Bloomberg News

Abramovich Says He Feared Russia’s Murderous Aluminum Trade

November 04, 2011

(Updates with Abramovich comments in ninth paragraph)

Nov. 3 (Bloomberg) -- Billionaire Roman Abramovich had to be persuaded to invest in Russian aluminum plants in 2000 because “every three days someone was murdered in that business,” he told a London court.

Abramovich, testifying in the $6.8 billion legal fight with his former business partner Boris Berezovsky, said he got into the aluminum business in spite of worker disputes and the presence of criminal gangs after being pressured by Badri Patarkatsishvili, an associate of Berezovsky.

“I didn’t want to have anything to do with a business like that without Badri,” the 45-year-old billionaire owner of Chelsea Football Club said. “I wouldn’t have poked my nose in there.”

Abramovich was part of a group who bought the assets, including one of the largest aluminum smelters in the world, for around $550 million in 2000. Berezovsky says Abramovich could never have taken part in that deal without his help and political connections and that he wasn’t paid enough for his stake in the business. The aluminum assets eventually became part of what is now United Co. Rusal.

Berezovsky claims in his lawsuit that Abramovich bullied him into selling his stakes in Russian oil and metal companies, including OAO Sibneft, for far below their real value by telling him the government would seize his shares if he didn’t sell. The London trial has provided insight into how two of the world’s richest men made their fortunes in the chaos following the collapse of communism, and how their friendship soured after Berezovsky fled Russia in 2000.

Offering Krysha

In witness statements filed at court, Abramovich argued Berezovsky’s role had been to provide “krysha,” or protection, in the “dangerous and risky” environment of Russia after the fall of communism, and that he held no shares.

He said he paid Berezovsky and Patarkatsishvili hundreds of millions of dollars for physical and political protection before eventually giving them $1.3 billion in 2001 and 2002 to break off the arrangement.

In the 1990s, the fight for market share often involved violence and dozens of people died in the “aluminum wars” of the time. OJSC United Co. Siberian Aluminium, or Sibal, in late 2000, merged with the aluminum business of Sibneft, a company by then controlled by Abramovich, to form Rusal. Rusal in January raised HK$17.4 billion ($2.24 billion) in the first initial public offering by a Russian company in Hong Kong.

One facility in Krasnoyarsk was unprofitable and merely “a heap of metal” when it was sold in 2000, Abramovich told the court today. When the price of the aluminum assets was unexpectedly raised from $550 million to $575 million, some of those involved in the deal suspected “there was something fishy there” he said. “Others felt Badri was trying to earn money from both sides.”

Patarkatsishvili died in 2008.

The case is: Berezovsky v. Abramovich, High Court of Justice, Queen’s Bench Division, Commercial Court Case No. 09-1080.

--With assistance from Bei Hu in Hong Kong and Stephanie Baker in London. Editors: Christopher Scinta, Anthony Aarons.

To contact the reporter on this story: Kit Chellel in London at cchellel@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net


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