Threat of Sanctions Puts Rusal in a Bind

The Trump Administration amended its proposed Russia sanctions, granting a possible reprieve for UC Rusal, which found itself being ostracized by the market in April. Rusal’s owner, the En+ Group, was facing a possible delisting until the majority shareholder, Oleg Deripaska, who is also the CEO of UC Rusal, gave up his board seat and reduced his share holdings. The U.S. Treasury granted several Russian companies, including En+, an extension for compliance. The announcement caused Rusal’s stock price to rise sharply. As of press time, the company had regained almost of the ground it lost when the U.S. sanctions where initially proposed.

In April, Rio Tinto said it would declare force majeure for contracts involving shipments of alumina from a refinery it operates with Rusal in Australia and for bauxite shipments to a Rusal alumina refinery in Ireland, which feeds smelters in Europe. Rio’s announcement rattled metals markets. Other western companies are also trying to avoid becoming entangled in the sanctions. Glencore CEO Ivan Glasenberg resigned his position as a director of Rusal. Glencore holds a 9% stake in Rusal, which is valued at about $1 billion. The company said it was committed to complying with the sanctions.

Rusal’s aluminum, alumina and bauxite production accounts for approximately 7%, 7% and 4% of the global production in 2017, respectively. The company’s inability to conduct business is creating great uncertainty in the marketplace. A Rusal spokesperson said Deripaska called the sanctions against him baseless, ridiculous and absurd.

As featured in Womp 2018 Vol 05 - www.womp-int.com