Abu Dhabi, UAEMonday 27 May 2019

US lifts sanctions on Russia's Rusal and others

Aluminium giant one of three firms tied to Russian tycoon Oleg Deripaska, an ally of President Putin, to have sanctions removed

Sanctions on companies linked to Russian tycoon Oleg Deripaska have been removed. Reuters
Sanctions on companies linked to Russian tycoon Oleg Deripaska have been removed. Reuters

The US Treasury Department lifted sanctions on three companies tied to Russian tycoon Oleg Deripaska, including Rusal, a move that will provide relief to the global aluminium market.

Mr Deripaska, an ally of Russian leader Vladimir Putin, will remain under US sanctions, and his property will remain blocked. But the Treasury Department is removing restrictions on Rusal, En+ Group and EuroSibEnergo.

“The companies have also agreed to unprecedented transparency for Treasury into their operations by undertaking extensive, ongoing auditing, certification, and reporting requirements. All sanctions on Deripaska continue in force,” the Treasury’s Office of Foreign Assets Control (Ofac) said.

In a separate statement, En+ announced the addition of seven independent directors to its board, as well as a securities swap with Ivan Glasenberg’s Glencore. Under the deal, the London-listed commodity trader will get global depositary receipts representing 10.55 per cent of En+’s enlarged share capital in exchange for its existing 8.75 per cent stake in Rusal.

Rusal said that chairman Jean-Pierre Thomas had resigned as a director after an “imperative request” from Ofac as a condition for lifting the sanctions. He became chairman in December, replacing Matthias Warnig, a former East German Stasi agent who has known President Vladimir Putin since at least 1991, Bloomberg said. Mr Thomas’ appointment drew criticism from American media and some policymakers during debates in Congress in January because of his calls for investment in the Crimea peninsula, which Russia annexed from Ukraine in 2014, leading to the first round of sanctions. His departure was effective from January 26.

At En+, new independent directors include Christopher Burnham, the chairman of Cambridge Global Capital, who was a member of US President Donald Trump’s transition team at the State Department.

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Congressional Democrats have tried to block treasury’s action, citing concerns about the Trump administration’s motives at a time when Special Counsel Robert Mueller is continuing his investigation of Russian interference in the 2016 presidential election and possible connections to the Trump campaign.

“This represents just one more step in undermining the sanctions law, which President Trump has obstructed at every opportunity, while Russian aggression remains unabated,” said Lloyd Doggett, a Texas Democrat.

Earlier this month, 11 of Mr Trump's fellow Republicans in the US Senate joined Democrats in a failed effort to keep the sanctions on Rusal, En+ and EuroSibEnergo. But that was not enough to overcome opposition from Trump and most of his fellow Republicans.

Mr Deripaska had ties with Paul Manafort, Mr Trump’s former campaign manager, according to Reuters. Mr Manafort pleaded guilty in September 2018 to attempted witness tampering and conspiring against the United States.

Sanctions relief for Rusal, the world’s second-largest aluminium producer, will remove a source of uncertainty from the market. Aluminium surged in April when Treasury announced the financial restrictions, but tumbled in recent months on speculation that the sanctions would be lifted. The price fell on Monday, losing as much as 1.6 per cent on the London Metal Exchange.

Mr Deripaska’s agreement with Treasury, negotiated over eight months, includes cutting his direct and indirect share ownership below 50 per cent in each company, overhauling the boards of En+ and Rusal, and providing extensive disclosures, the department said in December when announcing its plans to remove the sanctions.

Rusal is among the largest companies the US has ever put on its sanctions designation list. The value of the aluminium producer declined by more than half from $9.2 billion more than eight months ago.

Updated: January 29, 2019 03:09 PM

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