Rusal shares up 15% on Moscow Exchange amid potential U.S. sanctions relief

Anna Jefferson
April 26, 2018

Aluminium's breath-taking rally has been thrown into reverse after the USA switched tack, saying on Monday it would provide sanctions relief if Oleg Deripaska relinquishes control of Rusal and extended the deadline for companies to wind down dealings with the producer.

Aluminum stocks are plunging after the United States said it would consider relaxing sanctions against a Russian company.

The sanctions threatened the business of Rusal, which accounts for some seven percent of the world's aluminum production.

So far, the USA has sanctioned 14 individuals as well as many companies who are believed to be closely allied with Russian President Vladimir Putin.

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The US Treasury this afternoon announced that investors - who previously were given until 5 June - now have until October 23 "to engage in specified transactions related to winding down or maintaining businesses" with Rusal and its subsidiaries. The price of Rusal had fallen by nearly 70 percent after the announcement.

"We believe close to 1.5-2 mtpa of global aluminum output could be at risk of reduced output if sanctions continue", the brokerage said.

The Financial Times is reporting that US Treasury secretary Steven Mnuchin said the "impact on our partners and allies" was a factor in the decision to soften its stance on the sanctions and that they were aimed at Mr Deripaska.

As reported earlier sanctions relief can be provided for Rusal if its co-owner Oleg Deripaska makes divestment and relinquishes control over the company.

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The impact of this announcement was immediate and profound.

Aluminum prices dropped on Monday by as much as 9.4 per cent.

The Treasury also said it will not impose secondary sanctions on companies outside the United States that do business with Rusal and its subsidiaries.

The sanctions, by threatening actions against companies with U.S. units doing business with the Rusal, also spurred worries of tighter aluminum supplies on the global market, sending prices of the metal soaring.

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Besides being close to the Kremlin, Deripaska was also once an associate of Trump's ex-campaign chairman Paul Manafort, a top target of U.S. Special Prosecutor Robert Mueller in his investigation of ties between Russian Federation and the Trump campaign. The Kremlin and Deripaska did not immediately respond to the announcement.

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