18 Dec 2020
European officials have provided information to the U.S. government indicating that Russian billionaire Oleg Deripaska continued to exert control this year over United Co. Rusal International PJSC, which the officials say was a breach of a U.S. sanctions agreement reached in 2018.
An assessment sent to U.S. officials earlier this year concluded that Deripaska retained significant day-to-day influence over Rusal, one of the world’s largest aluminum producers, and its parent, EN+ Group International PJSC, according to the officials. He used company resources and employees to support his personal business interests and the political agenda of the Kremlin around the world, they said.
Such activities could run afoul of an agreement reached in late 2018 between the U.S. and EN+, Rusal and another company founded by Deripaska. The deal called for the oligarch, who is under personal U.S. sanctions, to reduce his ownership and relinquish control of those operations as a condition for the U.S. lifting sanctions against the companies.
The officials said they shared information that the Russian oligarch directed executives at Rusal and EN+ to press western governments and multilateral institutions to block Chinese aluminum from flooding foreign markets early this year. They also alerted U.S. officials of their findings that Deripaska personally oversaw a media campaign led by company executives to undermine China’s reputation in Africa, they said.
Any review of the U.S. government’s Russia sanctions could become politically contentious for President-elect Joe Biden and his nominee for Treasury secretary, Janet Yellen. Congressional Democrats criticized the deal that lifted sanctions on Deripaska’s companies last year. A Senate Intelligence Committee report released in August described Deripaska as a proxy for the Russian state and its intelligence services.
Officials on both sides of the Atlantic confirmed that the information was shared with U.S. government agencies, which declined to comment on queries from Bloomberg News. U.S. officials are aware of Deripaska’s past activities and continue to assess compliance with the agreement, a person familiar with the matter said.
It would ultimately be up to the U.S. Treasury, which enforces sanctions, to determine whether the companies breached their agreement with it. A Treasury spokesman declined to comment or say whether the activities outlined by European officials would have constituted a violation of the sanctions-relief deal.
The law firm Schillings, which represents Rusal parent company EN+ and its executive chairman Greg Barker, said the allegations have no basis in fact. It is false, the firm wrote, to suggest Deripaska controls EN+, influences day-to-day operations or allows its resources or its employees to support his personal business interests. In a statement following publication, EN+ said its “independent board of directors continues to have full confidence in the group’s robust compliance procedures.”
In a separate post-publication statement, Rusal said it “refutes in the strongest terms any suggestion that it violated the terms of its agreement with OFAC,” referring to the office within Treasury that administers and enforces sanctions. “We consider the speculation in the article to be totally false, groundless and untrue.”
Lawyers for Deripaska said the European officials’ allegations aren’t true. Deripaska “has supported the removal of En+ & Rusal from sanctions and taken all requested steps in relation to the same, and at all times has complied with his commitments made related thereto,” said U.K. lawyer Paul Tweed.
A U.S. lawyer for Deripaska, Tom Clare, said his client “made monumental efforts to divest from the companies pursuant to the U.S. government’s directive — which he accomplished to the U.S. government’s total satisfaction.”
The Trump administration’s blacklisting of Deripaska roiled metals markets and prompted the U.S. Treasury to rethink one of its highest-profile moves against Russia.
The U.S. sanctioned him and six other Russian oligarchs in April 2018 for their roles in supporting what Treasury Secretary Steven Mnuchin called the Kremlin’s “malign activity around the globe,” including the occupation of Crimea, support for the Syrian regime of Bashar al-Assad and attempts to subvert Western democracies. The U.S. said it was targeting Deripaska for acting or purporting to act on the Russian government’s behalf and for operating in the country’s energy sector.
Along with the individual measures, the U.S. sanctioned several Deripaska companies, citing the Russian’s ultimate control of them. Those companies included EN+ and its Rusal unit, as well as an EN+ energy unit.
Although the U.S. has announced measures against some of Russia’s wealthiest and politically connected billionaires, few of those moves had the impact of the actions against Deripaska. Sanctioning Rusal, the world’s largest aluminum producer outside of China, sparked concerns of a global shortage. Prices of aluminum, used in everything from food packaging to airplanes, rose almost 40% in the two weeks after the U.S. sanctions on Rusal.
Mnuchin soon backtracked, saying Treasury would provide relief from sanctions on the companies if Deripaska relinquished control.
By Alan Katz, Kitty Donaldson and Stephanie Baker, Bloomberg, 17 December 2020
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