Falling for the Sideshow? The Real Battle is Far from the Barricades

The big news from Russia has been yet another series of arrests at an opposition rally. Nemtsov and Limonov were predictably hauled off while astute bloggers dissected Putin’s latest macho threat that unauthorised protesters would be hit upside the head with a truncheon.

Yet behind these political theatrics, another much less boisterous yet much more important conflict is being meticulously played out. One whose outcome may do more to shape Russia’s -and Putin’s- future.

This is the conflict between court oligarchs and rival shareholders Potanin and Deripaska over the control of Norilsk Nickel, the world’s largest nickel producer. Yesterday, Putin personally tried to mediate in the increasingly acrimonious tug of war for one of the country’s most strategic assets.

Indeed, unlike the gruff public persona he deployed when dealing with demonstrators, Putin was silky smooth and subtle in his meetings with Potanin and Deripaska. He chose his words very carefully and avoided any harsh words, delivering a subtle rebuke to the latter and ruling out any ‘third party’ state intervention.

There is more than just Russia’s mineral wealth (and the regime that it nurtures) at stake here. Norilsk is a giant factory town whose terrible environmental and social conditions make it a prime candidate for the kind of unrest that crippled Deripaska-controlled Pikalevo last year and that could seriously undermine the government’s stability.

Hundreds have died in the original battle for control of Russia’s natural resources, when Deripaska crowned himself king of the country’s aluminium reserves. Potanin, who acquired much of his wealth during loans for shares by using his extensive Kremlin connections in shady circumstances, is no less a pushover. Yet both oligarchs are Putin approved survivors who outlived the purges of their one-time contemporaries Berezovsky and Khodorkovsky.

Right now, many of Russia’s strategic resources are in the hands of such loyal oligarchs. Until recently, they maintained a sort of cartel over their respective goodies, but now, it seems that there is a push to expand, consolidate and renegotiate ownership. Sometimes, this is welcomed. But at other times, it can cause problems. Perhaps in a related development, the government is now holding back from transferring any more vital assets into private hands.

The Norilsk wars present a major challenge for the leadership; something that, unlike a mere protest, a few truncheon blows can’t fix.