Norilsk Nickel's board of directors elected Vladimir Strzhalkovsky, a former KGB officer and longtime friend of Prime Minister Vladimir Putin's, as chief executive on Friday.

The move was seen as an attempt by the government to settle a lengthy dispute between the company's fighting shareholders. Strzhalkovsky, who until recently headed the Federal Tourism Agency, replaced Sergei Batekhin, who occupied the post for less than a month and became deputy chairman of the management board in the shakeup.

"The company's task [under Strzhalkovsky] is to act as a consolidation leader in the industry," Vladimir Potanin, Norilsk's chairman and a 30 percent shareholder, said at a news conference after the meeting.

United Company RusAl – a 25 percent shareholder in Norilsk with three representatives on its nine-member board, including billionaires Oleg Deripaska and Mikhail Prokhorov – had questioned Strzhalkovsky's candidacy, saying he lacked managerial and metals-industry experience, and voted against him.

Strzhalkovsky served as a KGB officer with the Leningrad branch of the Soviet security agency from 1980 to 1991, according to the government's web site.

"The consolidation effort will require cooperation with the state," Potanin said. "We will also need the state's help in international expansion and improving relations between shareholders."

Deripaska, who controls RusAl through his Basic Element holding company, told reporters Thursday that the miner was "not ready to merge with Norilsk at present." He also ruled out a three-way merger with iron ore giant Metalloinvest, a move that had been actively supported by Potanin.

Potanin said Friday that he would consider any partners for the merger and was even ready to cut his stake in Norilsk to achieve such a deal. "We are not considering RusAl as a sole partner," Potanin said after being asked to comment on Deripaska's statement.

Strzhalkovsky told reporters after his election that he saw his primary task as increasing the company's profit, but he also gave a nod to what investors consider his main purpose at the Norilsk. "Any large company should be interested in good relations with the government," he said.

Investors, however, were unenthusiastic about the move. "A private company should be managed by a private businessman," said Alexander Branis, chief executive of Prosperity Capital Management, which manages $5 billion in assets in the former Soviet Union.

Potanin's and Strzhalkovsky's statements were harshly criticized by RusAl chief executive Alexander Bulygin, also a Norilsk board member, who held a conference call with reporters late Friday. He was RusAl's only representative who attended the meeting.

"Potanin talked about the international projects after the board meeting, which looks like absolute nonsense to me," Bulygin said. "He should first of all concentrate on the company's problems, as the company is in crisis.

"People are fleeing the company en masse, the production of all metals fell 8 to 11 percent last year and there are huge environmental problems in Norilsk," Bulygin said, blaming Potanin's Interros holding for the problems.

Interros was not immediately available to respond to Bulygin's claims.

Bulygin said RusAl was going to call an extraordinary shareholders meeting to re-elect the Norilsk board and that it did not plan to sell its Norilsk stake "at any price." He added that he did not think his company's opposition to the Strzhalkovsky's candidacy was going against the state's interests. "I don't think RusAl's opposition to Strzhalkovsky's candidacy contradicts the government's interests," Bulygin said. "Strzhalkovsky is a man fully affiliated with Potanin. He has known him since 2001."

The Norilsk board also decided Friday not to bid independently for Udokan, Russia's largest untapped copper field, Potanin said. "Norilsk will only take part in the auction of Udokan with a partner," he said.

The company had filed an application for the tender, which is to take place Sept. 14. The list of bidders included Metalloinvest, Basic Element and the Russian Copper consortium, which comprised Urals Mining and Metal Company, Russian Railways and the Development Bank.

Bulygin also criticized that decision. "I was the only board member to vote for Norilsk Nickel's independent participation in the Udokan tender," he said. "I think the company is perfectly competent to develop the project on its own.

"Udokan would be a very good example of a public-private partnership, and Strzhalkovsky said he would be responsible for interaction with the government," Bulygin said. "Then the new chief executive gave up on Udokan, and I don't see any logic to it."

Vladimir Zhukov, of Lehman Brothers, said the decision made sense given the difficulty of developing deposit. "Udokan is a very complicated project, and Norilsk Nickel knows it better than its tender competitors because it has already worked at the deposit," he said. – The Moscow Times