Russia, betting on EU Trump talks, keeps powder dry in Rusal row for now

MOSCOW (Reuters) - Moscow is holding off on taking retaliatory measures against the United States for imposing sanctions on Rusal, hoping the EU can persuade Washington to ease restrictions against the world’s second largest aluminum producer further, sources told Reuters.

FILE PHOTO: An exterior view shows an office of RUSAL company in Moscow, Russia March 19, 2012. REUTERS/Denis Sinyakov/File Photo

The United States on Monday gave American customers of Rusal more time to comply with the U.S. sanctions imposed earlier this month after some European capitals lobbied for them to be eased, triggering a 43-percent jump in Rusal’s Hong-Kong listed shares.

With French President Emmanuel Macron already in Washington and German Chancellor Angela Merkel planning to go there later this week, Moscow hopes both leaders can reopen European markets for Rusal’s aluminum, a source at the finance ministry said.

“Everyone is sitting now and waiting to see if Merkel agrees with Trump, if she secures exceptions,” the source said. “This explains why Russia is not going in with all guns blazing now.”

Washington blacklisted Rusal and its billionaire major shareholder Oleg Deripaska, along with some other Russian businessmen, for suspected meddling in the 2016 U.S. election and other alleged “malign activity”.

For many of those affected, the sanctions were a surprise, said a source close to the Russian government.

“Our side did not think that there would be such pressure, but the West did not expect it either. Therefore, attempts are being made to ease the pressure on both sides,” he added.

Russian Finance Minister Anton Siluanov met U.S. Treasury Secretary Steven Mnuchin last week, the ministry said.

Russia has a history of imposing quick bans on Western imports when it needs to send a strong response in conflicts with other countries. However, in this case the reaction is unusually slow in coming.

Russian lawmakers drafted legislation in response to the U.S. sanctions that would give the authorities the power to ban or restrict imports of U.S. goods and services to Russia on April 13. The first reading is planned on May 15.

Russia is not in a hurry to approve this law also because it cannot allow itself a tough response ahead of the World Cup it is hosting this summer and because restrictions on U.S. imports could hit its domestic industries, said a source familiar with the discussions of the draft.

Slideshow ( 2 images )

“But this (law) in any case is a gun which will be hanging on the wall and can shoot someday,” the source said.


Washington said on Monday it would consider lifting the sanctions if Deripaska, who along with the company was included on a U.S. sanctions list on April 6, ceded control of Rusal.

However, Deripaska wants to keep his assets, the source at the finance ministry said, adding that nobody in government likes the idea of nationalization.

The Kremlin is unlikely to favor a scenario whereby Washington tells it who must own what in Russia, said a source who knows Deripaska.

“Plus, the situation is not easy for Deripaska, no one likes it when someone is talking to him from a position of strength,” the source added.

Russian industry minister Denis Manturov said on Tuesday that he would not rule out the possibility of the state buying a stake in Rusal from Deripaska, but there had been no detailed discussion on the subject yet.

Kremlin spokesman Dmitry Peskov said on Tuesday that neither Macron nor Merkel had discussed their efforts to secure an easing of sanctions with Putin.

However, “it is known that many business structures and legal entities, including from Europe, are actively raising this subject with the governments of their countries,” he added.

The coordinated European effort to alleviate the impact the sanctions could have on their own companies includes France, Germany, Italy and Ireland, French sources said on Monday, adding that American officials had offered a sympathetic ear.

EU aluminum consumers are concerned because Europe is Rusal’s largest market with 42 percent of the company’s products sold there in 2017. The sanctions also damaged Rusal’s overseas supply chain, smelters and refineries, partly based in Europe.


If Rusal is allowed to keep its European market, Russia’s retaliatory measures on U.S. companies are likely to be modest and the government would be able to focus on restructuring the company’s loans, the source at the finance ministry said.

Help with loans is likely to be needed because while the United States on Monday extended the license allowing continued business relations with Rusal from June 5 to Oct. 23, another license restricting financing operations was unaltered and will expire on May 7.

Russian companies hit by U.S. sanctions have asked for 100 billion roubles ($1.6 billion) in liquidity support from the government, Siluanov said last week.

The current plan is to use Promsvyazbank, a lender earmarked by the government to provide credit to sanctioned entities so that other lenders can offload the risk, to solve the short-term liquidity problems for Rusal, the finance ministry source said.

In the longer term, the rescue package may include the creation of offshore zones in the Russian cities of Kaliningrad and Vladivostok which would provide sanctions-hit companies registered there with corporate confidentiality, the source added.

In a sign that support from state banks was being prepared, Russia’s central bank on Monday decided to permit Russian banks not to raise risk levels when assessing the creditworthiness of companies sanctioned by foreign countries.

Rusal’s foreign creditors were not on the government’s agenda for now because Moscow was focused on securing aluminum supplies to Europe, the source added.

Reporting by Darya Korsunskaya, Polina Devitt, Polina Nikolskaya and Elena Fabrichnaya; Writing by Polina Devitt; Editing by Giles Elgood