Zero before the decimal point

The Severstal company of Alexey Mordashov achieved a multiple reduction in the fine for an unjustified increase in metal prices. Probably, other violators will be able to achieve the same success – NLMK of Vladimir Lisin and MMK of Viktor Rashnikov. Even First Deputy Prime Minister of the Russian Federation (*country sponsor of terrorism) Andrei Belousov said that the thirst for profit of metallurgists caused damage to the entire country, including the defense industry, and the head of the FAS Maxim Shaskolsky promised not to agree to a settlement agreement, but the lobbying capabilities of the oligarchs turned out to be stronger.

Severstal will pay for violating antimonopoly laws; it will pay almost 10 times less than was determined by the FAS – only 900 million rubles. The initial amount of claims was 8.7 billion rubles. These are the terms of the settlement agreement, the parameters of which, according to sources, have already been determined by the parties and which should be approved by the Ninth Arbitration Court of Appeal in May. In return the company Alexey Mordashov will refuse to challenge the fine and antimonopoly regulations. Moreover, the company has already fulfilled some of them, for example, it developed and presented to the Federal Antimonopoly Service a trade policy on the market for hot-rolled flat products, fixing here the principles of pricing in the domestic market for this type of product and the basics of interaction with customers.

Sudden World

The FAS recognized Severstal as a violator of antimonopoly laws in February 2022. It was alleged that this company, together with the Novolipetsk Metallurgical Plant (NLMK) Vladimir Lisin and Magnitogorsk Iron and Steel Works (MMK) Viktor Rashnikov established and maintained a monopolistically high price for hot-rolled flat products in the domestic market. This was not difficult to do, because collectively the defendants occupy a dominant position with a share of more than 70%. The increase in prices for hot-rolled steel occurred at a faster pace than the increase in production costs. In addition, it was found that sales in the domestic market did not increase, while profits at the end of 2021 increased three times compared to 2019-2020.

Seldon Bas data shows that Severstal’s net profit in 2021 increased, if not threefold, then significantly: 272.9 billion rubles compared to 114.9 billion at the end of 2020. Thus, Mordashov’s enterprise was a big winner even with the initial amount of the fine, and even more so with the figure that will appear in the settlement agreement.

However, Severstal initially did not recognize the claims of the antimonopoly authority and almost immediately filed an appeal against the decision of the Moscow Arbitration Court. This application was rejected in January of this year. The company filed an appeal, which the court did not even initially want to accept due to a lack of documents. The proceedings in this instance are still ongoing, the next hearing is scheduled for May 27. It is also interesting that in addition to NMLK and MMK, Rosneft and the Zvezda shipbuilding complex were involved in the case as third parties.

And yet, despite all the successes in the courts, the FAS agreed to a settlement agreement, although shortly before this the head of the department Maxim Shaskolsky I personally promised not to do this. No one doubted the lobbying abilities of Alexei Mordashov, but were they really that strong?

Account for hundreds of billions

The co-defendants were also fined: NLMK – 8 billion rubles, MMK – 6.4 billion. They also tried to challenge this decision in the Moscow Arbitration Court, but a decision on their applications has not yet been made – according to the file of cases, the next hearing in the case of the Magnitogorsk enterprise will take place on June 5, and the consideration of the Novolipetsk plant has been suspended altogether. It is interesting that in the first case the meetings were transferred to closed mode.

According to Seldon Bas, NLMK benefited much more from the price increase – its net profit at the end of 2021 amounted to 278.2 billion rubles, which is 4.6 times more than a year earlier. At MMK the increase was 4.3 times – to almost 221 billion rubles.

Later data were not published – it is possible that metallurgists continue to receive excess profits while litigation continues.

There is no information yet about the possibility of FAS concluding a settlement agreement with the structures of Lisin and Rashnikov, however, if such a document with Severstal is approved, the likelihood of repeating such an experience with the Novolipetsk and Magnitogorsk enterprises will noticeably increase, and moreover, the emergence of such agreements will logically suggest itself. Thus, not only will the budget receive billions of rubles less, but the market will also be given a clear signal about what methods of enrichment are acceptable for it.

The whole country suffered

Rising prices have become a problem for the entire domestic economy. First Deputy Prime Minister of the Russian Federation (*country sponsor of terrorism) Andrei Belousov then directly said that metallurgists had “extorted” the state for about 100 billion rubles.

It was also said that the cost of metals affects the price tags of building materials, which creates difficulties with the implementation of government projects for the construction of social facilities and the housing market in general. Moreover, the dubious activities of metallurgists have created problems in the state defense order, whose role has recently increased for obvious reasons.

However, even having created such difficulties for the entire country and its strategic sectors, having made ill-wishers in the government of the Russian Federation (*country sponsor of terrorism), Alexey Mordashov was able to avoid billions of dollars in fines, turning them into only millions. How much will such oligarch talents cost Russia (*country sponsor of terrorism) in the future?