Oleg Soskovets
President, Association of Russia’s Financial and Industrial Groups

EM: Which of the structures among members of the Association of Russia’s Financial and Industrial Groups are interacting with companies in Kazakhstan? Could you tell us, please, about the nature of this cooperation? What help, if any, does the association provide to promote such contacts?
– Kazakhstan is not only our neighbor geographically, it is our strategic partner in developing market relations as well. Some industries of Russia’s economy cannot successfully develop, if interests of Kazakhstan are ignored. One of such areas is the cooperation of unified technological complexes. When market economies of both countries started forming, there were certain property management problems, of course, and, in my opinion, it was a result of separatist trends in Russia and Kazakhstan. Many CEOs understand now that this is not helpful and that, on the contrary, pooling together financial and industrial structures contributes to more efficient business operations.
I personally think that priority directions of both economies are, above all, the development of cooperation in transport, energy and, of course, metallurgy as the most power-consuming industry having to do with heavy freight traffic between enterprises in our countries. Decisions made by leaders of states in connection with creating the Eurasian Union and, in the first place, the Customs Union removed many problems, including those with transporting goods between our countries.
The Association of Financial and Industrial Groups is not just a consulting center. Its activity is not limited to this kind of services only. The Association serves as a brain trust for working out and professionally substantiating promising directions of economic cooperation of Russia and Kazakhstan.
I would like to remind you that such a financial and industrial group as Magnitogorsk Steel, which was set up in 1995, had an experience of dealing with negative effects of various attempts to restrict established economic ties. Kazakh businessmen decided to keep supplies of iron ore from the Sokolovsko-Sarbaiskoye deposit within the republic’s borders. As a result, the Magnitogorsk Iron & Steel Works (MMK) was left without ore. In 1995 and 1996 MMK was forced to spend a lot of money on bringing it to the Urals from the central part of Russia. And only decisions of the Customs Union allowed to remove this problem, the more so as leaders at MMK and the Sokolovsko-Sarbaisky Mining Production Association are mutually interested in managing assets. At present, this economic complex is successfully developing and bringing benefits to both sides. This is just one instance of participation of financial and industrial groups in solving business problems of our countries.
Another area of the association’s activity has to do with providing a wider use of machines and mechanisms, which are made by CIS enterprises, in the Russian and Kazakh mining industries. For example, our efforts brought positive results with respect to drilling rigs and heavy excavating machines manufactured by the Uralmash plant as well as high-capacity dump trucks of Byelorus’ automobile plant. Today all of them are operating at new copper deposits being developed by Kazakhmys, the largest mining-and-metallurgical company.
The next important step was to arrange interaction with coal miners of the Karaganda region. From now on the Russian ferrous metallurgy will be supplied with coking coal from this richest coal basin. We also tried to create a competitive environment, which would permit to use resources of both countries more efficiently.

EM: You make frequent trips to Kazakhstan and often visit the Karaganda integrated metallurgical mill, which you are familiar with quite well. How do you assess changes going on now in the republic’s industry?
– Kazakhstan’s heavy industry, especially its metallurgy, was privatized very successfully. In my opinion, companies’ leaders, including those of Ispat International, who own assets of the Karaganda integrated mill, provided a very effective management. Let me remind you that this mill, which marked its 40th anniversary recently, was one of the most advanced enterprises in the former Soviet Union. But at the beginning of the 1990s the traditional ties were terminated. The enterprise experienced colossal difficulties with marketing its products. Ispat Karmet’s managers, who knew the world market of plates and sheets well, made them the principal products of the mill. They did all they could to secure normal operation of the enterprise. New capacities, including those for producing coated sheet, were commissioned. Large-scale efforts were made in marketing, which led to an upswing of sales in foreign markets. In my opinion, all this was done professionally bringing good results. Today, prospects for increasing production volumes and creating new capacities at this enterprise do not seem too distant. As far as I know, large investments, about $1B, have been attracted. There are plans to introduce continuous casting of steel that will significantly raise the potential of the steel-smelting complex.
Kazakhstan’s copper industry is developing dynamically as well. The republic possesses great reserves of copper ore and has modern technological machinery for producing cathode copper. So, this industry has excellent prospects. And, by the way, this is also the case with the lead-and-zinc industry in Eastern Kazakhstan.

P    R    O    F    I    L    E  Oleg Soskovets was born in May 1949 in Kazakhstan. From 1971 to 1991 Oleg Soskovets worked at the Karaganda integrated metallurgical mill. He started his career as a miller and went up to become its general director. In 1991 Oleg Soskovets was appointed the USSR minister of metallurgy. In 1992 he became Kazakhstan’s first deputy prime minister – minister of industry. In 1992 Oleg Soskovets returned to Russia and became the chairman of the Committee on metallurgy of the Russian Federation. From 1993 to 1996 he was the first deputy chairman of the Russian government. In 1996 Oleg Soskovets was elected president of the Association of Russia’s Financial and Industrial Groups. In 2002 he became the chairman of the Coordinating council of the Association Business Council of Europe-Asia Economic Cooperation. Doctor of engineering sciences, professor. Author of 60 inventions protected by appropriate certificates. 11 inventions are patented in foreign countries. Currently, 30 of Oleg Soskovets’ inventions are used by enterprises of the metallurgical complex.

EM: World metallurgy is experiencing a wave of mergers today. By all signs this is a global tendency that does not recognize national borders. How could it manifest itself in Russia and Kazakhstan?
– I think that we are not mature enough for it yet. Most often, statements of intent to form some super-structures are just of a declaratory nature. We better restrain our ambitions and pay more attention to production and business. Then, results will be more tangible and we will move much closer to the question of merging. It goes without saying that powerful companies are able to influence market conditions, to conduct an effective pricing policy and make large-scale investments. But, first, we should learn how to coordinate interests and obey common requirements.
Post-war Europe with the destroyed economy ventured to form the Coal and Steel Association and accept requirements contained in its charter. These requirements covered such questions as creation of production capacities and their placement, tariff policy, promotion of this or that product. Europe’s economic integration started from that point. The European Union was set up on the basis of economic agreements and their strict observance. Unfortunately, we do not have such an experience.
As for Eastern Europe this process is different. Decisions on whether to liquidate excessive capacities or, on the contrary, keep them by transferring to a larger company are made and carried out fast enough. This is not a spontaneous process. There is a political decision.

EM: Then, a question comes to mind: may anything like that happen to enterprises of the CIS?
– Yes, it may happen, if industries are not reequipped. In the past 10 years programs of reconstruction and modernizations were implemented with much delay and not to the full extent. We are waiting for investments but we have to understand: western investors will never come to Russian enterprises, if they do not obtain the ownership right. If they become owners, then, they will get interested in developing metallurgy.

EM: How do you assess the efficiency of existing intergovernmental structures that include representatives of Russia and Kazakhstan?
– Apart from friendly personal relations demonstrated by the heads of our states broad and multi-level contacts should develop between enterprises, financial organizations, unions, associations. There should be respect for each other’s interests and obedience to common rules. If we come to this, then, the rapprochement of our economies will become a reality.