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Will Russian Oligarchs Get a ‘Free-Pass’ from U.S. Sanctions?

After a striking hit to the global aluminum and metal markets, the U.S. Treasury Office of Foreign Asset Control is considering loosening the sanctions it imposed earlier this April on Russian aluminum conglomerate Rusal, suggesting that easing of sanctions is attached to the stipulation that the company’s head, Oleg Deripaska, a Putin-entangled Russian oligarch, would cede control of the organization before it may be reintegrated into conducting complete business transactions with the U.S.

 Russian President Putin and Rusal’s Deripaska; Credit: Wikimedia Commons

Russian President Putin and Rusal’s Deripaska; Credit: Wikimedia Commons

In January the Russian oligarch inquisition began with the U.S. Treasury issuing a list of specific individuals seen as having close Kremlin ties within Russian President Vladimir Putin’s core group of business partners. The list was an extension of a prior initiative named the “Countering America’s Adversaries Through Sanctions Act,” and sanctions against many individuals on the list were rolled out at the beginning of this April.

Deripaska was a key figure targeted for his alleged ties to current U.S. President Trump’s previous advisor Paul Manafort during his presidential campaign. Additionally, Deripaska’s company, the En+ Group, was a sanctioned member on the list. En+ is a major controlling stakeholder in the Russian aluminum company Rusal, both of which suffered large share losses in the wake of the sanction enactments. The U.S. was strategic in its assailment of Rusal which serves as Russia’s main “aluminum giant.” As a prominent consumer of 16% of the world’s aluminum, the U.S.’ move was poignantly aimed at striking the heart of a leader in Russia’s export industry.

 Credit:  REUTERS/Ilya Naymushin//File Photo

Credit:  REUTERS/Ilya Naymushin//File Photo

As of late, the U.S. is now retreating on its heavy-handed initial actions, allowing for an extended ‘wind down’ period for business to be conducted with Rusal, while also considering a petition by the company to be exempt from the list of sanctioned Russian individuals and corporations. The weakened stance of the U.S. can be accredited to the severe plummet in global aluminum prices that went down a staggering 9.4% in response to the sanctions, predicting a worldwide shortage of aluminum supply creating widespread impact across Europe and the North Atlantic. The U.S. Treasury has most recently said that if Deripaska is willing to give up his position of control in Rusal, it would consider lifting the sanctions against the company. This conditional stance reflects the U.S.’ attempt to establish a hardline relationship of intolerance against Putin’s meddling with oligarchs and Putin’s use of crony-corporate favoritism within Russia.

However, despite U.S. aluminum tariffs, alongside the established sanctions and threats, Russian oligarchs and the Kremlin have not significantly wavered in their plans and goals. The Kremlin will extend favorable treatment to those loyal oligarchs harmed by U.S. sanctioning activity and will use U.S. assailment as something to foster the nationalistic and anti-Western fervor in the Russian public. It remains to be seen whether or not Deripaska will be willing to relinquish his stake in Rusal, or if he will configure a deal with the Kremlin to retain some form of control one way or another. Regardless, if the Kremlin does not eventually acknowledge the increasingly assertive stance of U.S. sanction policy, market tensions may escalate until some form of dialogue or change is initiated on both sides of the Atlantic.