In recent weeks, the potential outcome of the talks between Vladimir Putin and Donald Trump, which will be held in Helsinki on July 16, is widely discussed. The two presidents have much to discuss: the situation in Syria and Ukraine, control over nuclear weapons, bilateral relations between the US and Russia. But it seems that the meeting will have an image character, since the depth of the parties' disagreements will not allow reaching concrete agreements.
And yet there is an important question, the interests of Russia and the United States on which largely coincide. Probably, it will be possible to seriously advance in the framework of the forthcoming meeting, especially since his decision does not require the participation of the US Congress and is in the competence of the White House. It is a question of lifting the sanctions imposed on UC Rusal by Oleg Deripaska in April this year.
Deripaska under fire
Recall, on April 6, the US Treasury expanded the special sanction list called SDN-list (Specially-Designated Nationals), including, among others, Oleg Deripaska and a number of its companies, including UC Rusal. Inclusion in the SDN-list is a "black mark" for any business: it provides for the freezing of assets located in the US and a total ban on any transactions with the company and its securities. In fact, the ban concerns residents not only of the US, but also of other countries. In the case of UC, Rusal was prohibited from owning securities of the company after May 7 and conducting any trading operations with it after June 5 (later the deadline was extended until October 23).
Never before had such stringent measures been applied to the largest Russian companies with an international listing. The business community took this step not only as a blow to UC Rusal, but also as a serious signal for the entire Russian business. Before that, many believed that Americans were wary of applying particularly painful measures to Russia, so as not to tease the "Russian bear". And if they do, then to individuals who are closely connected with the state, but not in any way to backbone private companies. But what seemed impossible, happened, caused real panic and questions: "Who is next?".
In just ten days the capitalization of the Russian stock market collapsed by 13%, and shares of UC Rusal lost 70% of the value on the Hong Kong stock exchange. The largest traders - Glencore, Mechem and Mitsui - stopped buying aluminum from UC Rusal, and the London Stock Exchange froze trades with its products. The export of the company in April fell by 70% (and export supplies account for 4/5 of the company's sales). It became clear that UC Rusal will not be able to receive dividends from Norilsk Nickel, which brought almost $ 600 million a year.
There was a real threat of default of US Rusal on debt obligations, which amount to $ 8.8 billion, and closing down company's enterprises, employing about 60,000 people, many of which have the status of city-forming. UC Rusal immediately appealed to the state for support, and the head of the Ministry of Industry and Trade Manturov announced the possibility of nationalization of the company. State support could minimize the social and economic consequences of the collapse of UC Rusal. But this would put a heavy burden on the budget of Russia, which this year for the first time in seven years could reach a small surplus. But the main thing is that even the support of the state is not able to prevent the economic losses that will be borne by every major Russian company because of the threat of opening at any time "fire to defeat" by the US.
That is why the lifting of sanctions against UC Rusal is of great importance for the Kremlin. Demonstrate now that sanctions against Russia can not only be imposed, but also removed, it would be a serious foreign policy success.
Withdrawal of sanctions from UC Rusal not only suits the administration of Trump, but it is beneficial to it. The US is interested in stabilizing aluminum prices and in restoring global supply chains, which were violated after the introduction of sanctions.
UC Rusal produces 6% of world aluminum and is the largest producer of metal outside of China, so its withdrawal from the market will seriously disrupt the balance of global supply and demand. Immediately after the imposition of sanctions, world prices for aluminum jumped by 25%. If such prices persist, tens of thousands of goods will rise in price, from aircraft and machinery to cans and foil, which will also hit American business and consumers. According to Reuters, Boeing has already begun lobbying for easing sanctions in the US Treasury.
In addition, from the departure of UC Rusal from the market, the European countries, whose largest aluminum smelters are buying alumina from the Russian company, will suffer greatly. Among the possible consequences are not only interruptions in supply, but also the shutdown of a number of enterprises, including the alumina plant itself UC Rusal in Ireland. In view of these risks, several European countries, including Germany and France, appealed to the US Treasury to mitigate the sanctions. The United States is already negotiating with European partners on trade duties, spending on NATO and relations with Russia, and are not interested in Europe having a new lever of pressure.
Apparently, the scale of the rebound from the sanctions became a surprise even for the US Treasury itself, so on April 23 it decided to extend the time of settlements with UC Rusal. At the same time, the ministry did not exclude that sanctions could be lifted if Oleg Deripaska ceases to control the company. Deripaska confirmed his readiness to take such a step.
The main thing that needs to be agreed upon for the lifting of sanctions against UC Rusal is what kind of deal the US Ministry of Finance will agree to recognize as a transfer of control. At the moment, Oleg Deripaska owns 66% of the shares of En + Group, which, in turn, controls 48% of UC Rusal. Another 11% of En + belongs to Deripaska's relatives.
There are many options for changing the ownership structure: the transfer of shares of Deripaska to a blind trust controlled by independent directors; the sale of shares to a financial investor, for example a VTB group or one of the oligarchs; reverse repurchase of En + own shares from Deripaska. Moreover, the deal may concern both the entire block of shares in Deripaska and its part. Before implementing any of these structures, it is necessary to obtain confirmation from the US Treasury that the corresponding deal will suit them. According to En +, concrete proposals on the structure of the deal should be ready by the middle of summer.
It seems likely that during the talks the Russian side will discuss these proposals with the Americans and will try to enlist their support. If agreement can be reached, reorganization of the ownership structure of UC Rusal can happen quickly enough that in August sanctions were lifted. Deripaska has every reason to hurry: despite the fact that UC Rusal's counterparties are allowed to continue settlements with the company before the end of October, some of the products are ordered two months before the calculations. Therefore, in August the company can lose a number of orders if the sanctions remain in force.