Weekly 13 September 2021

Rusal's Guinea woes

Hello! This week our top story is about how a coup in one of the world’s poorest countries caused a major financial headache for Russian aluminum producer Rusal. We also look in depth at political party New People, which is tipped to do surprisingly well in next weekend’s parliamentary elections, and the death of minister Yevgeny Zinichev in an accident at a Siberian waterfall and the resulting Kremlin PR storm.

Political turmoil in Guinea hits aluminum giant Rusal 

A coup d’etat in Guinea this week rocked international aluminum markets and sent prices for the metal shooting to a 10-year high on the London Stock Exchange. The overthrow of President Alpha Condé is a major headache for Russian aluminum giant Rusal, which owns Guinea’s large Friguia alumina refinery. If the refinery is forced to halt operations, it would be a major financial blow to Rusal.

  • Col. Mamady Doumbouya led a team of special forces last weekend in a coup in Guinea, one of the world’s poorest countries. President Condé was arrested and Doumbouya announced the suspension of the constitution, the dissolution of parliament and the closure of the borders. “We will no longer entrust politics to one man,” he said. “We will entrust it to the people.” He said power would pass into the hands of a National Committee for Unity and Development.
  • Guinea is an important economic partner for Russia — and Rusal — because the country is the world’s third largest producer of bauxite, the ore that is refined into alumina and ultimately smelted into aluminum. Rusal owns three bauxite mines in Guinea, which account for 42 percent of the company’s total bauxite capacity.
  • Under Condé, Russia enjoyed good relations with Guinea. Diplomatic ties were close and Condé could count on Russian support to stay in power. Condé had a closed-doors meeting with Russian President Vladimir Putin in 2019 and, the following year, Guinea changed its constitution and Condé was elected for another six years (a somewhat similar process to the constitutional amendments approved in a referendum in Russia last year).
  • Before Condé came to power, Rusal had problems in Guinea. The company purchased Friguia for $19 million in 2006 under previous president Lansana Conté. Two years later, Guinea complained the purchase was unfair and that the refinery would need to be paid for. The regime took Rusal to court in 2009 and demanded a further $238 million. Subsequent claims took the total to $1 billion. It wasn’t until 2010 — on the eve of the elections that brought Condé to power — that Rusal managed to reach an agreement with the Guinean authorities.
  • After this week’s coup, Rusal announced it was preparing to evacuate its staff from the country “in the event of any further escalation of political instability”. If Friguia stops work, the company could lose a big chunk of its aluminum production capacity — and is unlikely to get any compensation.

Why the world should сare: Rusal is one of the world’s leading producers of aluminum and alumina, selling most of its output abroad. The closure of Friguia — even if temporary — would lead to an even bigger leap in aluminum prices than the one seen this week.

 

Who are the ‘New People’ in Russian politics?

The big story in upcoming parliamentary elections is the New People political party. A survey by pro-Kremlin pollsters recently suggested they even have a chance of getting past the 5-percent threshold and into the State Duma as a result of next weekend’s vote — even if The Bell’s sources said this was not part of the Kremlin’s plan. New People was created in 2020 with the approval of the authorities, part of a plan to take votes away from opponents of the ruling United Russia party. New People was founded by businessman Alexei Nechayev, who denies any connection with the Kremlin.

Who is Alexei Nechayev? 

Nechayev is the founder of cosmetics company Faberlic, which works via catalogs much like Mary Kay or Amway. In pre-election interviews the businessman rejected suggestions his interest in politics is something new, insisting it was anything but sudden. And, if you look at his career, he has a point.

After school, Nechayev studied at the Law Faculty at Moscow State University and dreamed of becoming a police investigator. At the age of 19, inspired by a famous Soviet children’s writer Vladislav Krapivin, he set up the Rassvet movement to take children on sailing expeditions and train them in fencing and hand-to-hand combat. A year later, Nechayev met Krapivin himself. In conversation with The Bell, the businessman said that reading Krapivin helped him develop a concept that he calls ‘Humanism 3.0’ – according to him, this is the basis of New People’s ideology.

After the fall of the Soviet Union, Nechayev went into business. He tried various activities – publishing children’s literature, selling toys and developing an investment company in Ukraine. In 1995, Nechayev was invited to invest in Swiss insurance company Fortuna. Nechayev turned it down, (correctly) recognizing it as a pyramid scheme, but he liked the underlying principle and set about creating a legitimate version.

Nechayev and his business partner Alexander Davankov (another New People founder) realized that cosmetics companies were the most effective vehicles for the network marketing tactics used by Fortuna. In 1997, Nechayev and Davankov sold the first batch of products under their ‘Russian Line’ brand. By 2000, the company’s revenues were about $4 million. In 2001, the brand was renamed Faberlic, from the Latin for ‘master’ and the old Russian for ‘face’. It paid $2 million for its own production facilities and began an aggressive TV advertising campaign. The results were immediate: Nechayev said that in 2001 turnover leapt to $10 million, and by 2004 it was $100 million. In 2020, Faberlic earned 28.5 billion rubles. That netted Nechayev 4.3 billion rubles in dividends for that year – more than enough to found a political party.

Faberlic’s range is currently sold by 2.1 million consultants. “We wanted to talk to people from a position of warmth and trust… Each month we hold 35-40 big seminars across the former Soviet Union, and about 100 smaller events. These train up to 30,000 people. Our consultants love to sing and compose ditties about Faberlic, about our products, even about an intimate gel. These are the quirks of a team of women,” Nechayev said in a 2004 interview with Vedomosti. For distributors, the company offers ‘Success Forums’ in Turkey, rafting on the mountain rivers of Altai and maternity bonuses for new moms. “All my life, I have been building social networks,” Nechayev said.

New People

Nechayev’s first foray into politics was prior to 1999 parliamentary elections. Back then, he founded the Russian Line group — but it never contested an election and shut-down in 2007. Nechayev said Russian Line was more of “a forum to search for answers to the turmoil of the 1990s” and when that turmoil eased there was no need for it.

New People emerged in March 2020 when the Kremlin green-lighted the creation of several ‘small parties’ with an eye to this month’s parliamentary vote. The idea was that they would attract votes away from larger opposition parties that had ‘overperformed’ in 2018 local elections. Even publications like newspaper Kommersant have written about the close links between Nechayev’s party and the Kremlin.

Nevertheless, Nechayev strongly denies such links. “Someone might call us a Kremlin project, but I don’t care,” he told The Bell. “I know for certain how I came here, what brought me here, and who is here with me.” A political strategist close to the Kremlin said Nechayev had been discussing political projects with the authorities as long ago as 2010. Nechayev denied this. “Nothing like that ever happened,” he said.

In its first election campaign in local elections last year, Nechayev’s party did better than expected. While other small parties struggled, New People took seats in four regional parliaments and several city councils. In Tomsk, the new party won over 15 percent of the vote.

Three political analysts attributed New People’s popularity to effective media and social media campaigns. According to official figures, New People spent more on campaigning in the first quarter than all the other non-parliamentary parties put together – 15 million rubles. Unofficial figures suggest the real spend was even higher.

At this year’s election, New People wants to end up with deputies in the State Duma. To achieve this, it must get at least 5 percent of the vote. If it succeeds, it may come as an unpleasant surprise to the Kremlin (political managers in the Kremlin reportedly do not want New People to get any deputies). A clutch of small political parties were apparently created to ensure the legitimacy of the polls and split the opposition vote — not to win enough votes to actually get representation in parliament. If parties do not win 5 percent of the vote, their votes are split between the parties that do. “The party [New People] was created for one reason – to collect protest votes,” according to one political analyst. “The 2020 election showed that it could get results, but the party started gaining votes not from supporters of [opposition leader] Navalny or the Communists, but from United Russia. It transpires there is a big overlap between the ruling party’s electorate and New People supporters.”

Why the world should сare: New People’s results are one of the most interesting things about this election. All the rest is — more or less — predictable. However, many analysts suspect New People may be another Kremlin ruse to create the ‘illusion of competition’. And even if the party does find itself in the Duma, it is hardly likely to foment revolution. Nechayev has said he doesn’t intend to ‘smash the system’, but, rather, to ‘start talking to it’.

Russian minister, Putin confidante dies in cliff-top tragedy

Minister of Emergency Situations Yevgeny Zinichev died Wednesday in the Krasnoyarsk region of Eastern Siberia. The ministry said that Zinichev — also a military general — hit a rock when he jumped into a river to try and rescue a renowned film director. But there is an alternative – less heroic – version of events. Zinichev is a former deputy head of the Federal Security Service (FSB) and known to be close to Putin.

  • Zinichev’s death was announced Wednesday afternoon. At first, the Emergency Situations Ministry said Zinichev had died in an inter-departmental training exercise. Later, the ministry released more details. There were apparently training exercises in the Krasnoyarsk Region that day, but Zinichev’s death was not linked to them in any way. Instead, the tragedy occured when the minister accompanied film director Alexander Melnik on a helicopter trip to the Kitabo-Oron waterfall in the Putorana nature reserve. Melnik, a prize-winning Russian director, has long co-operated with the ministry. He was working on a documentary about the Arctic and the Northern Sea Passage.
  • Zinichev traveled with the director to assess the 27-meter high Kitabo-Oron waterfall as a possible filming location. According to the ministry’s version of events, the 63-year-old director slipped on wet rocks and fell into the water. Zinichev, 55, leapt to his aid but hit a stone ledge and suffered a head injury.
  • But there is a second version of events, as described by independent media outlet Novaya Gazeta. According to the newspaper’s source, when Zinichev and Melnik approached the waterfall, one of them lost his footing and grabbed at the other. Both men lost their balance on the slippery rocks and fell together from the height of an eight-story building. Novaya Gazeta noted it is not recommended to climb near the waterfall without specialist equipment.
  • Both men were airlifted to hospital in Norilsk, but neither recovered from their injuries. President Vladimir Putin described Zinichev’s death as an “irreplaceable loss” and posthumously made him a Hero of Russia. “The minister died trying to save others,” said the Ministry for Emergency Situations.
  • This heroic narrative has been questioned by many. Journalist and commentator Oleg Kashin said the false heroic narrative was a “test of public loyalty… [and showed] a willingness to swallow Kremlin lies.”
  • Doubts were further fuelled by the fact that it was Margarita Simonyan, editor-in-chief of state-owned television channel RT, who was the first to report the heroic version of the story (a film crew from the channel apparently witnessed the tragedy). After her, a familiar chorus of pro-Kremlin celebrities joined in.

Who was Zinichev?

Zinichev’s official biography is somewhat patchy. For example, nothing is known of his upbringing. We only know he was born in Leningrad in 1966. But in 2006, Zinichev began accompanying Putin on all work trips. At the time, Russian state news agencies described him as an FSB officer. However, a source close to the Kremlin told media outlet RBC that Zinichev was an adjutant to the head of state.

Zinichev was briefly appointed governor of Kaliningrad Region in 2016 (his 70-day tenure was a record for the shortest stay in such an office). He left the post ‘for family reasons’. During his time as governor, he was noted for a single media briefing that lasted just 49 seconds and in which he answered only two questions.

After that, Zinichev worked for the FSB, and was then transferred to become the head of the Emergency Situations Ministry. That year — 2018 — was a difficult time for the ministry. Two months earlier, 60 people, including 37 children, had died in a fire at a mall in the Siberian city of Kemerovo. The blaze exposed a mass of problems in Russia’s fire services and the ministry. In his new role, Zinichev immediately began recruiting more staff, created a new safety department within the ministry and reversed a ban on planned inspections of small and medium businesses. “Under Zinichev order started to return,” an employee of one of the regional divisions of the ministry told Kommersant.

Why the world should сare: The head of the Emergency Situations Ministry is not the biggest political job in Russia and its ministers rarely make important announcements. But human lives depend on the ministry’s work. Under Zinichev, there were no serious complaints about its functioning. It is not yet clear who will replace Zinichev, nor how the department might change under new leadership.