Moscow — A privatisation deal to sell control of the Aluminium Smelter Company of Nigeria (Alscon) to Russian Aluminium (Rusal) has come under attack, with critics saying it will cost more to sell Alscon than Rusal owner Oleg Deripaska will pay.

Nigerian members of parliament have passed a resolution on the deal, which was announced last week and confirmed by Rusal, saying it "amounts to corruption and fraud to the nation".

President Olusegun Obasanjo and his personal advisers are directly involved in the scandal, according to the Nigerian-American company Bancorp Financial Investment Group (BFIG), whose high bid for Alscon was first accepted and then rejected by Nigerian government officials.

Nigeria's Federal Appeals Court is reviewing a legal challenge by BFIG, which could cancel the Rusal deal.

US litigation is being prepared by Los Angeles-based BFIG, should the Nigerian court process decide to reject BFIG's claim.

In all, according to a company statement, Rusal proposes to pay $50m as a down payment and $200m in instalments over several years, for a 77,5% stake in Alscon.

The government retains a 15% stake, while a German company, Ferrostaal, holds 7,5%.

According to BFIG spokesman Frank Scherer, the terms of the Alscon deal provide Rusal "far more in subsidies and allowances (by the Nigerian government) than the amount they proposed to pay for the entire industrial infrastructure complex.

The Alscon complex, which the Russian company is acquiring, includes a port, four townships, a 200-bed hospital, a water-treatment plant, fire-fighting facilities and a power plant of 540MW."

According to the nonbinding resolution of the Nigerian house of representatives issued last year after a review of the bidding process, BFIG's bid to buy Alscon for $410m, payable in 90 days, plus $800m in investment, had been cancelled "without any valid or legal reason".

A technical bid submission by Rusal to the Nigerian government claimed that Rusal could restart and complete the smelter within two years, at a cost of $130m, plus $20m in operating capital and another $25m in ancillary infrastructure and social costs. Alumina supplies were to come from Rusal's concession in Guinea.

The delayed payment terms accepted last week by the Nigerian government allow Rusal to produce and sell enough aluminium to cover the cost of both the asset purchase and the proposed investment. The costs to the Nigerian government include more than $160m for river dredging and more than $200m in subsidised gas prices to fuel the smelter's power plant.

Alleging a massive fraud, and corruption of the Nigerian government by Rusal, BFIG responded to Rusal's takeover announcement, saying:"BFIG's legal right to sign an Alscon share purchase agreement is a matter officially in dispute before the Federal Appeals Court."

Nigeria has proceeded with the deal despite the court challenge and the recommendation of parliament.

New aluminium smelters, industry sources said, cost $4000 a ton to build. Rusal's offer of $250m, with an average of $1667 a ton, is almost one-third the going rate. But Alscon is virtually a startup operation. Partially completed in 1997, it operated for just three years and has stood idle since 2000 when costly gas supplies and limited transportation access created debts and made production too costly to sustain.

Rusal's move in Nigeria follows expansion of its bauxite mine and alumina refinery in the Republic of Guinea. There, according to UK High Court records, Rusal tried to influence politicians to deprive a local company of its service contract.

The UK court ordered Rusal to pay compensation. The Russians are attempting to build a self- sufficient bauxite, alumina and aluminium empire outside Russia in case its Russian assets are taken over by the Kremlin.

A media release on the deal highlights the benefits to Nigeria of technology transfer: "We are ready to actively contribute to the country's industrial growth," the company says.