The Kremlin has opposed plans to create a Russian metals giant by merging indebted miners with Norilsk Nickel (GMKN.MM: Quote), a source close to negotiations between metal company owners and President Dmitry Medvedev told Reuters.

Medvedev met on Thursday with Oleg Deripaska, chief executive and main owner of aluminium giant United Company RUSAL, as well as Norilsk Nickel largest shareholder, Vladimir Potanin, and Chief Executive Vladimir Strzhalkovsky.

A consensus was reached at the meeting that there is no need for a merger, a source close to one of the participants in the meeting said, on condition of anonymity.

Russia's metals elite, saddled with billion-dollar debts, have proposed various schemes to merge their companies around Norilsk, the world's largest nickel miner, and offload some of their debts to the state in exchange for a stake in the giant.

But the Kremlin has in recent weeks signalled its reluctance to bail out indebted business as it preserves cash to survive its first recession in a decade.

The Kremlin said in a statement late on Thursday that Medvedev discussed measures to support the metals industry during the financial crisis when he met with Deripaska, Potanin and Strzhalkovsky, a former KGB official.

Issues of support to the metallurgical industry in the conditions of the global financial crisis were discussed, the Kremlin said in a statement on its Web site,

Separately, protecting the interests of workers in the sector was discussed.

The Kremlin's press office declined to comment further.

UC RUSAL spokeswoman Vera Kurochkina said: A wide range of measures to support the metals sector in the conditions of the crisis was discussed.

Various proposals have been made, from a merger between Norilsk and Metalloinvest, the iron and steel firm founded by billionaire Alisher Usmanov, to a six-firm colossus including state-controlled titanium firm VSMPO-Avisma (VSMO.MM: Quote).

The state's refusal to support this consolidation sends a clear signal that the core shareholders of the companies will have to decide their debt issues themselves, analysts from UralSib investment bank said in a note.

It may also indicate that the state is not ready to convert the state-owned debt of the companies into equity.

Norilsk Nickel officials were not available for comment.

For an analysis on the merger plan, see [ID:nLK562122]. (Reporting by Aleksandras Budrys and Robin Paxton, Editing by Peter Blackburn)

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