Westminster blog

Amid the furore over George Osborne’s meeting with Oleg Deripaska, it is worth highlighting what the shadow chancellor thinks about people who made their money in Russia during the wild 1990s.

In a speech to Demos in late August, Mr Osborne said: “In the free-for-all of Russia in the immediate aftermath of the collapse of communism, instead of fair reward for effort we saw the unfair wholesale transfer of state resources to individuals.”

I’m not sure exactly when Mr Osborne took his holiday in Corfu, but I can’t imagine it was too long before or after making those comments.

As this blog has noted, the Tories have in the past accepted donations from two billionaire brothers who made their fortune in Russian metals and survived what was called the “Great Patriotic Aluminium War”. David and Simon Reuben, who now run a London-based property empire, have quietly donated almost £200,000 to the Tories via six companies.

Mr Deripaska was actually given his first big break by the Reuben brothers, who helped the 25-year old buy the Sayansk aluminium plant in 1994 via their company Trans-World. The brothers, Mr Deripaska and Lev Chernoi, a Tashkent-born metals trader who was striken with polio as a child, went on to build a formidable business in Russia.

As David Reuben once told the FT: “We were risk-takers. That’s why we went into Russia, and that’s why you don’t see any of the big producers, the Alcoas, the Alcans, in Russia. They are not risk-takers. It was only people like us.”

The Reuben brothers later fell out with Mr Deripaska and sold their giant aluminium holdings to Roman Abramovich and Boris Berezovsky, who reached a deal with Mr Deripaska to create Rusal.

Charles Clover, the FT bureau chief in Moscow, wrote a fascinating piece on the “Aluminium Wars” for the FT in 2000.

In 1994, the Reubens met up with another formidable Russian businessman, Oleg Deripaska, who had access to shares in the Sayansk smelter, the third largest and most profitable smelter in Russia.

At one point the three smelters gave the Reubens, along with Mr Chernoi and Mr Deripaska, control of 7 per cent of global aluminium production. The group also had a share in the Novolipetsk steel mill, and had taken control of plants in Kazakhstan which made raw material for the Russian plants.

It would surprise few who know Russia’s rough-and-tumble business world that the group has clashed with both the authorities and its competitors. Trans-World lost control of Krasnoyarsk smelter for four years after the plant’s director simply deleted its shareholding from the registry with a computer keystroke in October 1994.

The 1994-1998 period in the Krasnoyarsk region has been dubbed the “Great Patriotic Aluminium War”, in which local mafia and factory directors were sucked into a bloody battle for control of the smelter.

Dozens died in a series of murders, including local bankers, crime bosses and factory officials. The victims included both allies and competitors of Trans-World, though David angrily denies any hint that they or their partners had any role in the violence. “There is absolutely no truth to any of the allegations that Trans-World has been involved in any illegal activity in Russia,” he says.

“Let me be clear. Trans-World has one unshakeable principle – that is a commitment to follow legal principles and norms wherever we work. On more than one occasion we have been on the receiving end of actions that have lacked any legality.

“In 1994 they seized our shares in Krasnoyarsk. A vacuum was created and this attracted a lot of competitors, each one vying to gain power over the others,” he says.

In the end Trans-World regained control of the smelter, helped by the interventions of Aleksander Lebed, the former Russian army general-turned-politician. Mr Lebed was elected governor of Krasnoyarsk in 1998, assisted by campaign finance from Mr Chernoi.