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U.S. Softens Stance on Rusal Sanctions; Aluminum Plunges

Bloomberg: The U.S. softened its position on sanctions against Russian metals giant United Co. Rusal, sparking a record plunge in aluminum prices.

For the first time, the U.S. Treasury discussed a path for lifting the sanctions on Rusal, saying it would provide relief if Oleg Deripaska relinquished control. It also extended the deadline for companies to wind down dealings with the Russian aluminum producer by almost five months.

Rusal petitioned to be removed from the sanctions list and Treasury granted the extension while it considers the appeal, according to a statement from Treasury Secretary Steven Mnuchin.

“Rusal has felt the impact of U.S. sanctions because of its entanglement with Oleg Deripaska, but the U.S. government is not targeting the hardworking people who depend on Rusal and its subsidiaries,” Mnuchin said.

Aluminum plunged in response as traders speculated that supply disruptions could ease. Prices fell as much as 9.4 percent, the most ever. U.S. metal producers also dropped, with Alcoa Inc. sliding 12 percent.

Washington’s clarification follows two weeks of chaos in global metal markets. Aluminum shot to multiyear highs as manufacturers raced to secure supply. A German lobbying group said European plants may be forced to close and carmakers could face supply shortages.

Rusal’s wind-down operations can include debt payments in U.S. dollars through Oct. 23, a Treasury spokesman said in response to questions.

The U.S. statement also adds pressure on Deripaska as he tries to save the company without surrendering control. He owns 48 percent of Rusal and controls it through a shareholder agreement with others including Glencore Plc and Viktor Vekselberg, who is also under sanctions.

"If there were previously doubts if Rusal will remain sanctioned if Deripaska sells out, now we have a clear answer," Oleg Petropavlovskiy, analyst at BCS Global Markets, said by phone. "Changing ownership structure would be a solution for the company."

Deripaska was targeted as part of a sanctions-package that hit dozens of Russian tycoons, companies and key allies of President Vladimir Putin.

While analysts have suggested that nationalization may be the only solution, Russian Finance Minister Anton Siluanov told reporters Friday that Rusal was not on the list to be nationalized.

Rusal declined to comment. Deripaska’s spokeswoman wasn’t immediately available.

Rusal produces about 6 percent of the world’s aluminum and operates mines, smelters and refineries across the world from Guinea to Ireland, Russia to Jamaica >>>