September 5, 2006

Russia and South Africa forge closer ties

By Tom Miles

CAPE TOWN (Reuters) - Russian President Vladimir Putin met
South African leader Thabo Mbeki on Tuesday at the start of a
visit intended to forge closer ties between the mineral and
diamond superpowers.

Putin went quickly into talks with Mbeki after arriving in
Cape Town from Greece for a two-day visit.

Despite long historical ties between Moscow and the ruling
African National Congress (ANC), Putin is on the first visit to
South Africa by a Russian head of state.

But the visit is motivated by hard economic considerations
more than nostalgia and Putin is accompanied by 100 business
leaders hoping to build bridges between two of the world's
biggest emerging market economies.

The Kremlin said in a statement that investment firm
Renova, owned by oil and aluminum billionaire Viktor
Vekselberg, would sign an agreement on a ferro-alloy plant
during Putin's visit.

Renova would sign a "whole range of documents" at a
business conference in Cape Town on Wednesday, including an
agreement to guarantee electricity supplies to its jointly
owned manganese mine and to the ferro-alloy plant.

Renova has 49 percent of United Manganese of Kalahari,
which it says has deposits of several hundred million tonnes of
the metal. South Africa has 80 percent of the world's reserves
of manganese, which is used in steelmaking.

Putin will also oversee the signing of a memorandum of
understanding between De Beers and Alrosa, the South African
and Russian firms that account for around 75 percent of the
world's diamond mining.

The dominance of the industry by the two firms forced them
to accept a deal with the European Commission in February,
under which top producer De Beers agreed to phase out the
purchase of rough diamonds from No. 2 producer Alrosa from


Moscow was a leading supporter of the long battle against
white minority rule, which ended in 1994. Many of South
Africa's leaders, including Mbeki, received military training
in Russia.

Both states have evolved along parallel lines since the end
of apartheid and the fall of Communism, as democracies
struggling with social problems but blessed with mineral

De Beers, 45 percent owned by mining conglomerate Anglo
American, accounted for about half the world market in 2005. De
Beers chairman Nicky Oppenheimer will meet Putin during his
visit. Alrosa, owned by the Russian state, extracts nearly a
quarter of the world's diamonds.

In the banking sector, Russia's Vnesheconombank will agree
a memorandum of understanding with Nedbank, South Africa's
fourth biggest bank by assets, the Kremlin statement said.

Putin, who this year chairs the Group of Eight
industrialized nations, will also talk with Mbeki about wider
trade questions and other African issues.

Putin, a former KGB spy, will also visit Cape Town's Robben
Island, the prison where former South African leader Nelson
Mandela was held for almost 20 of his 27 years in jail during
the apartheid years.