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The former Business Secretary was a 'valuable extra' as a dinner guest as billionaire Oleg Deripaska entertained American aluminium executives in Moscow.
The meeting, also attended by British-born financier Nat Rothschild, resulted in a deal to sell two of Deripaska's giant Russian-based RUSAL factories to a U.S. firm, Alcoa.
But the 2005 agreement had grave consequences for hundreds of British jobs.
Mandelson - who was the EU Trade Commissioner - was in a position to allay 'concerns' over tariffs on imports from Eastern Europe.
Indeed, over the following three years, they were slashed.
This prompted the dumping of cheap aluminium on the European market, forcing at least four British factories to the wall.
Within a year of the Russian deal, Alcoa closed its South Wales aluminium rolling plant with the loss of 300 jobs.
Another Welsh plant at Rogerstone, which used to be the third largest in Europe, shut two years ago with another 400 jobs lost. Plants at Falkirk and Glasgow were also casualties.
Questions were being asked last night about what exactly Mandelson told the Americans and Russians about EU tariffs.
In the past, he has denied ever talking to Deripaska about aluminium or even meeting Deripaska before 2006. His presence at the private dinner has been confirmed to the Mail by eyewitness sources linked to both Alcoa and Rusal.
Russian sources said he had been flown from Switzerland to Moscow in a private jet belonging to Deripaska's close adviser. Rothschild and Mandelson have been friends for years.
The trip was 'unplanned' and made in such haste that Mandelson had no valid visa.
A source close to Rusal said that it needed the intervention of the company's head of security, a former senior KGB officer, to secure his entry into Russia.
'It was a big headache,' said the source last night. 'But Peter Mandelson's presence at that dinner was a very valuable extra for Deripaska.'
A source close to Alcoa said: 'We certainly didn't expect Mandelson at the dinner, and assumed it would just be folks from Rusal and Alcoa.
'Nat has known Oleg a long time, and he played match-maker.'
Mandelson was reported to be back in Switzerland, as a guest of Nat Rothschild, last night.
A spokesman for Lord Mandelson declined to comment on the circumstances of his attendance at the dinner.
But he stated: 'There was no personal intervention by Lord Mandelson in his capacity as Trade Commissioner in favor of Russian aluminum company Rusal.'
Last night a senior spokesman for the EU said: 'All (tariff) decisions are taken in full transparency.'
But he added: 'I am totally unaware of this meeting. I suggest your first port of call should be Lord Mandelson himself.'
SPECIAL INVESTIGATION by Richard Pendlebury and Neil BarnettSunday was never the busiest night at Cantinetta Antinori, a fashionable Tuscan restaurant in Moscow. But this one crackled with the electricity that only powerful tycoons and a ?500 million deal on the table can generate.
Holding court in a private room upstairs was Oleg Deripaska, controversial oligarch owner of Russia's giant aluminium producer, Rusal.
He had only just returned to Moscow from the World Economic Forum in Davos. And, according to sources, his dinner had hardly begun when two more people appeared, hotfoot from Switzerland.
One of the new arrivals was financier Nat Rothschild, scion of the British banking dynasty and ultra-loyal special adviser to Deripaska.
Rusal executives will tell you that Rothschild liked nothing more than to please his billionaire patron.
And to that end Rothschild had brought with him a 'surprise' VIP guest; none other than the European Union's Trade Commissioner, Peter Mandelson.
By bringing his friend halfway across Europe in his own private jet - and getting him into Russia without a valid visa in his passport - young Rothschild had pulled a very unexpected and also rather useful rabbit out of his hat. How useful we can explain here for the first time.
The bare fact that Mandelson had dinner with Deripaska in Moscow on that Sunday evening in January 2005 was first made public 18 months ago. He had wanted it kept secret.
Until now, the soiree had been viewed, as with similar meals, as yet another example of Mandelson's fatal fascination for the company and lifestyle of the super-rich; an attraction which in the past has led him into errors of judgment that twice forced him to resign from British ministerial posts.
But we can now reveal that there was much more at stake in the Cantinetta Antinori that night than the chance for Mandelson to break ciabatta with Deripaska.
So important was it that Rothschild was prepared to cause what one former Rusal executive described to the Mail as a 'serious headache' by engineering Mandelson's visa-less arrival to Moscow.
According to the same source, that headache was cured only by Rusal's head of security, a former senior KGB officer, pulling strings to get Mandelson through passport control.
Why the extraordinary efforts? Deripaska was dining with two of his closest cronies; Gulzhan Moldazhanova, female chief executive of his Basic Element holding company and his Canadian friend and business partner, the gold magnate Peter Munk.
But they were not the only people at that table that night. Eating with them were three senior executives from the American aluminium giant Alcoa.
The presence of Alcoa chairman Alain Belda, executive vice-president Barbara Jeremiah and head of communications Jake Siewert, a former Press Secretary to President Clinton (and now an adviser at the U.S. Treasury) is enough to explain the real significance of Rothschild and Mandelson's helter-skelter trip across Europe.
Alcoa was about to sign a deal to pay ?250 million in cash for Rusal's two Russian aluminium plants, with a similar sum to be invested in them afterwards.
The metals industry has never had a squeaky clean reputation. But this deal now looks particularly grubby.
On one side of the table that night in Moscow sat Deripaska, a man who is denied entry to the United States for reasons officially unexplained but which might have something to do with the alleged involvement of the mafia in Rusal and its victory in the bloody 'war' to gain control of the Russian aluminium industry in the 1990s.
On the other was Alcoa, the world's biggest aluminium producer. It is currently under investigation by the U.S.Department of Justice, for alleged bribery and corruption in the Middle East.
The Alcoa agent who is central to this inquiry is one Victor Dahdaleh. A Canadian- Jordanian international business fixer with a home in London Dahdaleh is, according to a friend who spoke to the Mail, worth 'about ?8-9 billion'. Mr Dahdaleh has denied any wrongdoing.
The 2005 deal, between two firms from the opposing Cold War superpowers, was unprecedented. Under Rusal ownership, the plants were working at only 30 per cent capacity, supplying the 'saturated' Russian market, a former executive told the Mail.
Under the Americans, the aluminium products would be exported around the world, including Europe. But another source said 'there were concerns' from Alcoa about the level of import tariffs levied by the EU on Russian aluminium.
Alcoa needed the tariff rates to go down - as they subsequently did - or even be abolished completely - as happened.
The same man who was a friend of both Deripaska and Victor Dahdaleh, the Alcoa agent under scrutiny.
As EU trade supremo, Peter Mandelson, president of think-tank Policy Network, to which Dahdaleh donated ?15,000 only months later, was a very welcome guest at the 'close of deal' dinner that night in Moscow.
By his presence, Mandelson could, at the very least, bless the ?500 million union of the metals giants. It also signalled that he was well disposed to their efforts, which were projected to make some ?30 million annual profit under the Americans.
In short, it is very hard to believe that by being there Mandelson had not done Deripaska an enormous business favour. Certainly, the Mail has been told, the Americans did not expect him to be there. It is hard to believe that tariffs were not discussed.
Whose interests were Peter Mandelson representing that night? Neither of the companies at the table that night was EU-owned.
One analyst even claims that the deal harmed European industry interests. Last night, a senior EU spokesman said he was 'totally unaware' of the meeting.
Why, then, was Mandelson there at all?
It was an infamous holiday on Corfu in the summer of 2008 that first drew public attention to the links between Mandelson and the Russian oligarch.
The Rothschild family's holiday villa is on the island, and Deripaska's super-yacht was moored offshore. That August, Mandelson and the then Shadow Chancellor George Osborne enjoyed the hospitality of both.
The luxury jaunt had a nasty aftermath, however. Osborne and Mandelson - who had just left Brussels to become Gordon Brown's Business Secretary - began briefing against each other about what had been said or done during the vacation.
Amid the claim and counter-claim, it became clear that the Mandelson-Deripaska association predated Corfu by several years.
But Mandelson did not want the world to know.
His EU spokesman had first stated that the two men met 'at a few social gatherings in 2006 and 2007', but had never discussed aluminium. This was not true and, under pressure, Mandelson soon had to admit he first met the Russian in 2004 'to the best of my recollection'.
Certainly, the pair were seen together in Moscow in October 2004, just after Mandelson had been appointed EU Trade Commissioner but before he'd taken up the post.
He officially entered office as EU Trade Commissioner on November 22, 2004. And EU records show that on November 23 his department began a review of the anti-dumping tariff imposed by the EU on Russian rolled aluminium imports - of the type which was being produced at the two plants Deripaska's Rusal was in the process of trying to sell to Alcoa.
An understanding between the two firms had been struck the previous May. But the sale had been delayed, one of the main reasons being the Russian government's concern over plants that supplied the local defence industry being sold to its former Cold War foe.
Those worries were allayed by the beginning of 2005 and in late January a 'big team' of Alcoa executives flew from its Pittsburgh headquarters to look over the plants and close the historic deal.
The Cantinetta Antinori dinner which followed threw a fascinating light on the dynamics in the relationship between Deripaska, Rothschild and Mandelson.
'It was the first time American and Russian companies have done a deal like this. For Alcoa, it was a very attractive proposition'
'The dinner was simply supposed to be a meeting of Rusal executives and their counterparts at Alcoa,' says the former Rusal executive. ' Nat Rothschild bringing the EU Trade Commissioner to the table was a very valuable extra for Deripaska.
'Mandelson's sudden arrival was one of the games Rothschild played to impress Deripaska and keep him close.
'It was all about Nat. You have to see the event through the prism of Nat. Rusal was full of young, ambitious Russians and they did not like Nat taking all the glory. But Nat was literally dictating the colour of the loo paper at Rusal.'
So not everyone was happy to see the British pair arrive. According to sources, there was irritation that the Rusal CEO Alexander Bulygin left the dinner only a few minutes after Rothschild and Deripaska arrived.
Why? 'Alexander did not like Rothschild,' explained a former colleague. 'Once Nat and Mandelson started entertaining the Alcoa people with jokes and small talk, he'd had enough.'
Left at the table was the complex Deripaska network of money and influence.
As we have mentioned, there was Peter Munk, owner of Barrick Gold, the world's largest gold producer.
Munk also sat on Rusal's international advisory board. Nat Rothschild sat on the equivalent board at Barrick Gold and Munk has reportedly invested heavily in Nat's Atticus hedge fund.
Deripaska, Munk and Rothschild were also co-developing Porto Montenegro, a resort for the super-rich near the town of Tivat in the former Yugoslav republic of Montenegro. Deripaska was the largest private employer in Montenegro having snapped up a state-owned aluminium company at a knockdown price.
And, in early 2008, Mandelson would be instrumental in securing a bilateral EU trade agreement with, yes, Montenegro, whose economic progress he described as 'remarkable'.
Some nexus. On January 31, 2005, fewer than 24 hours after the Moscow dinner attended by Mandelson, the Rusal-Alcoa deal was closed and triumphant press releases sent out.
That night, Rusal and Alcoa executives went off to dine at the Cafe Pushkin, another of Moscow's high- end restaurants where Deripaska and Mandelson are known to have met in 2004.
This time Mandelson was not present, according to one ex-Rusal executive. The Rothschild-choreographed favour had been done and the Trade Commissioner's use to Deripaska was at an end, for the moment.
But over the next four years his department in Brussels was to make a series of decisions on tariffs which had huge benefits for those who attended the Cantinetta Antinori dinner.
In December 2005, the tariff on cheap Russian rolled aluminium imports was cancelled, to the benefit of Alcoa's newly acquired fabricating plants.
In May 2007, the EU Trade Commission under Mandelson lowered the duty on imports of unwrought aluminium (the metal in its basic cast form) from 7.5 per cent to 6 per cent, which benefitted Rusal.
Then, in January last year, the EU quietly gave Russia a 3.5 per cent discount on the import duty for rolled aluminium products. Mandelson had returned to Westminster three months before, but the tariff reduction can be traced back to his time in power in Brussels.
A report last year in a specialist metal industry journal set out just how beneficial this was to Alcoa. It said: 'In Europe, the company benefits from a preferential import duty introduced on January 1 for rolled aluminium from Russia.
'Import duty on aluminium flat-rolled products is 7.5 per cent, but Russian imports are taxed at 4.5 per cent. Together with the effect of the weak rouble, Russian rolling mills have a ?300-?430 (?260-?373)/tonne advantage.'
An expert on the world aluminium market told the Mail: 'I don't know why or how Russia was granted that tariff reduction. It surprises me. Who benefits? Only Alcoa, because of the two plants bought from Rusal.'
He added: 'This is undermining the position of EU and British producers. Rogerstone in Wales was the third-largest plant in Europe, and it closed at the end of 2008 because the EU has overcapacity for these products.
Falkirk and Glasgow have also closed because of the high cost of primary metal and the lower cost of rolled products from Eastern Europe.
The discount undermines the position of the remaining producers, no one has considered them in drafting this measure."
Indeed, Rogerstone, which produced wings for the Supermarine Spitfire during World War II, closed for good last year, after 200 years of operations on site. Alcoa's own Welsh rolling mill, at Waunarlwydd, near Swansea, was closed with the loss of 300 jobs in 2006.
Two years ago, Mandelson said of Deripaska: 'All I would say about that is that he has never asked for any favours, I have never given him any favours.'
A senior business figure who knows some of the parties present that night disputes that the relationship is without reward: 'I do not think there is some secret bank account where he has millions of pounds of under the table payments stashed away,' he said.
'But the people Mandelson seeks to mix with are able to equip the lifestyle he loves but cannot independently afford. They have the private jets, villas and yachts which they are prepared to put at his disposal.'
There is no evidence that Mandelson orchestrated these tariff reductions specifically to help his Russian friends, but he certainly has many questions to answer.
Once again, his actions have brought his public offices and personal integrity into disrepute and exposed him to accusations of conflict of interest.
By any standard, the desperate race to attend the Cantinetta Antinori dinner was another gross error of judgment
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