A deal to cap dividends at Nornickel, the world’s top palladium and refined nickel producer, will lapse at the end of this year as its co-owners avoid renewing a row which could anger the Kremlin, three sources familiar with the matter told Reuters.
Moscow brokered a 10-year accord between Nornickel’s two largest shareholders in 2012 – Russian businessman Vladimir Potanin and Rusal, then controlled by Oleg Deripaska – protecting its dividend payouts with a formula based on a ratio of its debt and earnings.
The deal expires at the end of 2022 and there are no talks to renew it, the sources said, because neither Potanin nor Deripaska wants a dispute at a time when Moscow faces Western sanctions over what it describes as a “special military operation” in Ukraine.
The pair, who are two of Russia’s most powerful businessmen, had previously clashed over how much profit should be returned to investors and how much should be invested in Nornickel. Potanin’s holding, Interros, owns 36% of Nornickel (GMKN.MM) and Rusal 26%.
Nornickel declined to comment. Interros did not reply to a request for comment. A representative for Deripaska, who dropped control of Rusal in 2018, did not reply to a Reuters request for comment.
Rusal said it was “ready to consider all possible options for interaction with our partners in Nornickel”.
“The mechanisms in the agreement to control key decisions, spending of funds, transactions with related parties … have proven to be effective,” it said.
The feud over one of the biggest prizes in the post-Soviet carve-up of Russian industry dates back to 2008 when Rusal bought a stake in Nornickel for $14 billion and Potanin opposed attempts by Deripaska to merge the two companies.
After the tycoons took the row to a London court, the Kremlin sought to restore order: a minority shareholder was brought in to act as a buffer between them in 2012.
“It is not nice to make unnecessary noise amongst each other in Russia now,” one source familiar with both shareholders’ thinking told Reuters. “They are likely to put the fight on pause and place attention on their own survival.”
The risk of further sanctions against Russia over Ukraine, a strong rouble and fears of global recession and lower demand in China, are also curbing any appetite for a fight.
“Of course, the government is not interested in major conflicts between major shareholders of major companies that employ many thousands of people,” Kremlin spokesman Dmitry Peskov told Reuters.
Potanin said in July that dividends in 2022-2023 from Nornickel, which has a market value of $43 billion, will be lower than previous payouts – the strategy he has advocated for years.
For Rusal, receiving dividends is not as important as it was a few years ago after it repaid part of its debt and in August recommended its first dividend in five years after strong first-half results.
The shareholder accord was brought back into focus in July when Potanin said a tie-up with Rusal could strengthen the companies’ defences against sanctions.
That idea is not expected to materialize, in part due to British sanctions imposed against Potanin.
“The agreement will quietly disappear on December 31,” another source said, adding that while there could be last minute changes “as of today the chances of that happening are slim to none.”
Nornickel remains strategically important to the Kremlin, employing 72,000 people and guaranteeing social stability in the Arctic city of Norilsk.
Meanwhile, Russian metals exporters have been under pressure to spend more on development at home, rather than boosting dividends, since President Vladimir Putin said last year that they invest more for the good of the country.
“What is happening now in the West is a direct threat to the property rights of our entrepreneurs,” Peskov said.
“They see this, they know this, and in these conditions, investments in Russia are much safer than investment in Europe or the United States,” he added.