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Russian oligarch can save his sanctioned companies. But will he?

The world's second largest aluminum producer is being pulled apart in a high-stakes tug of war.At one end of t...

Posted: May 2, 2018 11:58 PM
Updated: May 2, 2018 11:58 PM

The world's second largest aluminum producer is being pulled apart in a high-stakes tug of war.

At one end of the rope is the US government. At the other is Oleg Deripaska, the sanctioned Russian oligarch who controls metals giant Rusal through a stake in holding company EN+.

Rusal, which produces 7% of the world's aluminum, has been under intense pressure after it was included last month in US sanctions targeting Deripaska. International buyers and commodity exchanges scrambled to sever ties to the company, putting its survival in doubt.

Still, reports of its demise may be premature. The US government has made clear in recent days that sanctions on Rusal could be lifted -- depending on how much rope Deripaska is willing to cede.

One positive sign came Tuesday, when the US Treasury extended a deadline for stakeholders to divest from Rusal and EN+ until June 6.

The move comes after Deripaska agreed last week to reduce his stake in EN+ to below 50% and resign from the firm's board. Treasury's decision to extend the deadline allowed EN+ to maintain its listing on the London Stock Exchange.

Related: Russian oligarch retreats as sanctions slam his companies

Investors have cheered the developments. The price of aluminum, which shot up by nearly a third after the sanctions were announced, has returned to levels seen in January. Rusal shares have surged over 70% from their post-sanctions low.

US sanctions announced April 6 targeted oligarchs and government officials and were designed to punish Moscow for meddling in the 2016 presidential election.

For Deripaska, one major question still looms: Has the Kremlin insider done enough to satisfy the Trump administration?

US Treasury Secretary Steven Mnuchin said Monday that discussions with Rusal had so far been "encouraging."

"There are lots of facts and circumstances that we are discussing. The first aspect would be that [Deripaska] sells down below 50%," Mnuchin told Bloomberg TV. "Our objective was not to put Rusal out of business."

But the oligarch may be required to do much more.

Last week, a Treasury spokesperson said that "a reduction in the percentage of ownership by a sanctioned individual is not necessarily in and of itself a basis" for easing sanctions.

Related: US sanctions are killing this oligarch's business

"I suspect that bringing it under 50% isn't good enough," said Brian O'Toole, a senior fellow at the Atlantic Council who formerly worked as a senior adviser to the director of the Treasury's Office of Foreign Assets Control.

O'Toole said that under a normal process, Treasury would be looking for a sanctioned individual to fully divest and give up operational control of a company before it's removed from a sanctions list.

Negotiations are often fraught, he said, citing a sanctions case involving two Panamanian newspapers that took over a year to resolve.

"This is going to be a tough nose fight," he said of sanctions on Rusal. "I wouldn't be shocked if it drags on for a couple years."

Even if Deripaska does decide to give up control of his companies, a buyer who was acceptable to the US government would need to be found. That could prove difficult given the politics involved.

Rusal, which will struggle to do business in the West while under sanctions, will continue to atrophy while negotiations are ongoing.

"Washington and Moscow will each calculate it has leverage over the other... and likely force a certain amount of brinksmanship over any eventual deal," said O'Toole.

A metal magnate

Deripaska emerged from the chaotic scramble for assets following the collapse of the Soviet Union with a massive fortune, which Forbes estimated at $28 billion in 2008. Soon after, a sharp decline in commodities prices during the financial crisis caused his net worth to plummet.

He recovered his footing, and billions of his fortune, in the years that followed.

Deripaska has a longstanding relationship with Russian President Vladimir Putin. He is also a former business associate of Trump campaign chairman Paul Manafort, who has been indicted as part of an investigation by US special counsel Robert Mueller. Manafort has pleaded not guilty to all charges against him.

In announcing the new sanctions, the US Treasury said that Deripaska had "said that he does not separate himself from the Russian state."

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

--CNN's Donna Borak contributed to this report

Mississippi Coronavirus Cases

Data is updated nightly.

Cases: 513622

Reported Deaths: 10264
CountyCasesDeaths
Harrison34892556
DeSoto33234432
Hinds32638641
Jackson24854389
Rankin22507403
Lee16337242
Madison14922283
Jones14113247
Forrest13766259
Lauderdale12270324
Lowndes11305193
Lamar10659140
Pearl River9719244
Lafayette8846143
Hancock7836132
Washington7550169
Oktibbeha7210138
Monroe7010179
Pontotoc6990109
Warren6863178
Panola6759134
Neshoba6730210
Marshall6678141
Bolivar6445151
Union638297
Pike5928156
Alcorn5879107
Lincoln5530136
George510180
Prentiss503884
Tippah491482
Itawamba4844107
Scott477899
Adams4768125
Tate4756116
Leflore4729144
Copiah456495
Yazoo456491
Simpson4546117
Wayne443072
Covington433695
Sunflower4299106
Marion4277112
Coahoma4237109
Leake413990
Newton395781
Tishomingo383593
Grenada3777109
Stone365866
Jasper340666
Attala338290
Winston317892
Chickasaw315467
Clay312278
Clarke301195
Calhoun285049
Holmes271889
Smith269052
Yalobusha243947
Tallahatchie231553
Greene224749
Walthall221666
Lawrence218740
Perry213456
Amite209857
Webster205348
Noxubee188742
Montgomery181657
Carroll174541
Jefferson Davis173643
Tunica163239
Benton152939
Kemper145041
Choctaw136727
Claiborne134338
Humphreys131239
Franklin125529
Quitman107628
Wilkinson105939
Jefferson96934
Sharkey65221
Issaquena1957
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Alabama Coronavirus Cases

Cases: 845284

Reported Deaths: 16116
CountyCasesDeaths
Jefferson1161552006
Mobile742111380
Madison53307732
Shelby38338368
Baldwin38085589
Tuscaloosa36022641
Montgomery34492781
Lee25562263
Calhoun22586518
Morgan22459406
Etowah20018517
Marshall18782316
Houston17731425
St. Clair16884358
Limestone16148218
Cullman16054303
Elmore15904294
Lauderdale14989306
Talladega14196299
DeKalb12972269
Walker12030380
Blount10717192
Autauga10517157
Jackson10162194
Coffee9417192
Colbert9342208
Dale9020191
Tallapoosa7256201
Russell708165
Chilton7018170
Escambia6957143
Covington6933195
Franklin6342108
Chambers5784142
Marion5406130
Dallas5285209
Pike5119109
Clarke484986
Lawrence4826129
Winston4780110
Geneva4642136
Bibb434094
Barbour369580
Butler3435100
Marengo342493
Monroe337266
Randolph334867
Pickens333188
Fayette330385
Henry320666
Hale318389
Cherokee317863
Crenshaw260477
Washington257052
Cleburne254460
Lamar251453
Clay250869
Macon244864
Conecuh192862
Coosa185047
Lowndes178168
Wilcox177438
Bullock152645
Perry141840
Sumter139241
Greene130245
Choctaw93228
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