Union official worried Russians could take over Canadian steel plants

REGINA — The union representing workers at Evraz Inc. steel-making operations in Regina and Calgary claims the Russian government could seize Evraz's Canadian assets if the company defaults on an $800-million U.S. loan to a Russian bank.

In a letter to Industry Minister Tony Clement, United Steelworkers (USW) national director Ken Neumann asked the federal government "about the implications for Canadian workers of Evraz's obligations to the Russian government."

Neumann said Evraz Group used the $800-million loan from Russia's State Corporation Bank for Development and Foreign Economic Affairs (VneshEconombank) to help finance its acquisition of the former Ipsco Inc. assets from SSAB last year.

USW notes that Evraz's annual report indicates the loan was secured by the "pledge of 100 per cent of the shares" and "all the moveable and immovable property of Evraz Inc. NA Canada."

Neumann also noted that the chairman of VneshEconombank is Russian Prime Minister Vladimir Putin.

"VneshEconombank's mandate is to develop the Russian economy," Neumann said in his letter to Clement. "Given global overcapacity in the steel industry, it might conceivably prefer to manufacture steel products at facilities in Russia rather than in Canada."

Neumann asked Clement what commitments Evraz made to the federal government when it acquired the former Ipsco assets from Swedish steel maker SSAB.

"Has Evraz met these commitments? Has the government of Canada taken any action to ensure that the Russian government will honour these commitments if it acquires the facilities?"

In an interview Monday, Neumann admitted that the Russian government acquiring the Canadian assets of Evraz Group was a "worst-case scenario" that is unlikely to happen.

But he said USW is concerned about the trend to foreign takeovers of Canadian companies and their impact on Canadian workers.

Neumann said the $800-million loan, which was initially due in December 2009, makes him concerned about the future of the company.

"At the end of the year, when this $800-million loan comes due and the loan is from the Russian government chaired by Putin, I'm a bit nervous about that.''

But Greg Maindonald, general manager and vice-president of Evraz Regina Steel, said the possibility of Evraz defaulting on the $800-million loan is not keeping him awake at nights.

"That is the least of my worries,'' Maindonald said. "I'm much more concerned about employees' skills training going forward. I'm much more concerned about unfair trade by the Chinese, and getting the economic stimulus into this economy.''

Maindonald said the loan was recently renegotiated to extend the deadline another year to December 2010. And he said the company is confident of paying off the loan in full when it comes due.