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UPDATE 1-Rusal's foil plant in Armenia starts reducing output - sources

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MOSCOW/YEREVAN, Sept 18 (Reuters) - Rusal’s foil-rolling plant Armenal has started cutting production due to U.S. sanctions on the Russian aluminium giant, a source at the plant and a source close to Rusal said.

Armenal, which is based in Armenia and employs 670 people, has seen demand for its products fall since Washington imposed sanctions in April against Russian businessman Oleg Deripaska and some of the companies he controls, including Rusal, the sources said.

Armenal and Rusal declined official comment.

The plant, which produced 33,720 tonnes of foil products in 2017, mainly for the North American and European markets, may temporarily suspend all of its production, the source at the plant said.

He did not say when and under what conditions the suspension could take place, but said 184 of Armenal’s workers would be transferred to a regime of forced outage with two thirds of their salary by the end of September.

The U.S. sanctions hit Rusal’s steady supply of raw materials and products within the group. In September, sources familiar with the discussions told Reuters that European customers would avoid signing 2019 supply agreements with Rusal.

In August, Rusal started shutting down production at one of its smaller plants, the Nadvoitsky aluminium smelter in Russia’s Karelia region.

Washington recently said Rusal’s customers from before the imposition of sanctions on April 6 could sign new contracts with the company without the risk of being hit with “secondary sanctions” themselves.

The guidance did not, however, address whether OFAC would extend a deadline of Oct. 23 for U.S. customers to wind down business with Rusal. (Reporting by Anastasia Lyrchikova and Hasmik Mkrtchyan; writing by Polina Devitt; editing by Kirsten Donovan)