Billionaire Vladimir Potanin just wants to live a quiet life. But when his company Norilsk Nickel spilled over 20,000 tons of diesel into the Arctic, Russian environmentalists went ham. Now they’re calling him out. They want him to take the blame for one of Russia’s worst-ever oil spills.
“We are very sure that this accident has happened due to poor management of environmental safety and risks. This is why we sent an open letter to Potanin about this,” says Alexey Knizhnikov, the head of WWF Russia’s Responsible Industry Program in Moscow.
Nornickel’s stocks have been in decline since. The company is the world’s largest producer of palladium and high-grade nickel and a major producer of platinum and copper.
Journalists from the media association Syndicate-100 said that on three different occasions, local law enforcement attempted to arrest journalists from the Novaya Gazeta newspaper who had come to Norilsk to report on the ecological catastrophe on May 29.
Damage to a diesel fuel storage tank resulted in a fuel leak at Nornickel’s Heat and Power Plant No. 3 (HPP-3) in the Kayerkan neighborhood of the city of Norilsk, pouring over 20,000 tons of diesel fuel onto grasslands, into the Ambarnaya River and possibly some waste being carried from the river into the Pyasino Lake. The accident was caused by a sudden collapse of supports holding up a fuel storage tank that had been accident-free for more than 30 years.
A total of over 33 kilotons of water and fuel mixture has been collected in the area, including near Arctic permafrost, with over 172 kilotons of contaminated soil removed. According to the company, some 90% of fuel has been collected and removed to date.
It is unclear if any of this will reach the Arctic Ocean.
“Potanin is trying to hide the true scale of the tragedy. The responsible authorities under his control deliberately hush up the fact that the contaminant is moving to the north,” writes Moscow hydrogeologist Georgy Kavanosyan after visiting the spill. “Potanin is trying to downplay the magnitude of the disaster.”
Right now, Potanin is laying low. No one from the company returned a request to comment on the WWFs push to blame Russia’s richest business man for the accident.
Here’s part of the WWF letter gunning for the billionaire:
“We believe that in this situation, the company’s management and you personally must take full responsibility for the environmental disaster that has occurred and immediately provide a full range of emergency measures to eliminate damage and prevent similar situations in the future at the expense of Norilsk Nickel.
First of all, we expect a maximally open position and informing both about the causes and consequences of the accident, and about the measures taken. In the first days after the accident, we observed an attempt to hide what had happened. WWF-Russia experts, having received information about the scale of the accident from social networks, had to intervene and inform the Marine Rescue Service.
Such secrecy, as well as the provision of false information is unacceptable.”
WWF, Greenpeace and others said Nornickel remained quiet for too long about the disaster, a disaster they compared to the Exxon Valdez spill off the coast of Alaska in the 1990s.
The accident was made public only two days after the fact, when images of the catastrophe had gone viral on social media.
Russian President Vladimir Putin declared a state of emergency and ordered a large scale clean-up operation.
Greenpeace estimates the environmental damage to Russia’s Arctic marine ecosystem at $1.4 billion. It will take nearly 10 years for biodiversity in the Arctic waters to return to pre-accident levels, Russian environmental officials have said. The fragile ecosystem is home to many species seen only in Russia’s Arctic, leading some alarm-ringing environmentalists to call this “the Arctic’s worst-ever environmental disaster.”
Nornickel blamed thawing permafrost for the tank implosion. WWF accuses Nornickel management and Potanin himself of using global warming to avoid punishment for the company’s ageing infrastructure, and hide from potential gross negligence and mismanagement. Some workers were fired last month over a separate issue from the original spill, but related to its clean-up effort.
Observers say the aging Soviet-era infrastructure was years beyond its safe use. Investigators discovered that the collapsed tank was built in the 1980s and most likely never upgraded. Officially, the faulty tank was decommissioned in 2016 and was to undergo a $2 million refurbishment, but it was still used and here we are today.
The Board of Directors has brought up this issue of aging equipment in the past, but there’s been no movement on it, based on a quote in the Financial Times.
“What Norilsk did…is what all Russian companies with old Soviet assets do. They don’t want to invest in modernization,” Evgeny Shwartz, a former head of conservation policy at the WWF who is an independent director at Norilsk today told the Financial Times.
Russian authorities have since launched a criminal probe, with Putin issuing stern words about the company’s handling of the disaster. But this appears to be the extent of the damage so far — leading some to claim Potanin has gotten away with a slap on the wrist.
Potanin, 59, is worth around $20 billion and is ranked the 41strichest man in the world. He has been the main man at Norilsk Nickel for almost 25 years.
For Russia watchers and investors, Potanin is one of the old Russian oligarchs with close ties to the family of former Russian President Boris Yeltsin and to Putin.
In the 1990s, he held various top positions in the Russian government. He was one of the people behind the so called “loans-for-shares” policy of privatization of state assets post Soviet Union. He used that policy to acquire Nornickel for around $170 million, a company he has turned around and made into a $50 billion metals giant.
Outside of the business world, Potanin is a top sponsor of the “Night Hockey League” founded by Putin. He also plays hockey with Putin from time to time and is one of the country’s most influential business leaders who has Putin’s ears.
This is not the first time Nornickel finds itself in the middle of an international environmental scandal.
In 2016, the company’s Nadezhda plant leaked several tons of iron salts into the Daldykan River near Norilsk turning its waters bright red.
The photos went viral on Russia’s social media and were picked up by many media outlets around the world. For several days, Nornickel denied any blame, but in the end, it admitted that its plant had sent iron slurry overflowing into the waterway.
According to Nornickel employees, Potanin hasn’t been a present figure at Norilsk for years. Instead, he manages it from Moscow or from his home in the French Riviera where he spends a lot of his time.
On July 2, the company announced that seven-year company veteran, Andrey Bougrov, would now oversee the Nornickel’s sustainable development efforts.
Bougrov has considerable experience in dealing with ESG matters and is positioned to coordinate activities across the various stakeholder groups who invest in Norilsk for its environmental and governance policies.
European funds, in particular, are very keen on this and so the spill is a potential lead loss for the company in terms of attracting the woke capitalists of Europe.
Bougrov said that Nornickel plans to step up its cooperation with Russian and foreign researchers and specialist organizations focused on Arctic ecology and permafrost zones to jointly study permafrost environments and find solutions to improve industrial safety in the region.
“Our joint efforts will provide us with the most advanced solutions, while also contributing to the protection of the Arctic,” he says.
Forbes reporter David Dawkins, who covers billionaires for the magazine and its website, estimated that the disaster could cost Potanin as much as $4 billion to fix.
Potanin owns around 34% of the company’s shares, shares that are down around 17% in the last four weeks, while Russian stocks overall are holding their own, down just around 1%.
A large part of his fortune has come from dividends he gets from Norilsk Nickel, which some shareholders said would have been wiser put to use had he re-invested dividends back into the company.