Trans-World Group

TransWorld Group was an association of commodities traders controlling stakes in most of Russia's aluminum smelters.[1] It was established by David and Simon Reuben.[2]

By 1996 TransWorld was the world's third-largest aluminum producer, behind Alcoa and Alcan.[3] In 1997 it controlled smelters across the former Soviet Union with revenues estimated in at $5–7 billion.[4] In early 2000, Trans-World sold most of its aluminum holdings to Roman Abramovich, who merged them with Oleg Deripaska's company to create Russian Aluminum (today Rusal).[1] In 2010 Rusal went public. The following year, 2011, the British mining giant Glencore, which is headquartered in Baar, Switzerland, acquired an 8.8% stake in Rusal and became one of the firm's largest clients. Until 2015, Rusal was the world's largest aluminium company, based on output, until it was overtaken by China Hongqiao Group.[5] On the 3rd of April 2020 Reuters reported that Rusal had signed a $16.3 billion contract with Glencore to supply aluminium until at least 2024.[6]

History

The aluminum sector was one of the most contested industries during the Russian privatization process.[4] David Reuben had been buying aluminum from the Soviet state since the late 1970s. In the post-Soviet turmoil, Reuben that found he could get the finished metal at low Soviet-era prices and then sell it at market rates.[4] To set up the scheme, he established a partnership with Lev and Michael Cherney.[4] Lev Chernoy's top aide was Vladimir Lisin, who, during the Soviet era, had been second-in-command to Oleg Soskovets when he was a steel-works executive.[4]

Oleg Soskovets, now Deputy Prime Minister, helped the firm in getting official approval for a tolling agreement.[2][7] Under the system, both the raw material and the finished product were the property of TransWorld.[2] The scheme maximized the cost of plant inputs and minimized the selling price for the metals.[2] Trans World concluded its first tolling agreement in 1992, with the BrAZ smelter in Bratsk.[2]

By 1994, Trans-World was selling more than 600,000 tons of aluminum a year, or a quarter of Russia's total exports.[4] As more of Russia's industry was privatized, Trans World bought stakes in the country's largest smelters, to prevent the rise of competitors which also might be interested in signing tolling deals.[4][8]

In the late 1990s TransWorld acquired the Krasnoyarsk Aluminum Factory, Russia's second-largest smelter, in cooperation with Anatoly Bykov.[1] In 2002 the New York Times dubbed Bykov "one of Russia's most infamous mobsters", after he was convicted of conspiracy in a contract killing plot.[9] However, in 2009 the European Court of Human Rights ordered the Russian government to pay him 26,000 euros (approximately $30,000) for illegally detaining him.[10]

Oleg Soskovets was dismissed from his government post in 1996, after falling out of favor with Yeltsin.[11]

In 1997 the company was investigated by the Russian police and the National Criminal Intelligence Service of Britain, but no charges were brought.[12] By late 1997 Trans-World Group was being squeezed out by Russia-based financial groups, and had lost control of parts of its holdings, including Novolipetsk Steel.[8]

References
  1. Klebnikov, Paul (26 November 2001). "Gangster-free capitalism". Forbes. Archived from the original on 2004-09-19. Retrieved 8 October 2018.
  2. Adachi, Yuko (2013). Building Big Business in Russia: The Impact of Informal Corporate Governance Practices. Routledge. p. 67. ISBN 9781135147129.
  3. "Capitalism In A Cold Climate". Fortune Magazine. 12 June 2000. Archived from the original on 2014-10-19. Retrieved 8 October 2018.
  4. Banerjee, Neela (28 January 1997). "Amid Privatization, Controversy: Metals Firm Scores inRussia". WSJ. Retrieved 8 October 2018.
  5. "Rusal", Wikipedia, 2020-03-02, retrieved 2020-04-16
  6. "Rusal, Glencore agree aluminium deal worth up to $16.3 billion". Reuters. 2020-04-03. Retrieved 2020-04-16.
  7. Mobius, Mark (2012). Passport to Profits: Why the Next Investment Windfalls Will be Found Abroad and How to Grab Your Share. John Wiley & Sons. p. 148. ISBN 9781118153840.
  8. "Glory Days Fading for Trans-World". The Moscow Times. 11 February 1998. Retrieved 9 October 2018.
  9. Tavernise, Sabrina (20 June 2002). "A Russian Aluminum Mobster, Set Free, Gains Teflon Status". New York Times. Archived from the original on 2018-01-29. Retrieved 9 October 2018.
  10. Spinella, Peter (2015-04-27). "Russian Gangster Jailed for Contract Killings in 1990s 'Aluminum Wars'". The Moscow Times. Retrieved 2019-12-15.
  11. "Yeltsin fires key security officials". CNN.com. 20 June 1996. Archived from the original on 2005-04-29. Retrieved 9 October 2018.
  12. "Siberia's great smelting pot". The Guardian. 18 February 2001. Archived from the original on 2018-07-05. Retrieved 2018-10-09.
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