Russian tycoon hit by U.S. sanctions

Sean Reid
April 11, 2018

Shares in firms controlled by Oleg Deripaska have plunged after the U.S. imposed sanctions on seven Russian oligarchs and their companies on Friday.

Aluminium giant Rusal (0486.HK), which Deripaska also controls, saw half its value wiped out in overnight trading in Hong Kong.

Rusal was included on a list of a dozen companies and seven tycoons with links to President Putin that are facing sanctions, announced by the United States on Friday in response to the poisoning of Sergei Skripal and his daughter Yulia in Salisbury and Kremlin-backed events in Syria and Crimea. The main RTS index dropped 11%, affecting companies not caught by the sanctions.

Aluminium is heading for its biggest winning streak since 1988 in the four days since the U.S. slapped sanctions on United Company Rusal and as top exchanges said they will stop accepting metal from the Russian smelting giant. A new provision expands those rules to transactions involving non-Americans, in a major blow to his operations. By making it virtually impossible for Deripaska's businesses to trade in United States dollars, the measures threaten the empire of one of Putin's closest allies.

The share price of the company "RUSAL" on Monday morning fell more than 40%.

"The company's initial assessment is that it is highly likely that the impact may be materially adverse to the business and prospects of the group", the company said. Glencore has various contracts with Rusal for the purchase of aluminium and alumina.

The London Metal Exchange said late on Tuesday Rusal's aluminum would be suspended from its list of approved brands from April 17 after some members raised concerns about settling contracts with sanctions-hit companies.

"The biggest blow was taken by public companies controlled by Oleg Deripaska", Moscow brokerage Aton wrote in a briefing note, adding that the market was looking for "possible actions to minimise" the damage.

The firm, which produces nearly 6% of the world's aluminium, said the sanctions could cause technical defaults on bank loans and some credit obligations.

Miner South32 Ltd said on Wednesday it plans to appeal a ruling by Colombia's constitutional court that it must pay damages over the health and environmental impact of its Cerro Matoso nickel mine.

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