Nothing personal, just aluminum

"Rusal" will be able to return to the world market, but only without Oleg Deripaska.
US sanctions against "Rusal" de facto recognized as a mistake. After the visit to Washington by the Minister of Finance of the Russian Federation Anton Siluanov and the appeal of EU officials, the US Treasury announced a sharp softening of its position. Now you can work with "Rusal" until October 23 or even longer. However, this applies only to the company itself, and the conditions are strict: Oleg Deripaska must in one form or another give up control. This statement has already lowered the price of aluminum by 7%, softening the buzz in the market. But the question is whether Moscow will comply with Washington's demand and in what form: lawyers believe that the loss of control must be transparent, and not formal, and nationalization does not help.

The US Treasury admitted that sanctions against Rusal could be lifted if Oleg Deripaska ceases to control the company. "US sanctions have affected Rusal because of its connection with Oleg Deripaska," US Treasury Secretary Stephen Munchin said. "But the US government does not try to touch upon the interests of workers dependent on Rusal and its structures." The official also said that Rusal filed a petition to exclude the company from the SDN list (with blacklisted individuals, American individuals and legal entities are prohibited from doing business). Given the impact of sanctions on the company on partners and US allies, the Office of Foreign Assets Control (OFAC) of the US Treasury extended the permission for US residents to work under contracts with Rusal until October 23, until the ministry considers the petition. OFAC guarantees that non-residents of the United States will not be subject to secondary sanctions when performing operations with Rusal. We are talking about the purchase of goods from Rusal and its structures or the curtailment of trade contracts. The deal does not extend to transactions with Rusal's debt or shares, US citizens still have to withdraw from the bonds and shares of the company by May 7. As a result, Rusal on April 23 went up by 17.65% on the Moscow Stock Exchange, to 410.2 billion rubles. ($ 6.63 billion).

Oleg Deripaska and a number of companies controlled by him, including Basic Element (Basel) holding, industrial group En +, Rusal, GAZ group, were included in the SDN list on April 6. Then the co-owner of "Rusal" Victor Vekselberg and his group "Renova", as well as a number of other top managers and businessmen, were included in the list.

These sanctions imply an immediate ban on exports from the US in favor of Rusal and its structures, but now the US Treasury has allowed working with the company until October 23. Deliveries of goods from third countries by non-residents of the United States to individuals on the SDN list on April 6 are not subject to sanctions. This may relate primarily to the supply of raw materials for Rusal from Glencore and Rio Tinto (the companies previously announced a review of the contracts with Rusal, and the sources of the Western media said that de facto was declared force majeure). In the interviewed companies of Oleg Deripaska and Glencore, which owns 8.75% of Rusal, and provides a quarter of its revenues, refused to comment, Rio Tinto did not respond to Kommersant.

The softening of sanctions was preceded by the meeting on April 20 between Anton Siluanov and Stephen Muchin on the margins of the session of the governing bodies of the IMF and the World Bank in Washington. The Kommersant's assumption that at the ministerial negotiations on sanctions issues the dialogue was that "the US is not satisfied with rising prices for aluminum, Russia is sanctioning against Rusal," a source in the White House familiar with the content of the talks did not refute. Since April 6, aluminum prices have gone up sharply, but on April 23 metal quotes for delivery in three months on LME fell by 7%, to $ 2295 per ton.

Western media also reported a shortage of aluminum in the EU due to sanctions and requests from Brussels to ease restrictions. Rusal, which sold 3.95 million tons in 2017, delivered 20% of the volume to North America, 45% in the EU. In the Ministry of Finance, the United States did not answer "b", the government did not comment on the topic. At the same time, none of Kommersant sources says whether it is worthwhile to regard the clarification of the US Treasury on stopping control of Rusal from Oleg Deripaska as real expectations and an ultimatum from the Russian Federation or as an attempt to justify itself to local consumers and European allies for the collapse of the market.

Formally, En + 48.13% of Rusal, but by agreement of the shareholders, while En + has at least 40% of Rusal, half of the seats on the board of directors, including the chairman, should be occupied by the candidates of Oleg Deripaska's group, she has the right to nominate and to remove the general director. Earlier, a number of interlocutors of "Kommersant" believed that for the withdrawal of "Rusal" from sanctions may be enough to break the agreement. Other sources at Kommersant believed that a more rigid scenario of fragmenting the company and changing shareholders could be applied. Last week, the idea of ​​nationalizing Rusal was actively discussed, although Anton Siluanov said that the company's shareholders did not apply to the government with this idea.

"It is difficult to predict whether sanctions can be canceled if Oleg Deripaska lost effective control over Rusal and retained a significant stake in him," said Alexei Panich, partner of Herbert Smith Freehills. But he admits that in case of nationalization of Rusal, sanctions can be lifted, and if the shares of Mr. Deripaska are bought by a non-resident of the United States, he can apply to OFAC for a license in order to avoid the risks of sanctions. "It is unlikely that OFAC wants Rusal to have no controlling shareholder at all, most likely, it is important that the company is not controlled by a person involved in the SDN," says the lawyer. The managing partner of the Borenius law firm Andrey Gusev points out that nationalization will not help: "There should be an honest transaction in any market way, and the loss of control by Oleg Deripaska is transparent and understandable. The formal scheme for changing control, I think, is not realizable. " About who could intercept control in "Rusal", the interlocutors of "Kommersant" do not speak, and the co-owner of the company Viktor Vekselberg is also under sanctions. At the same time, there were similar precedents, and Mr. Deripaska himself took part in them: in 2007 he took Russneft from Mikhail Gutseriev and returned it two years later, when the latter solved his problems with the law enforcement agencies of the Russian Federation.

Oleg Petropavlovski from BCS notes that the EU's response to sanctions against Rusal, the lack of raw materials and time to find alternative aluminum in the US, as well as rising metal prices could lead to Oleg Deripaska taking a tough stance and not will go even to break the shareholder agreement. Based on the reserves of raw materials and capacities, Rusal is 80% provided with its bauxite and 100% with its alumina, he says. "If Rusal's counterparties for major majors swap refuse to work with it, the cost of production may grow slightly, but the aluminum premium to the price of LME in the US soared to $ 450 per ton from $ 200," the analyst notes. "If RusAl can reorient a significant part of exports to China, then even the expected discount "for risk" to market prices will allow the company to remain profitable. " Earlier, Bloomberg reported that the top management of Rusal and Oleg Deripaska had discussed with the Chinese the prospects of buying alumina and selling aluminum to Rusal.