CNBC EXCLUSIVE: CNBC TRANSCRIPT: CNBC'S ERIN BURNETT SITS DOWN WITH RUSSIAN OLIGARCH OLEG DERIPASKA TODAY, TUESDAY, FEBRUARY 15TH ON CNBC'S "STREET SIGNS"
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Russian Oligarch Oleg Deripaska today, Tuesday, February 15th on CNBC's "Street Signs" at 2PM ET. Excerpts of the interview will run throughout CNBC's Business Day programming beginning with CNBC’s
“Squawk on the Street.”All references must be sourced to CNBC.
ERIN BURNETT: Thanks so much for being with us, Mister Deripaska. We appreciate it.
OLEG DERIPASKA: Okay.
ERIN BURNETT: So you're all about commodities, everything you do. - nickel, copper and cobalt, water now too. And a lot of them are at or near record prices. Is that sustainable?
OLEG DERIPASKA: --Part of it is because of quantitive easing. But-- I think a key driver, of course, is growth and-- development in-- China-- Korea-- India, in the whole of Asia. And better-- let's say-- stable growth in countries like Russia and Brazil.
ERIN BURNETT: You mention quantitative easing. How much of the price increase is due to the U.S. Federal Reserve?
OLEG DERIPASKA: No one knows.
ERIN BURNETT: But part of it?
OLEG DERIPASKA: Of course. yeah.
ERIN BURNETT: So, what do you think the downside is, or is there any downside?
OLEG DERIPASKA: From quantitative easing.
ERIN BURNETT: Uh-huh (AFFIRM).
OLEG DERIPASKA: Well, it is bringing up soft commodity prices. It is reflected in the food prices. You know, basic inflation. It is affecting stability in countries with a high proportion of low-income people. We've seen the effects of that in the Middle East.
ERIN BURNETT: So, what about China? You've chosen to list your companies there, and you do a lot of business there. Do you think that China can keep growing at ten percent a year?
OLEG DERIPASKA: I mean, China will definitely grow until-- you know, 2015. Then they have this, you know-- leadership transition. But their policy, you know, is to support-- urbanization. They are trying to develop more of their western regions. And-- of course-- the opportunity for-- for people to use, retail credit, and financial instruments is creating a lot of demand for product like cars and kitchen appliances and also driving a boom in the housing market.
ERIN BURNETT: Do you think that the leadership transition in China will be smooth? Do you have any concern about that at all?
OLEG DERIPASKA: I have no concern. But it will be different policy.
ERIN BURNETT: And is China—
OLEG DERIPASKA: Different people, different policy
ERIN BURNETT: So, the demand from China, it's all real?
OLEG DERIPASKA: It's all real, but not in aluminum. In aluminum, they're almost self-sufficient. But they will become a net importer of aluminum in say 2012-- 2013.
ERIN BURNETT: You're the biggest aluminum company in the world. Is it fair to say outside Russia you're putting all eggs in the China basket?
OLEG DERIPASKA: Not just China, northern Asia. Korea, Japan. But China is very important. You've seen, for example, China is the number one car market in the world. And-- they will produce more cars. And aluminum-- is a key to that. Transportation, cars, buses, trains, planes.
ERIN BURNETT: They want their planes too now.
OLEG DERIPASKA: Yes, and they will. Yeah. And-- construction. And these are the key areas for-- aluminum
ERIN BURNETT: Everyone says this is the century for Asia.. It used to be about America, now it's about Asia. Do you agree?
OLEG DERIPASKA: They're very dynamic. And-- they're producing as many engineers as they need. Well, for example...in the United States., President Bush announced a nuclear strategy. But if you look at the age of nuclear engineers, which work for U.S. companies, they're over 50 average.
And-- in China, they're in their mid-30's, you know. Maybe even even younger. That's why it a different dynamic. Although America has its-- own opportunity, especially as they, you know, realize that their market is letting America sell to America. You don't need to spend so much money in the Middle East.
And actually, Obama announced to the public that they're going to double export. And-- the way to double them, to secure a market for themselves, is in Latin America.
ERIN BURNETT: You're looking at the Americas, too, aren't you?
OLEG DERIPASKA: Canada is very important for Russia. There are a few countries, which are very important for Russia. You know, regarding China, if you look at Australia, 20-- almost 20 percent of Australian GDP is based on China, and China demand. In Russia, it's less than two percent.
ERIN BURNETT: Less than two percent based on China?
OLEG DERIPASKA: Yes.
ERIN BURNETT: Wow.
OLEG DERIPASKA: We (Russia) still have a very, you know, European focus. And-- it's good. You know, and it's actually created a lot of opportunity. Russia could provide, you know, an excellent logistic. You know, if you-- you know, go by train. You know, you can go from Shanghai to Europe, you know, in less than 16 days. By sea, it takes more than 40 days.
And look at Canada! Canada is the same climate zone. Russia-- you know, part of the Russian growth will be in-- in direction to the north and Siberia. And all the solution, you know, for-- for everything. For, roads, you know, for-- in exploration, you know, you can find in Canada.
ERIN BURNETT: Well, I mean, only a Russian would want to come to Canada in February I guess. You're used to the weather. But-- but when you look at all the different countries you could invest in-- you know, June would've been nice where are you putting the most money right now?
OLEG DERIPASKA: In Russia.
ERIN BURNETT: In Russia. And you believe in Russia. It's a good place for returns?
OLEG DERIPASKA: It's safe.
ERIN BURNETT: It's safe?
OLEG DERIPASKA: Of course.
ERIN BURNETT: Well, then, of course, I have to ask you, because a lot of people, when they hear safe, Russia is not the first place they that think of. They hear Russia, and they think-- they think about the mafia, and they think about-- stories about journalists getting killed. And they've been afraid. I mean, recently we had what, three IPOs pulled in London. Some people say it's 'cause investors are scared. What do you say to those investors?
OLEG DERIPASKA: Just, you know, try to understand the reality. You know, for example, if you have a court case somewhere, where will you get fair-- real, you know, justice and real results? You will spend in India maybe-- I don't know, 25 years and you will not get results. In Russia, you know, three, three and a half years maximum, and you can reach a supreme court decision, and it will be definitely be a fair decision. In China-- it's better not to start in any court case because it's so politically driven. That's why in this-- you know, in-- in this aspect, you know, Russia's much more safe.
If you look at-- let's say-- development by Russian region, of course Moscow is different. You know, Moscow is very hot, you know, everyone wants to-- to be there. There are all these issue with corruption. We have a new Moscow mayor who wants to fight it, who wants to change that. But he needs some time, you know, two or three years minimum, you know, to-- to prove what he, you know, tried to develop.
But the rest of Russia needs investors too. And if you look at the south of Russia, or Siberia, and parts of and west is very welcome. And every government will do whatever it needs to do to protect investors' interests.
ERIN BURNETT: What about, though, when they look at the-- Mikhail Khordorkovsky case, which obviously has gotten a lot of press-- around the world as being-- at best -- an unfair trial. A billionaire who is going to be serving another seven years in jail. Is that fair?
OLEG DERIPASKA: Difficult to say. He chooses this way.
ERIN BURNETT: Well, what about-- and I really wanted to get your reaction to this - the Wiki Leaks. And here's what-- the Guardian in London summarized about Wiki Leaks. Let me just read it here. They classified Russia as a quote corrupt, autocratic kleptocracy in which officials oligarchs and organized crime are bound together to create a virtual mafia state. You're an oligarch. Is that description fair?
OLEG DERIPASKA: I'm more on industrial side. If you look how oligarchs-- you know, were created. You know, there was a group of-- businessmen who got, you know, a lot of assets for loans, it was-- the mid-'90s. And-- I wasn't part of the group. We developed all of our companies based on assets, which we acquired or built. That's why it's slightly different in that situation, you know, from what you described. But-- Wiki Leaks, you know, actually shows the level in-- of understanding of state department or any related agency of what's going on in-- not just in Russia. When I read, you know, a lot of reports from Middle East or from Africa, I was quite surprised you know, just—
ERIN BURNETT: That they didn't-- what they didn't understand?
OLEG DERIPASKA: Yeah, you can't find anything, you know, that you can't find on Internet. You know, no real, you know-- intelligence resources or real knowledge or insight.
ERIN BURNETT: Well, and to be fair, this is—
OLEG DERIPASKA: Exaggeration.
ERIN BURNETT: --what a lot of people would say (about Russia) without reading Wiki Leaks.
OLEG DERIPASKA: Exactly.
ERIN BURNETT: This would be the stereotypical—
OLEG DERIPASKA: And to-- you know, it's a stop of-- you know, it's a sort of-- you know, stereotype, you know, and view on Russia. But in 20 years, to have a-- such a transition in a country where, you know, there was no freedom. Where, you know, there was no private property, no market, no institutions, you know, it's actually amazing. You know, and-- of course, we all-- also Russians also expect more. This year will be quite a challenging year with the parliament election and start of the president election. I think-- on top of the crisis, you know, there are a lot of-- new issues on Russian-- on the Russian agenda. And I think, you know, Russia will go in the right direction. We still have a lot of people who are educated and motivated to do, you know, for Russia-- what they can.
ERIN BURNETT: So-- what if you had to choose between-- Vladimir Putin and Dmitri Medvedev for President?
OLEG DERIPASKA: Equal.
ERIN BURNETT: Equal? Cast a vote for each? I guess you can only answer the question that way. Let me ask you-- there was a story today, I don't know if you saw it. Finans magazine in-- in Moscow came out with-- the wealthiest Russians, and you're on the list as $19 billion. That's what they-- they have you on as number for.
OLEG DERIPASKA: Huge-- huge mistake.
ERIN BURNETT: Now, as far as the number, is that right?
OLEG DERIPASKA: Maybe. But, you know. It's fairly inaccurate. You know, people try to, you know, value their asset, but there is a debt, there is a lot of obligation, which, you know, you need to fulfill.
ERIN BURNETT: And on the debt front-- obviously-- everyone's wondering what you're going to do with the Norilsk-- stake (he owns 25-percent of Norilsk). They have another offer on the table for what, $12.8 billion to buy out almost all of your stake. You could use that to wipe out Rusal's debt. You're going to do the deal?
OLEG DERIPASKA: No. Rusal is the best asset. Low cost, and very good-- 500 kilometers from China border. It's located next to the main growth area in northern Asia.. But, if you look at northern Russia, there are only a few companies, which have built there. One of is a Canadian company, Chicault Corre, It's an area full of resources. It's a great area to explore there are only three companies in the world who have the real experience to mine-- above the polar circle. And Norilsk is one of them. That's why, you know, I can say that- neither the board or I will support a decision to sell this trust.
ERIN BURNETT: Right, at any price?
OLEG DERIPASKA: It sounds about-- there is a price, but not the price is established now.
ERIN BURNETT: Right. And I know-- I had seen that you had said $16.5 billion, $17 billion would be a price you would be willing to talk about. Is that still where you stand?
OLEG DERIPASKA: Don't guess.
ERIN BURNETT: How much money are you going to be spending this year on expansion? Maybe you're going to be trying to dramatically change your businesses or buy entire new companies? I mean, why not buy Alcoa?
OLEG DERIPASKA: We're in favor of-- organic growth. (The crisis shaked things up and ) this is completely new world. And-- for us, it's important, you know, to put-- enough money into technology, making sure that we will less depend on resources And-- I have no doubt that sooner or later, there will be any equivalent of carbon tax established. And it's why any power-- you know, power-related business should-- should-- should be based on, you know, almost-- zero, you know, carbon-- process.
ERIN BURNETT: You-- I know you're planning for a carbon tax with-- you know, EuroSibEnergo, hydro power. And I know you've talked a lot about nuclear and-- moving in that direction. Which of those is going to be a bigger bet for you basic element? Hydro or nuclear?
OLEG DERIPASKA: At the moment-- you can develop hydro. And-- you know, a hydro project, you know, is fastest, seven years. And-- our recent development in-- and-- in part-- memoranda which was sent with Zanzipar, one of the biggest Chinese companies, actually provides us an opportunity to-- to develop up to ten gigawatts in eastern Siberia, near China border. Partially it would be for the Russian market, and-- and part would be for export.
Nuclear-- the issue is-- I am favor of small nuclear. Not because of-- economics and not just because of safety, but it's more efficient in my view.
And-- the first project that we are developing will be ready in the middle of 2018. And-- my views there-- we're ahead of anyone in the world by six, seven years. I mean, in-- in reality. There are a lot of nice ideas, but they're not economic. In terms of cost of construction, in terms of the cost of power generation, safety, and all, you know, infrastructure, which would be demanded. That's why nuclear at the moment, still, unfortunately, is a dream. Same as, you know, it was—
ERIN BURNETT: People are afraid of it still.
OLEG DERIPASKA: Yeah, five years ago when Bush, tried to-- promote nuclear. Not many things have changed. And-- but this is the only way...if we want to step-- away, from the dependence upon oil, we need to go nuclear.
And we need to put more efforts to train people. We need to put more efforts to developing a new product. You know, not just, you know, big reactors, but also small reactors.
ERIN BURNETT: And you're-- the one that you're working on is a small reactor, you said. It's-- it's a different prototype than one else has used?
OLEG DERIPASKA: It's the only one that-- private business could-- could afford. You know, the rest should be done by government. You know-- I mean, all-- it should be special arrangement but in the—
ERIN BURNETT: Long guarantees and—
OLEG DERIPASKA: Yeah, at the end of the day, it's a government business. And I'm trying to stay as much as possible on private platform.
ERIN BURNETT: So, let me ask you when the last time was you were in the U.S.
OLEG DERIPASKA: Year and a half.
ERIN BURNETT: Year and a half ago. And that was for what, General Motors?
OLEG DERIPASKA (nods): It was some discussion.
ERIN BURNETT: Some discussion. Okay. Let me ask you, though, about this whole issue. And this is everybody in the U.S.-- I say I'm going to interview Oleg Deripaska, and they say, that guy's scary. That's what they say. That guy is scary. And I just wonder when you hear that, does that make you feel good, or annoyed?
OLEG DERIPASKA: I pay no attention.
ERIN BURNETT: You pay no attention. What about this issue of-- of the visa in the United States? It-- do you think it's unfair? I mean, obviously, every time you read about that-- I know you've been trying to get a visa. They've refused it. Why do you think they won't just change their mind?
OLEG DERIPASKA: Why, of course, it's very broad. But why did the United States push forward NATO. What's NATO. NATO was a counterbalance. I think you maybe need to change a generation- you know, think tanks, advisors,, bureaucrats.
It's very difficult, since they have limited, information. They don't want to discuss it at the moment, and actually-- I have no time to discuss.
ERIN BURNETT: And-- I just wonder if it's frustrating 'cause, you know, in the U.S. right now, you've got Prokhorov getting so much publicity. He's got this basketball team, and he's always in the papers. And I-- you know, I know you guys talk a lot. And I'm just wondering if you think it's kind of ridiculous that he gets to be doing whatever he wants, and getting all these great magazine articles, and you can't come in?
OLEG DERIPASKA: I think you're very American-centric. The world changed. I think you spend better time in Tokyo if you want. If you want to find, you know, good interesting people, you can go to China. And actually, there's Americans all around the world. They visit Russia, they visit all these different times. You don't need to travel. But-- in general, as I said, I think there is a completely wrong understanding of what's going on in Russia. Even with the-- you know, this Khordokovsky case. It's a bad situation.
But in-- you know, the Russian legal system has very much improved based on, you know, this case. Because, there are the judges and that sort of thing to judge the system. Two days ago, there was an interview of a person who-- really, you know, tried to defend his position even though they were under such a pressure. That's why in my view, you just need to let the (older) generation step down. And if you look what they've (the older generation) done in America, not much progress.
ERIN BURNETT: So, let me ask you one thing that every time I read an article about you-- I notice it, and I think a lot of other people notice it too. And so-- there's this amazing story. Milking cows, you know, you started out doing-- you didn't-- you didn't come from a lot. And you went, and you were going to become a nuclear physicist, and then you-- you left school, and you became a metals trader. And then all of a sudden-- I don't know how old, 26, 27 years old. You own 20 percent of an aluminum factory, and boom-- you're the big aluminum guy. How did you get there so quickly? 'Cause nobody understands that, and I think that's why they say, ah, there's got to be something shady here. I mean, how did it happen?
OLEG DERIPASKA: You just need to be prepared to work 15 hours a day. And-- take responsibility, you know, on a lot of things. And-- when privatization started, (the company) was a-- you know, resource company in Russia, that was almost bankrupt. And there was a reason, because, you know, after the Soviet Union collapsed, so much material went to the market. And-- prices dropped down to, you know, historic low. And-- it was also a time when the factory had no money, you know, to pay salaries. You know, when I become CEO in Siberia in the middle of nowhere, people were not paid for almost four months.
There was no chance to buy raw materials. There was no chance to make a proper export arrangement, because it was licensing. And-- I started, you know, cleaning this up, and then taking-- it took me almost three years, before, I managed to, to bring the company to, to-- to the position where it's become a solid business.. Is that long enough?! I saw people turn around General Motors in three months.
ERIN BURNETT: That's a fair point. That's-- that's a fair point. No one's ever given that analogy.
OLEG DERIPASKA: Look at Chrysler. You know, Marchione did it in-- in less than one year. And he's hoping to do more. I don't know. (We started in) '94 and only now have we completely restructured the company. It takes-- 16 years.
ERIN BURNETT: Sixteen years. So, what are-- what are your ambitions? I mean, when and I know you -- you take issue with the term oligarch, but when people look-- a lot of oligarchs like you don't spend a lot of time in Russia. You spend a lot of time in Russia, and you want people to invest in Russia. So, I'm wondering whether you have political ambitions of your own?
OLEG DERIPASKA: Not at the moment.
ERIN BURNETT: Not at the moment. All business?
OLEG DERIPASKA: All business. And we have a lot of things to do. And actually-- they're very different in our environment. You know, here, you know, politician wants to deliver something. You know, which-- is a belief, you know, in-- interest of the people, and-- comply with their personal agenda. And you have an institution.
Russia's problem is that there are not-- many institutions established. Our history is very short, you know. You know, Russia in its present form and shape, is less than 20 years old. That's why being in the position when-- you know, you have under your control, you know, a lot of resources (is good). And-- I can change a lot for the people who live in the small cities, you know, where my plants are located. You know, I can change a lot for a lot of universities where, you know, people study, you know, the-- the subject, which is important for my companies.
And I think there is more direct-- way, you know, to help people, especially if you feel that-- you know, you being born in a country which supplies you so much opportunity..
Now, I think it's a unique opportunity for Russia, because we have a cycle. Which made a super cycle. You can buy whatever product, whatever company is important for your strategy. And it's actually, you know, in-- in a unique time.
ERIN BURNETT: And how will-- how should investors see some of the-- the recent events? I know we talked about some of them. But the terrible-- terrorist attack at the airport just being a recent example. There still-- are acts of terrorism that happen in Russia. How do you view those as an investor?
OLEG DERIPASKA: It was tragedy. And if-- if you look back, you know, four years, five years, there is a tremendous improvement. But you can't change people overnight.
You need to provide them jobs. You know, you need to provide them opportunity to-- you know, to-- to send the kids to school, and to have a good health care, you know, opportunity to travel. And it wouldn't come in overnight. We need to spend on a lot of efforts. And actually, government has tried to do these efforts. But in-- in-- in reality, we have-- quite a big Muslim population. It's more than 20-- more than 27 percent. And-- you know, Russia and Russian citizens represent hundreds of different ethnic groups. It's-- it's not an easy story.
And-- it's a new culture, which is still in the process of development. As I said, you know, 20 years. America has more than 250 years history. And look back 70 years. You-- you had racial issues, you had all these issues between man and woman and all this stuff. And you just need to be patient.
And-- use opportunity. Technology could easy change the people. Look, for example, in Africa. Seven years ago nothing and now there is mobile phone, there is Internet connection. There is a lot of opportunity. And-- we just need to use this opportunity in Russia.
ERIN BURNETT: Thank you.
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