The Prairie Oligarchs

Sanctions against Russian Oligarchs is impacting two major employers in Saskatchewan and Manitoba.

Hello Flatlanders,

Sanctions against Russian Oligarchs, because of the current situation in Ukraine, got me looking into Russian business connections in Saskatchewan and Manitoba this week.

Russia is tied to two very large corporations that provide a lot of jobs to people in Regina and Winnipeg.

In Regina that company is Evraz, the largest steel company in Western Canada, formally known as IPSCO. It currently employs 1,700 people in the Queen City. As a steel mill, it recycles scrap steel and produces carbon steel slabs, flat-rolled plates, and coil. It also makes oil and gas well casings and tubing, as well as line pipe.

In Winnipeg, it is the agricultural company Buhler Industries that builds and sells various farming machinery and parts.

What’s interesting is that these companies were both founded in the 1950s, both were locally owned, and it was only relatively recently that they were taken over by Russians. And now because of the sanctions against the Oligarchs that own significant shares in these companies, local jobs may be at risk.

Inside a tractor plant. GETTY IMAGES.

The story of Buhler Industries

Not your typical 20-something. Buhler Industries was created by John Buhler of East St. Paul, Manitoba. In 1956, when Buhler was 22, he borrowed the money to start his first business and began buying up troubled companies, which he refinanced and restructured.
 
The building of the Buhler empire:

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  • In 1969, Buhler purchased the Standard Gas Engine Works, renaming it Farm King Ltd.
  • He acquired Standard Gas Engine Works in Morden, Manitoba and renamed it Farm King Limited in 1969. The company produced the Farm King line of grain augers, snowblowers, mowers and compact implements.
  • In 1981, he bought the Winnipeg factory of Allied Farm Equipment of Chicago.
  • Buhler Industries expanded in 1982 with the purchase of the Allied line of front-end loaders.
  • In 1994, he amalgamated all his companies under Buhler Industries and listed the company on the stock exchange.
  • Buhler acquired the Versatile Tractor division of New Holland Ag in the year 2000.
  • He also purchased the Versatile tractor plant with a $32-million government loan.

You can read about what Buhler says has been the secrets of his success in this Western Producer article.


Enter the Russians. In 2007, Buhler sold 80.4 per cent of his shares in Buhler Industries to Rostselmash, the largest combine manufacturer in Russia for $145 million. The company experienced significant growth between 2008 and 2013 and acquired several companies including:

  • Redball in Minnesota
  • Feterl Manufacturing in South Dakota
  • Ezee-On in Vegreville, Alberta. (Vegreville is off of Highway 16 on the way to Edmonton. If you ever get the chance, stop in and check out its giant pysanka, a Ukrainian-style Easter egg).

A call for sanctions. In March 2014, there were calls for sanctions against several Russian members of Buhler’s board of directors because of Vladamir Putin’s actions in Crimea. These directors were Konstantin Babkin, Yury Ryazanov and Dmitry Udrasm, said to be members of Russia’s Action Party.

According to media reports, a video emerged from a rally in Moscow that shows Babkin publicly supporting Putin’s actions in Ukraine. No action was taken and no sanctions were placed on Buhler Industries or the board of directors.
 
The Russians gain more control. On December 22, 2021, Buhler and Highland Park Financial Inc., which he controls, sold their remaining 16.3 per cent interest in the company for $3.00 per share, or $12.3 million, according to financial statements filed by the company.
 
Rostselmash now owns 96.7 per cent of the shares in Buhler. The remaining shares are held by investors via the Toronto Stock Exchange
 
A controversial board member. Recently, Babkin, who was on the board of Buhler Industries, tweeted support of Putin’s recognition of the Donetsk and Luhansk People’s Republics (the Donbas area). These two regions broke away from Ukraine in 2014, and although they proclaimed themselves independent republics, they weren’t recognized by Russia until Feb. 21 of this year. When Putin did this, he basically killed what was the 2014-15 Minsk Protocol, a peace agreement of sorts, between the two Republics, the Ukraine and Russia.

Buhler Industries distances itself from Russia. Four days after Babkin’s tweet, when Russia invaded Ukraine, Buhler Industries sent out a press release saying they didn’t support Russia’s actions. Buhler Industries claims that although it is a majority-owned Russian company, it’s not a Russian company because its staff are Canadian and American.

The head office is in Winnipeg, so the company says most decisions are made in Canada. However, the Manitoba corporation registry records showed Babkin listed an address in Moscow, so did board chair Dmitry Udras, CEO Yury Ryazanov and director Oleg Gorbunov. The company has seven board positions.
 
Buhler Industries said it hasn’t exported products to Russia since 2019, and no longer does business in the country, however, a recent public financial statement told a different story—that it made $8.9 million in revenue from the Commonwealth of Independent States (CIS), which includes Russia. The CBC asked about this discrepancy last month, and Buhler Industries said that, actually, they did have a few small sales here and there of tractor parts in Russia, but that most of that CIS revenue came from Lithuania, Kazakhstan and Romania. But this doesn’t quite make sense because Lithuania and Romania aren’t part of the CIS. 
 
Despite the scrutiny around Buhler Industries’ business ties with Russia, on Feb. 27, Babkin went on a Chinese state-owned television program and blamed the Russian attack on U.S. Interference. (In December, Russia demanded the U.S. and NATO cease all military activity in Eastern Europe and Central Asia; to commit against further NATO expansion toward Russia; and prevent Ukraine from joining NATO in the future.

The United States and NATO allies said no. And the U.S. went on to send military assistance to Ukraine by giving the country ammunition, arms, and various other defensive weaponry. Then in February, the U.S. sent 3,000 American troops to Poland and Romania, which border the Ukraine. Russia also claims that NATO said it wouldn’t expand east into former parts of the U.S.S.R., but academics say this isn’t true and is revisionist history on the part of Russia).
 
Babkin said the invasion would build a unified economic space in Ukraine for Russia.
 
Buhler Industries said it opposed Babkin’s comments. On Mar. 2, they put out a press release saying Babkin would be leaving the board.
 
A new company chair. They also announced the board’s chair, Dmitry Udras, was replaced by Canadian Grant Adolph, even though Udras would remain on the board as a director, as would Russian Oleg Gorbunov.
 
CEO Yury Ryazanov would also be staying on.
 
Political and business ties. Udras and Ryazanov continue to be on the federal council of the Babkin-led Action Party. Babkin, Udras and Ryazanov are also the co-owners of Novoe Sodrugestvo CJSC, a Russian conglomerate that owns 20 companies including Russian tractor maker Rostselmash and Selmashbank, a financial institution based in Rostov-on-Don in southern Russia.
 
Babkin’s board resignation did not impact his ownership stake in Buhler Industries, which is 97 per cent owned by Rostselmash.
 
Federal backing. Export Development Canada — a federal Crown credit corporation — signed a guarantee to back half of a $14-million loan to Buhler Industries in December 2020 to support the company’s ongoing operations. The agency backed the Buhler Industries loan to promote Canadian agriculture equipment exports and create domestic jobs. 
 
No to Russia. EDC says it hasn’t been doing any business related to Russian contracts or Russian borrowers since 2014, when Russia annexed Crimea.  
 
About 700 Canadian workers could lose their jobs if Buhler Industries loses the loan.
 
A good deed. Buhler Industries announced it will match donations to the Red Cross made by staff and dealers up to $100,000 to help respond to the humanitarian crisis. 
 
Divesting itself of its Russian influences would be best, various experts said of Buhler Industries in a Winnipeg Free Press article.

The story of Evraz

Meanwhile, in Regina Evraz began as the Prairie Pipe Manufacturing Company Ltd. on July 13, 1956.

It was founded by a group of western Canadian businessmen led by J.W. (Bill) Sharp, the company’s first president.

No foreign interest. The provincial government had done an extensive amount of development work on the potential steel pipe plant and had been pitching the business to investors in America and Germany, who weren’t interested.

Serving Saskatchewan. When Sharp stepped into the fray, the plan was to build a small-diameter pipe mill to serve the Saskatchewan market.

Guaranted supply and demand. Despite the provincial government doing the initial leg work, there were no government subsidies or loan guarantees to be had. Instead, SaskPower agreed to purchase all its tubing from Prairie Pipe between 1957 and 1969. For the next several years after that, it would order half of their product needs from Prairie Pipe.

Prairie Pipe was successful, and its stock traded on the Winnipeg stock exchange.

Building a steel mill. The original investors thought Prairie Pipe needed its own steel supply to be successful and created a new enterprise called Interprovincial Steel Corporation in 1957. A small steel mill was built on a property next to Prairie Pipe, which was supported by provincial government-backed loan guarantees.

The steel company ran into financial difficulties, so in 1959 Prairie Pipe bought all the assets of Interprovincial Steel Corporation, including the partially built steel mill.

The government steps in. The merger of the two businesses resulted in the Saskatchewan government becoming a minor shareholder Prairie Pipe.

IPSCO is born. Prairie Pipe changed its name to “Interprovincial Steel and Pipe Corporation,” and in 1960 began production of steel; the company soon came to be known as IPSCO.

The Turvey Centre. In the mid-1960s, Bill Sharp stepped back from the company, and Jack Turvey became president. (If you’re from Regina, you probably recognize the Turvey name, if for nothing else, because of the Turvey Centre, a popular banquet hall in the city on Armour Road). Turvey and his successor, Jim Maclennan, ran IPSCO from the early 1960s until 1982.

IPSCO became the major producer of pipe and steel in western Canada through a combination of its own internal growth that included four new furnaces, a new rolling mill, and the addition of large-diameter pipe capacity using a new and innovative spiral pipe technology from Germany.

The expansion. IPSCO also went on to purchase several other mills across Western Canada, including Canadian Phoenix Steel and Pipe Ltd. mills in Edmonton and Port Moody, B.C.  

The government exits. In the mid-1980s, the Saskatchewan government disposed of their interest in the mid-1980s. In 1982, Roger Phillips took over for Jim Maclennan as president and CEO.

Ramping up production. In 1981, the company had produced 389,000 ingot tons of steel; when Phillips retired almost twenty years later, the company’s steel-making capacity had reached 3.5 million tons

IPSCO PARK. As someone who was a kid in the 1980s, I best remember IPSCO for the park that had the potato sack slide and some balls that you could try to balance on. Today, the balls are gone, but the slide still stands, apparently. I haven’t been there in years. From what I’ve read online, the park has been closed for the past two years because of COVID-19, but it should be open this summer. And the elk and bison are still there, as is the pool.

Continued growth. Over the years, several developments contributed to IPSCO’s growth. A continuous caster and reheat furnace were added to the Regina steel mill, which improved the quality and capacity of the steelworks.

Expanding into the U.S. IPSCO also purchased a number of downstream facilities in the United States) to provide markets for steel from the expanded Regina facility. In the early 1990s, the company built a new plate mill in the United States, which allowed IPSCO to improve its plate product at a significantly lower cost. The first such mill was built between 1994 and 1997 in Iowa, and a second mill was stood up between 1999 and 2001 in Alabama.

The battle to take over IPSCO. In 2007, there were talks that Russian steel firm Evraz Group would takeover IPSCO. In the end, there was a battle between multiple international companies that wanted to take over IPSCO. Companies from Brazil, Sweden and America went toe-to-toe with the Russians in hopes of taking over the company.  

Russia’s Evraz would be victorious. It bought IPSCO for $2.3 billion in 2008.

Fast forward to 2022, and Russian Oligarch Roman Abramovich is a significant shareholder in Evraz.  Although Evraz is incorporated in the United Kingdom, Abramovich along with fellow Russians chairman Alexander Abramov and CEO Aleksandr Frolov own 63.4 per cent of Evraz. In fact, Abramovich, who also owns the Chelsea Football Club in the United Kingdom, holds a 28 per cent stake in Evraz. According to the U.S. Treasury Department, Abramovich has direct ties to Putin. 

Sanctions. On March 11, the Canadian government sanctioned Abramovich and his Canadian assets were frozen.

No control. Evraz said it does not consider Abramovich to have effective control of the company due to his status as a minority shareholder.

Denial. “The company denies the statement that it is or has been involved in providing financial services, or making available funds, economic resources, goods or technology that could contribute to destabilizing Ukraine or undermining or threatening the territorial integrity, sovereignty or independence of Ukraine — which includes potentially supplying steel to the Russian military which may have been used in the production of tanks,” Evraz said in a press release on March 10 after the U.K. put sanctions on Abramovich.

Suspension. In response to the sanctions, the London Stock Exchange suspended trading on Evraz plc stock, to protect investors pending clarification of the impact of the U.K. sanctions.

Ten Evraz board of directors of Evraz resigned because of the Abramovich issue.

Defaulting on debt. On Monday, Evraz said it may default on its debt because of sanctions against Abramovich. Evraz said in a statement on Monday that it had made a $19 million payment on a $700 million bond that matures next year. But it said Societe Generale New York, its foreign correspondent bank, had blocked the payment for compliance reasons. The steelmaker said the holdup had forced it to notify BNY Mellon, the bank responsible for getting the money to bondholders, about the potential default. However, Evraz said that it had the money and that there was no reason for a default other than technical issues.

Job losses possible. Because of this mess surrounding Evraz, the Regina Leader-Post ran an op-ed yesterday, urging the Saskatchewan government to act as the local jobs at Evraz in Regina are in jeopardy


Five stories from Manitoba you may have missed

  1. Canada’s oldest grain elevator in Elva, Manitoba comes down.
  2. The Lake Winnipeg shoreline will be protected thanks to Ottawa and a conservation group.
  3. Manitoba hydro rate increases could be capped under a new bill.
  4. Nygard will face extradition to the U.S. after the Canadian case is completed.
  5. A Manitoba farmer urges others to step up security after $40K canola theft.

Five stories from Saskatchewan you may have missed

  1. A Saskatchewan man builds a snow sculpture to support Ukraine.
  2. There is a push to have Saskatoon’s Roxy Theatre be designated as a heritage property.
  3. Saskatchewan achieves new records in potash production and sales in 2021.
  4. The cost of hunting and fishing licences will be going up as Saskatchewan makes several fee changes.
  5. A new initiative aims to grow Saskatchewan’s helium sector.

Photo of the week

Assiniboine Park Pavilion Gallery Museum on a frosty day. Vignette added for effect. Landmark. Winnipeg, Manitoba, Canada.

Until next week…

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Thanks for reading, and kind regards,

Kelly-Anne Riess

Important work at a critical time.

Over the last 20 years, on the Prairies and beyond,  local newsrooms have shrunk, which means not much investigative journalism gets done in Saskatchewan and Manitoba. The Flatlander is changing this.

 

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