BOFIT Viikkokatsaus / BOFIT Weekly 2018/21

The latest round of sanctions announced by the US Treasury Department on April 6 have significantly impacted targeted Russian firms, most notably one of the world's largest aluminium producers Rusal and its main stakeholder Oleg Deripaska. Rusal's global production activities have been severely impaired by the move, forcing its customers and investors to get determinations e.g. on how fast they need to cease their business relations with the sanctioned giant. US officials have been willing to show flexibility in Rusal's case e.g. on arrangements in corporate structures, partly because the mere threat of disrupting the company's production caused global aluminium prices to spike by about a third. This week global aluminium prices were up about 15 % from the start of April.

Deripaska owns Rusal via the energy-focused EN+ Group. He has promised to reduce his ownership stake in Rusal from 70 % to below 50 %. Following the sanctions announcement, Rusal's share price plummeted by over 50 %. Its share price is currently down about 65 % from the beginning of this year.

The US sanctions list also includes Viktor Vekselberg and his Renova Group conglomerate. Renova owns, among other things, several machine-building firms and a stake in Rusal. Vekselberg says Renova paid off about 1 billion Swiss francs worth of loans to Western banks before sanctions took effect. Renova says the loans were paid off out of pocket and through borrowing arrangements. A press release from the Russian finance ministry noted that Renova also obtained a loan from Promsvyazbank. The government plans to make Promsvyazbank a major lender to Russian defence industry to make sure that other Russian banks are not burdened with the risk of sanctions that could arise if they loaned money to companies subject to financial sanctions.