| Stinginess at KrAZ Could Cost Russian Aluminium |
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By Yulia Latynina
Tuesday, Oct. 30, 2001.
The official reason is that world aluminum prices have fallen from $1,500 per ton at the start of the year to $1,300 per ton. Had RusAl been a transparent Western company with a transparent cost structure, the decision wouldn't have raised many eyebrows. However RusAl is not exactly a Western company. And the million dollars per month that RusAl will be saving itself at KrAZ is hardly the largest of RusAl's expenditure items.
True, there are some taxes to pay. But here things are complicated as well. "The sales volumes of KrAZ are comparable with the sales volumes of the biggest Russian metals enterprises," noted one of Russia's metals kings. "But thanks to tolling, taxes at RusAl enterprises are not calculated based on sales but on services provided by the factory processing the alumina. So you can calculate how much they pay."
All right then. Let's take the most recent rating from Expert magazine. In 2000, Severstal reported sales of $2.1 billion and profits of 24 billion rubles. KrAZ, which was already then controlled by RusAl, reported sales of $637 million, having sold 840,000 tons of aluminum for $1,300 to $1,400 per ton. Its profit was 1.1 billion rubles.
As a rule, the less taxes an oligarch pays the better connected he is to the top echelons of power. The total taxes paid by RusAl clearly demonstrate that Oleg Deripaska is oligarch No. 1 in Russia today.
It also indirectly confirms one fascinating but extremely controversial assertion, namely that the money invested by Deripaska in RusAl might be the "family's" money and the feverish buying spree by RusAl is also indirect corroboration to this effect.
However, the point is not that RusAl pays little in taxes. Thank God that they don't pay more because once the money is in the budget it would simply be stolen.
In fact, for the vast majority of Russian oligarchs nonpayment of taxes is combined, paradoxically enough, with a heightened sense of civic responsibility. The best example is Roman Abramovich, who plowed $40 million out of his own pocket into godforsaken Chukotka.
In essence, the charitable funds of Russian holding companies function as parallel budgets. It is a way for oligarchs turn the population into their clients and reduce the importance of the authorities.
One of the trailblazers in this field is the former general director of KrAZ, Anatoly Bykov. Oligarchs' and godfathers' habits are pretty similar. Nowadays the flow of contributions to Bykov's charity fund, Faith and Hope, has run dry.
However, RusAl's decision to cut wages at KrAZ will undoubtedly guarantee the success of Bykov's electoral bloc in the December elections to the Krasnoyarsk regional legislative assembly.
Yulia Latynina is a journalist with ORT.
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Russian Aluminum has cut wages at one of its main enterprises, Krasnoyarsk Aluminum Plant by 23 percent. Workers' wage packets will now be thinner by an average of 2,000 rubles.
