Sanctions have sent aluminum soaring. That could hurt your wallet

US sanctions aimed at punishing Russian oligarchs close to President Vladimir Putin could make your soda habit or lux...

Posted: Apr 11, 2018 6:28 PM
Updated: Apr 11, 2018 6:28 PM

US sanctions aimed at punishing Russian oligarchs close to President Vladimir Putin could make your soda habit or luxury car more expensive.

The price of aluminum has surged 10% since the United States slapped tough new sanctions on Rusal, a leading metal producer controlled by Russian oligarch Oleg Deripaska.

If sustained, that price hike could push up the cost of making a range of industrial and consumer products, including cars, airplanes, soda cans and pharmaceutical packaging.

Under the sanctions announced Friday, Americans are generally prohibited from doing business with Rusal, and people of other nationalities could face sanctions themselves if they facilitate transactions for the firm.

Rusal produces 7% of the world's aluminum, according to the US Treasury. But buyers, business partners and commodity exchanges are now scrambling to sever ties with the company. Its shares have plummeted 56% since the sanctions were announced.

"Businesses just don't want to deal with even a remote risk of getting on the wrong side of US authorities," said Gregor Irwin, chief economist at the political advisory firm Global Counsel.

It won't be easy for aluminum buyers to replace the lost supply, and prices are rising as a result.

Rusal had sales of nearly $10 billion in 2017, with about 15% coming from the United States -- its second largest market after Russia.

Aluminum prices can be volatile, and short term price hikes won't do much to affect the price of consumer staples. But if aluminum remains expensive, companies will eventually look to raise prices on products that use the metal.

"If the sanctions are sustained ... I think it's inevitable that we will see an increase in the cost of assembling cars and therefore, car prices," said David Bailey, a professor of industrial strategy at Aston University in the United Kingdom.

Bailey said luxury automakers like Jaguar Land Rover and BMW would be hit hardest because their designs use more aluminum in order to make the cars lighter and more fuel efficient.

A new 10% tariff imposed by the US on some aluminum imports won't help matters.

"There's potentially a double hit for American consumers," said Irwin.

On Wednesday, US Treasury Secretary Steven Mnuchin said that the sanctions have been "quite impactful."

"You've seen the impact on the market," Mnuchin told lawmakers in Washington. "These are very, very powerful tools. We need to do them carefully and thoughtfully."

Deripaska is one of seven oligarchs to be hit by the new sanctions. Other companies that the US government said are owned or controlled by Deripaska, including EN+ Group and GAZ Group, were also sanctioned.

The Russian is best known in the United States as a former business associate of former Trump presidential campaign chairman Paul Manafort.

The US Treasury said Deripaska has been "investigated for money laundering, and has been accused of threatening the lives of business rivals, illegally wiretapping a government official, and taking part in extortion and racketeering."

On Friday, Deripaska described the US sanctions as "groundless, ridiculous and absurd."

-- CNN's Donna Borak and Ivana Kottasova contributed to this report.

Mississippi Coronavirus Cases

Data is updated nightly.

Cases: 148387

Reported Deaths: 3769
CountyCasesDeaths
DeSoto9953104
Hinds9892198
Harrison7045110
Jackson6270119
Rankin5462102
Lee501095
Madison4734106
Forrest380586
Jones354888
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Washington3161107
Lamar289250
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Marshall213850
Leflore204790
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Monroe197377
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Tate168051
Union166025
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Yazoo154239
Scott152129
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Leake133543
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Newton104229
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Clay90327
Clarke89353
Jasper82022
Walthall76328
Stone76114
Calhoun73913
Montgomery73625
Carroll72115
Lawrence70814
Noxubee70617
Yalobusha70627
Smith70516
Perry66126
Tunica60619
Greene60022
Claiborne58316
Jefferson Davis56517
Amite53114
Humphreys53119
Benton49117
Quitman4897
Webster43414
Kemper42518
Wilkinson39422
Jefferson34811
Franklin3365
Choctaw3237
Sharkey30917
Issaquena1144
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Alabama Coronavirus Cases

Cases: 242874

Reported Deaths: 3572
CountyCasesDeaths
Jefferson31944500
Mobile19687361
Madison13065148
Tuscaloosa12983154
Montgomery12286236
Shelby1020377
Baldwin860398
Lee773566
Morgan653850
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Marshall621355
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Houston523038
DeKalb481336
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Lauderdale400454
Walker3634111
Talladega349054
Jackson313423
Colbert309342
Blount288840
Autauga271642
Franklin251033
Coffee242615
Dale231854
Dallas225932
Chilton221938
Russell22143
Covington218534
Escambia197931
Chambers176550
Tallapoosa175791
Pike158314
Clarke158019
Marion137936
Winston132323
Lawrence127336
Pickens122318
Geneva12138
Marengo121024
Bibb117317
Barbour117110
Butler115341
Randolph102021
Cherokee101524
Hale96131
Clay91124
Washington90919
Fayette89816
Henry8526
Lowndes79529
Monroe78711
Cleburne77114
Macon73122
Crenshaw71130
Bullock69419
Conecuh68414
Perry6846
Lamar6718
Wilcox63218
Sumter57722
Greene42418
Choctaw42113
Coosa3414
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