Russia row could sink Rusal float

The UK's diplomatic row with Russia shows no sign of cooling - now Rusal's London IPO is under threat...

Last Updated: 06 Nov 2012

The FT reports that Rusal, the world’s largest aluminium producer, is thinking about moving its flotation from London to Hong Kong – partly because of the stricter rules for London listings, but also because of the ongoing feud between the UK and Russia since the murder of Alexander Litvinenko in 2006. Britain is still insisting that Russia give up Andrei Lugovoi, the man accused of the crime; Russia has not only told the government to go whistle but also elected him to parliament. As a result, relations between the two countries are suddenly at their lowest ebb since the Cold War.

Although the row has claimed some slightly strange casualties – last week Moscow shut down the regional office of the British Council, that well-known subversive influence – it has so far not encroached into the business world, where relations have generally been pretty good in recent years. But an executive at Basic Element, the holding company that owns two-thirds of Rusal, apparently told the FT there was now a ‘95% chance’ that it would now list in Hong Kong, where investors are apparently ‘more hungry for Russian shares’. Given the fees involved in a $9bn IPO, we imagine that Clara Furse and the LSE were pretty hungry for the business too, but there you go.

Of course it may be that Rusal is using the diplomatic row as a smokescreen to hide other motives for shunning London – for instance, the $2bn court action it is facing from Michael Cherney, a veteran of the Russian aluminium industry, who claims he’s owed a 20% stake in Rusal. Or it could be that the Russian government is trying to hit the UK government where it hurts – in the wallet.

Russia seems to be in a belligerent mood at the moment; it's apparently spoiling for a fight with several of its neighbours and trading partners. And if it comes down to a straight scrap, we wouldn’t fancy Foreign Secretary David Milliband’s chances of getting one over on Vladimir Putin...

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