War helps Russian nickel king expand his realm

3 minute read

Vladimir Potanin, CEO and co-owner of Norilsk Nickel, speaks as he attends the Reuters Russia Investment Summit in Moscow, September 23, 2014. REUTERS/Maxim Shemetov

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LONDON, July 5 (Reuters Breakingviews) - Vladimir Potanin is striking while the iron is still hot. Shortly after snapping up two Russian banks in a post-sanctions fire sale, the largest shareholder and chief executive of $47 billion Russian metals group Norilsk Nickel (GMKN.MM) is eyeing a takeover of $16 billion aluminium maker Rusal (RUAL.MM).

Norilsk Nickel definitely has the upper hand in any negotiations – it is bigger, more profitable and brings more to the table in terms of sanctions protection. As the United States learned in 2018, blacklisting Rusal had disastrous consequences for the global aluminium market. Sanctioning Norilsk Nickel would multiply the pain across nickel, copper, palladium and platinum – all metals key to the transition to a lower-carbon economy. With inflation already rocketing, Washington is even less likely to take the risk. And, despite being ice hockey buddies with President Vladimir Putin, Potanin has somehow managed to stay off the U.S. blacklist, unlike his Rusal rival, Oleg Deripaska.

Making aluminium is a very different process from nickel, copper, palladium or platinum, but there could still be some cost savings, as long as hydroelectric plants technically owned by Rusal parent En+ are included in the deal. Rusal would also get access to Norilsk’s shipping fleet, a rarity for metals groups. And a larger company with hefty sanctions armour-plating would secure cheaper finance, handy for developing sites like the massive Kolmozerskoye lithium ore deposit in Murmansk on Russia’s northwest tip.

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However, there are snags, in particular Potanin and Deripaska’s prickly personal history, which has spilled over into disputes in London courtrooms over how Norilsk should be run. Right now, Potanin has his nose in front with a 36% stake. But En+ is not far behind, with a 26% shareholding. Chuck in Deripaska’s 45% slice of the Rusal owner, and it’s easy to see how Potanin’s crown could be dislodged in the merged entity. Of course, Deripaska technically doesn’t control Rusal because of a sanctions deal with the U.S. Treasury, but he’s unlikely to agree a merger that doesn’t recognise at least some of his Rusal clout.

Putting such differences aside is easier now that they’re on the same side against a hostile West. If they can keep it going after the guns fall silent, Russia’s nickel and aluminium kings will have expanded both their realms.

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(This article has been corrected in paragraph four to state that En+, not Oleg Deripaska, has a 26% shareholding in Norilsk Nickel.)

(The author is a Reuters Breakingviews columnist. The opinions expressed are her own.)


Vladimir Potanin, Norilsk Nickel’s chief executive and largest shareholder, said on July 4 he was ready to discuss a possible merger of the Russian mining giant with aluminium producer Rusal.

Norilsk Nickel and Rusal are not under Western sanctions. However, top Rusal shareholder Oleg Deripaska is on Washington’s list of “specially designated nationals”. Potanin was sanctioned by Britain last week, adding to measures already imposed by Canada and Australia.

Potanin cited the need to protect the companies against Western sanctions as one of the reasons for a possible merger.

Norilsk Nickel is the world’s largest producer of palladium and refined nickel. Rusal is the world’s largest aluminium producer outside China.

Rusal shares were up 6% at 0818 GMT on July 5, while Norilsk Nickel shares were down 2%.

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Editing by Ed Cropley and Oliver Taslic

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Dasha is a columnist in London writing about the consumer goods sector, as well as Russia and Turkey. She has been at Reuters since 2012 as deals reporter in London and Turkey correspondent, covering the 2016 coup and the war in Syria. Prior to that she produced business news on BBC radio and worked as an investment banking analyst. She holds a degree in Politics, Philosophy and Economics from the University of Oxford.