Deripaska core empire sanctions to be lifted

Oleg Deripaska the core empire of Russian businessman U.S. Treasury will lift sanctions, including aluminum giant Rusal and its parent En+, watering down the toughest consequences imposed since Moscow’s 2014 annexation of Crimea.

U.S Oleg Deripaska - owner of the industrial groups Basic Element, President of En+ Group and United Company RUSAL

In April, the U.S. Treasury imposed sanctions on Deripaska, Rusal, En+ and other corporations in which he owns stakes, noting “malign activities” by Russia, causing turmoil in aluminum markets worldwide.

After lobbying by European governments, Washington suspended the implementation of the sanctions and began talks with Deripaska’s team on removing Rusal and En+ from the blacklist if he surrendered control of Rusal.

Deripaska will stay under sanctions, the U.S. Treasury said. Nonetheless, the three Deripaska corporations – Rusal, En+ and electricity company EuroSibEnergo – have decided to restructure to lessen Deripaska’s stakes.

“These companies have committed to significantly diminish Deripaska’s ownership and sever his control,” the U.S. Treasury said in a statement on Wednesday, adding that the sanctions would be lifted in one month.

The Irish government, which lobbied heavily in Washington for the removal of sanctions to secure 600 jobs at an alumina plant, stated that the move was “a very welcome return” on those efforts.

The Aughinish Alumina plant will be free from the warning of sanctions following a 30-day Congressional review period, the Irish foreign ministry said in a statement. The facility churns out a third of Europe’s alumina, a material used to make aluminum.

Prices for aluminum dropped to $1,911 a ton after the U.S. Treasury statement, their lowest since August 2017.

Rusal, the world’s second biggest aluminum maker after China’s Hongqiao, was not immediately available for comment.

The London Metal Exchange stated that it would remove its suspension on aluminum manufactured by Rusal if the U.S. sanctions were lifted.

The deal, concurred with the Office of Foreign Assets Control (OFAC) in the U.S., will stop Deripaska from obtaining cash or getting future dividends from the corporations.

His stake in En+ will tumble from 70 percent to 44.95 percent. The agreement also includes Swiss company Glencore, or its subsidiary, switching shares in Rusal for a direct ownership interest in En+.

Glencore refused to comment.

VTB Bank, Russia’s second-biggest lender, or another assignee approved by OFAC, will take ownership of a block of Deripaska’s shares in En+ promised as collateral for outstanding duties.

Deripaska will also give a block of shares to a charitable foundation and allocate any voting rights exceeding 35 percent of En+ shares to a voting trust. A number of shareholders with professional or family ties to him will also allocate their voting rights to an independent third party.

As part of the contract, half of En+’s restructured board of directors will be U.S. or UK nationals and Rusal’s present board chairman will step down. En+ will make a board or 12 directors, with eight directors independent of Deripaska, in 30 days.

After the restructuring, En+ will never be subject to sanctions again and will hold a 56.88 percent stake in Rusal, keeping its right to nominate Rusal’s chief executive.

Deripaska will keep a direct shareholding interest in Rusal of just 0.01 percent.

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