s longstanding denial of a visa.

He is not known for ostentatious displays of wealth unlike many other Russian oligarchs.

GAZ, unlike Magna and Sberbank, will contribute no cash and receive no stake in the GM assets under the deal as agreed.

Its presence as a partner may raise concerns in Europe, particularly in Britain.

GAZ-controlled van maker LDV was bailed out to the tune of 5 million pounds in taxpayer money this month, pending a sale to Malaysian importer Weststar.

Last year British business minister Peter Mandelson was accused of impropriety over meetings with Deripaska.

Sakhnova said Magna’s strong relationships in Europe -- where it assembles Mercedes and BMW vehicles -- would likely take precedence there.

“Deripaska will not have a lot of influence,” she said.

Editing by Jon Loades-Carter

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