Kyiv court nationalizes Rusal's factory

The Ukrainian government says the world's largest aluminum producer hasn't fulfilled its investment obligations.

A Ukrainian court claims to have renationalized a Zaporizhya-based aluminium smelter owned by Russia’s Rusal, the world’s largest aluminium producer, allegedly for failing to fulfill investment obligations.

Ukrainian prosecutors said on May 18 that Kyiv’s Appellate Business Court had one day earlier nationalized a 68 percent stake in the factory.

But Rusal, owned one of Russia’s most influential oligarchs, Oleg Deripaska, shot back in a statement insisting that it still remained in control of the factory, valued by analyst at “hundreds of millions of dollars.” Rusal pledged to challenge nationalization as high as Ukraine’s Supreme Commercial Court.

According to the London-based Financial Times newspaper, the standoff demonstrates that courts under President Viktor Yanukovych – long labeled as pro-Russian by critics – do not shy away from challenging the business interests of Russia’s most influential oligarchs.

“This is one of the first sizable assets in Ukraine taken away from big Russian businesses by Ukraine’s leadership,” Vadim Karasiov, head of Kyiv’s Global Strategies Institute told the Financial Times.

"It shows that Yanukovych is not pro-Russian, as he was earlier labeled to be. In contrast, he represents the interests of Ukrainian business clans, which from time to time compete with Russian oligarch-business clans.”

Kyiv officials insist the dispute is about business, not politics.

Ukrainian prosecutors said the court found that Rusal’s affiliates had failed to uphold investment obligations. Rusal has sharply cut production over the years, from 112,800 tons in 2008, halting it earlier this year after Ukraine’s government declined to lower electricity tariffs. Rusal says operating the plant under current tariffs is not profitable.

Experts said there were no signs that Ukraine would next try to nationalize Rusal’s more prized asset in Ukraine, Mykolayiv Alumina Plant, which produces raw materials used in making aluminium.