Interviews
“What we see today is more than just another economic crisis”
NLMK owner Vladimir Lisin on the consequences of the conflict in Ukraine
Since the beginning of military action in Ukraine and the imposition of sanctions the Russian economy has been faced with a new reality. Few of Russia’s leading businessmen are coming forward with comments on the situation today. NLMK owner Vladimir Lisin shares his position with Kommersant and notes that the situation is very challenging and urges the government not to aggravate through hurried regulation.
For the first time, NLMK’s main shareholder Vladimir Lisin publicly shares his opinion on the issues related to the Ukraine crisis and the sanctions imposed on Russia. The key point on the agenda is not the development of business but its survival, he told Kommersant:
“Supply chains that have taken years to build are being disrupted; logistics, payments, and financial infrastructure are failing. In this context, the rules of the game are changing every day, with new restrictions being imposed. We are changing our business processes and trying to deliver on our social commitments in the face of tremendous uncertainty.”
According to Mr. Lisin, some regulatory initiatives in Russia are concerning. “Obviously, a lot of the measures introduced in the current environment are being rushed through, and their consequences haven’t been analyzed in full. I think this haste should give way to thorough and calm deliberation, to make sure that the consequences aren’t destructive for Russian industry that employs millions of people.”
Among such initiatives he cites one aimed at extending the list of goods to be exported for rubles. On 31 March 2022 Vladimir Putin signed a decree requiring buyers of Russian gas from “unfriendly countries” to pay in rubles. Chairman of the State Duma Vyacheslav Volodin has suggested selling other goods, including metals, for rubles as well.
Vladimir Lisin noted: “The suggestion is to start selling fertilizers, grain, oil, metal, timber, and other goods in rubles. Maybe it could work with gas, but the rest? We’ve spent decades competing on export markets, where customers are not exactly waiting for us with open arms. We’ve established relationships with thousands of customers in 70 countries. It’s hard to imagine how we could convince our customers to switch to settlements in rubles and take on currency risks. Logistical issues have already complicated the delivery of our products to our customers. Switching to ruble payments will just exclude us from global markets.”
Another ill-considered idea, according to Mr. Lisin, is a draft law for delisting Russian companies’ depository receipts from foreign exchanges. “How could this help stabilize the economy? The Ministry of Economic Development thinks that this will reduce the risk of losing control through shares being purchased at low prices. If this is a concern for any of the Russian issuers today then they have the right to make the decision to delist themselves, there is nothing stopping them from doing so. The draft law proposed won’t mitigate but rather exacerbate the risks. This will infringe on the rights of those shareholders that have chosen to believe in Russia, that have invested into the Russian market for many years, such as those that cannot be direct holders of Russian shares. They have nothing to do with politics, and there is a risk that their ownership rights will just be lost.”
“Avoid over-administering”
Vladimir Lisin is not contesting the fact that the Government is looking for mechanisms that can support business in the current environment. “I can see, for instance, that the ministries are working on ways to support infrastructure projects to stimulate internal demand - the possibility of incentivizing construction through preferential mortgages is being discussed, and audits have been suspended. These are constructive but localized initiatives,” admits the industrialist.
In his opinion, the best recipe in the current environment is to give businesses, both big and small, as well as the people themselves, the chance to adjust to the current reality: “Avoid over-administering - it will only harm business. What we see today is more than just another economic crisis like those that we’ve faced in the past. The situation today requires a much more serious approach, and sound, well-thought-out decisions.”
In particular, Mr. Lisin noted that fixing the prices of steel products on the domestic market and stepping away from formula price setting based on market indices won’t make life easier for businesses. “Suppliers of materials, equipment, and spare parts have dramatically increased their prices over the past few weeks. Freezing prices for end products in this environment will just result in production being discontinued due to losses.”
“We are already seeing a rise in transportation costs,” Mr. Lisin says, “No sooner had the Russian Railways proposed a 30% increase in tariffs for export steel shipments, than they submitted a new proposal for quarterly tariff indexation based on the rate of inflation and currency exchange rate difference. The idea of indexing transportation tariffs while fixing prices for everything else will result in it only being possible to transport metal and fertilizers by rail – and everything else only by road. This would be a complete collapse for agriculture.”
According to Mr. Lisin, another concerning initiative is aimed at creating a consolidated railcar fleet managed by Russian Railways: “Private companies supported Russian machine-building and spent 2 trillion rubles on acquiring new cars that now account for over 70% of the entire fleet. These companies are now being urged to hand these over to be managed by Russian Railways. Why? It seems like the times of chronic railcar shortages have been forgotten. Meanwhile, Russian Railways already has the leading fleet operator in the country – Federal Freight - that can be used to help achieve all of the state’s objectives.”
“The deaths of people must be stopped by any means possible”
Russian business is caught in the crossfire between regulatory initiatives from the authorities on the one hand, and the constant threat of Western sanctions, including personal ones, on the other.
“It is hard to reduce my attitude to personal sanctions down to one simple thought or emotion,” Mr. Lisin explains in response to a question from Kommersant. On the one hand, the businessman continues, they have a direct or an indirect impact on a great many people that now have to try to work and live in the new reality. Of course, he says, “being forced into this reality is inevitably unsettling because sanctions are capable of destroying everything that had taken many years to create.” And it’s not so much about personal well-being, Mr. Lisin says, but rather a “cascade of negative consequences for tens of thousands of our workers and tens or perhaps even hundreds of thousands of employees of our many partners and customers.”
“On the other hand, and this is an important part of my position on this, it is shameful to complain about sanctions and associated personal inconveniences against the backdrop of the unfolding humanitarian catastrophe,” Mr. Lisin added, “Sanctions may be perceived as unfair or carrying elements of collective liability, but the death of people and the destruction of cities need to be stopped by any means possible.” According to Mr. Lisin, economic measures may be seen as today’s “alternative to military actions giving the situation a chance not to escalate into a global conflict, which will be a catastrophe for everybody.”
Sanctions and the shooting sport
Vladimir Lisin is the President of the International Shooting Sport Federation (ISSF). After the start of the military operation in Ukraine, the ISSF moved the European Shooting championship out of Moscow and suspended Russian and Belarusian athletes from competition. The Russian authorities perceived this as an infringement of the RF athletes’ rights. Talking about Vladimir Lisin and Arkady Dvorkovich, the President of the International Chess Federation on March 30 in an interview for “Sport-Express” daily, Oleg Matytsin, Russian Sports Minister, stated that “the priority should be to defend the basic Olympic principles and the unity of sport that do not allow politicization of sport and discrimination of athletes”, and not “personal interests and perspectives to continue as a leader of an international federation”.
Vladimir Lisin thinks that the position of the authorities makes the situation of the athletes only worse. “It is necessary to decide what we are looking to achieve in this: do we want Russian athletes to be full members of the international sports and Olympic movement or to turn them into outcasts with limited opportunities to compete”, Mr. Lisin says.
“Starting from this year, many international competitions will offer quota places, for example, for the Paris 2024 Olympic Games,” he goes on to explain, “Opportunities should be created for athletes to be allowed to participate in these competitions. When an athlete is prescribed temporary abstention, it’s not a tragedy,” Mr. Lisin says. “It’s a type of situation that is much easier to defuse, even if the accusation is not fair. Escalating the problem into a stream of insults and lawsuits, that’s what I call “unrestrained” behavior. And if the situation is escalated by the state authorities that cannot interfere with the activities of the public sports organizations to begin with, it won’t lead to anything but athletes being banned from international competitions. They seem to have forgotten that five of our national federations are already suspended. It is a much more serious problem that not participating in current competitions,” he says.
According to Mr. Lisin, the way out of the crisis for sport is through taking stock of past errors. We need to expand internal competitions, work on improving the quality of sports reserves, sports schools, and sports education. It’s high time we changed our approach to physical training in schools with a priority of health and well-being rather than the state GTO PE standards. With a focus on physical culture and mass sports. All of this is way more efficient, and more importantly, healthier than politicizing sport.
Source: Kommersant.