Russky Aluminy, Russia's leading aluminum producer, has told The Russia Journal that changes in its shareholding are now close to completion and that it will end the stakes previously held by Mikhail Chorny and Iskander Makhmudov.

The disclosure by a senior company executive, who asked not to be named, suggests that Oleg Deripaska is now in full control of the metal-producing assets that have made up his Sibirsky Aluminy group, and is an equal shareholder in the Russky Aluminy group, along with Roman Abramovich and a group of shareholders from the Sibneft oil company.

The disclosure is aimed also at refuting claims in a New York lawsuit by Base Metal Trading that Chorny and Deripaska continue to do business together in exporting Russian aluminum. The charges have been made by Mikhail Zhivilo, who controlled the Novokuznetsk Aluminum Works (NkAZ) until it was taken over in January 2000 by the Deripaska group.

Zhivilo is currently in prison in Paris, fighting extradition to Russia on a charge of conspiring to murder a regional governor involved in the battle for control of the smelter.

Chorny is under house arrest in Israel, where he is being investigated by the Israeli authorities. His sale of his last Russian aluminum assets to Deripaska began "some time ago" and is close to completion, The Russia Journal was told by the insider.

According to the Russky Aluminy source, Chorny, Makhmudov and Deripaska each had a 17 percent shareholding in the Sayansk smelter in Siberia in 1997. That was enough to form a majority of 51 percent, while the London-based Trans World Group and Mikhail's brother, Lev Chorny, held a minority. Trans World supplied the smelter with alumina and took metal in exchange, according to the terms of tolling schemes through which Trans World managed the smelter's exports.

In 1998, Deripaska mobilized the support of the others to cancel the Trans World export contracts; capture control of the smelter's cashflow; and take over the minority shareholdings. Accused by Deripaska of diverting more than $400 million in export profits from the smelter and starving it of cash, Trans World fought back in the local courts, but lost. Lev and Mikhail Chorny were on opposite sides of the battle. Despite losing at Sayansk, Lev went on to maintain his hold, with Trans World, over the Krasnoyarsk Aluminum smelter until last year. Trans World retained its hold at the Bratsk smelter.

The takeover of Sayansk was the cornerstone of the Sibirsky Aluminy group, which expanded rapidly from 1998, acquiring the Samara Metallurgical Plant, Russia's largest rolling-mill, and production units for foil, can stocks, cans and other assets. In all, Mikhail Chorny held about 20 percent of Sibirsky Aluminy. Without his support against his brother and Trans World in London, industry sources concede Deripaska was unlikely to have succeeded in building up Sibirsky Aluminy.

Last year, when Deripaska and Abramovich reached an agreement to form Russky Aluminy, combining the Sayansk, Krasnoyarsk and Bratsk smelters, Lev Chorny and his allies at Trans World, David and Simon Reuben, were bought out and evicted from the Russian aluminum sector entirely.

By late in the year, Deripaska was also in negotiations with Mikhail Chorny and Makhmudov to acquire their stakes. Chorny announced in the Russian press that he and Makhmudov controlled 50 percent of Sibirsky Aluminy and that he was willing to sell to Deripaska or to anyone else willing to pay his price. In November, Chorny claimed he also had stakes in the Urals Mining and Metallurgical Co., which is headed by Makhmudov; Kuzbassrazrezugol, a coal producer; and Altaikokos, a coke producer.

Makhmudov declined to comment at the time and has kept silence ever since. In the interval, however, Makhmudov visibly expanded his management of Urals Mining, and raised copper production to challenge Norilsk Nickel, Russia's leading copper producer.

According to the Russky Aluminy source, Makhmudov agreed to an asset swap with Deripaska, transferring to Sibirsky Aluminy his 17 percent stake in exchange for Deripaska's stakes in Uralelectromed, Russia's second largest copper producer, and the Kuzbassrazrezugol coal mine. A management change at Kuzbassrazrezugol late last year signaled Makhmudov's takeover and his departure from Sibirsky Aluminy.

In parallel, the Russky Aluminy source told The Russia Journal, Chorny and Deripaska agreed on a sale of Chorny's 20 percent stake for cash.

The target for Deripaska was to eliminate both Chorny and Makhmudov in time to transfer 100 percent of Sibirsky Aluminy's shares into the charter capital of Russky Aluminy. That transfer was one of the conditions agreed between Deripaska and Abramovich for their partnership. Approval of the new aluminum group structure by the Russian Ministry of Anti-Monopoly Policy at the beginning of April was also conditional on ending Chorny's and Makhmudov's positions.