The Office of Foreign Assets Control of the US Treasury Department (OFAC), the structure responsible for sanctions, issued an explanation on Friday: what are the restrictions imposed on the companies of Oleg Deripaska. The document says that US citizens and their partners can conclude new contracts with UC Rusal and other Deripaska companies on the sanctions list. But the permit is valid only for those companies that for several years already purchased goods and services of UC Rusal, GAZ Group or other companies of Deripaska, and also provided them with maintenance services, reports OFAC.
The Office explains: transactions and actions that were not in previously concluded contracts can be considered as maintaining business activity and this will not be considered a violation of the sanctions regime.
But for this, UC Rusal's contracting companies will have to have documents on their hands that they have been buying UC Rusal products for several years in a row and will not buy a new contract under the new agreement than in previous years. And "maintenance of business activity" is treated in OFAC documents in a broad sense ", states the partner of the legal company TA Legal Consulting Ivan Tertychny.
This clarification allows UC Rusal contractors to enter into new contracts for the next period without the risk of secondary sanctions, provided that OFAC extends License No. 14 (it allows US citizens and their partners to execute contracts with UC Rusal before October 23 without risking sanctions) believes managing partner Debevoise & Plimpton in Russia Alan Kartashkin.
Thus, OFAC partially eliminated the threat that in the next year UC Rusal, which exports up to 80% of the output, will only work for the warehouse.
The OFAC solution will allow Deripaska to retain 60-70% of its revenue, says Andrey Tretelnikov, investment director of TKC Partners.
The United States imposed sanctions personally against Deripaska and its companies on April 6. The sanctions implied a complete ban on US citizens for any significant cash transactions with UC Rusal, GAZ and other Deripaska entities, and anyone who disobeyed could themselves be subject to similar sanctions. According to the original OFAC plan, all foreign companies and citizens had to completely cease business relations with UC Rusal until May 7 of this year - including stopping to buy aluminum from UC Rusal and withdraw from its capital, En + capital and GAZ group, and sell bonds of companies Deripaska.
But later, the deadline for the complete termination of business relations with UC Rusal was postponed to October 23. OFAC received a plan from the Russian company to withdraw it from the sanctions (Deripaska agreed to reduce the stake in En + and, consequently, the indirect ownership of UC Rusal), said in early May, US Treasury Secretary Stephen Mnuchin. According to him, Washington intends to find an acceptable solution and the US has no plans to squeeze the company out of business - especially since UC Rusal provided 6% of world and 10% of US aluminum consumption at the beginning of this year.
In the second quarter of 2018, revenue of UC Rusal due to sanctions fell to $ 2.3 billion, or 18% compared to the same period in 2017. Early in August, the question arose whether UC Rusal could renew contracts for 2019 The OFAC wording directly forbade this. "The signing of contracts for the next year is traditionally taking place in September, and if by that time there will be no understanding of whether the US will extend the license to work with UC Rusal and how much the company can neither extend old contracts nor conclude new contracts," Fitch analysts wrote. review. Most participants of the Metal Bulletin industrial conference, which ended last Friday in Berlin, did not want to conclude deals with UC Rusal, Bloomberg reported.
46% of aluminum UC Rusal sold to end users and 56% - through traders. The five largest buyers of UC Rusal in 2016 included the Glencore commodity trader, the Toyota car manufacturer, the private Swiss trader Mechem, the Savelovsky machine-building plant (manufactures machines for the Russian defense industry) and the Kamensk-Urals metallurgical plant (produces aluminum semi-finished products) - together they gave 42% of revenue, of which Glencore - 31%, follows from the disclosure of the main shareholder of the aluminum company, En +. If the company fails to extend the seven-year contract with Glencore (expiring at the end of 2018), this will significantly affect the financial and operating condition of UC Rusal, the company's shareholder wrote in the prospectus to last year's IPO.
The representative of Glencore did not answer whether the trader would renew the expiring seven-year contract for the purchase of aluminum from UC Rusal. A representative of UC Rusal declined to comment.
The Office explains: transactions and actions that were not in previously concluded contracts can be considered as maintaining business activity and this will not be considered a violation of the sanctions regime.
But for this, UC Rusal's contracting companies will have to have documents on their hands that they have been buying UC Rusal products for several years in a row and will not buy a new contract under the new agreement than in previous years. And "maintenance of business activity" is treated in OFAC documents in a broad sense ", states the partner of the legal company TA Legal Consulting Ivan Tertychny.
This clarification allows UC Rusal contractors to enter into new contracts for the next period without the risk of secondary sanctions, provided that OFAC extends License No. 14 (it allows US citizens and their partners to execute contracts with UC Rusal before October 23 without risking sanctions) believes managing partner Debevoise & Plimpton in Russia Alan Kartashkin.
Thus, OFAC partially eliminated the threat that in the next year UC Rusal, which exports up to 80% of the output, will only work for the warehouse.
The OFAC solution will allow Deripaska to retain 60-70% of its revenue, says Andrey Tretelnikov, investment director of TKC Partners.
The United States imposed sanctions personally against Deripaska and its companies on April 6. The sanctions implied a complete ban on US citizens for any significant cash transactions with UC Rusal, GAZ and other Deripaska entities, and anyone who disobeyed could themselves be subject to similar sanctions. According to the original OFAC plan, all foreign companies and citizens had to completely cease business relations with UC Rusal until May 7 of this year - including stopping to buy aluminum from UC Rusal and withdraw from its capital, En + capital and GAZ group, and sell bonds of companies Deripaska.
But later, the deadline for the complete termination of business relations with UC Rusal was postponed to October 23. OFAC received a plan from the Russian company to withdraw it from the sanctions (Deripaska agreed to reduce the stake in En + and, consequently, the indirect ownership of UC Rusal), said in early May, US Treasury Secretary Stephen Mnuchin. According to him, Washington intends to find an acceptable solution and the US has no plans to squeeze the company out of business - especially since UC Rusal provided 6% of world and 10% of US aluminum consumption at the beginning of this year.
In the second quarter of 2018, revenue of UC Rusal due to sanctions fell to $ 2.3 billion, or 18% compared to the same period in 2017. Early in August, the question arose whether UC Rusal could renew contracts for 2019 The OFAC wording directly forbade this. "The signing of contracts for the next year is traditionally taking place in September, and if by that time there will be no understanding of whether the US will extend the license to work with UC Rusal and how much the company can neither extend old contracts nor conclude new contracts," Fitch analysts wrote. review. Most participants of the Metal Bulletin industrial conference, which ended last Friday in Berlin, did not want to conclude deals with UC Rusal, Bloomberg reported.
46% of aluminum UC Rusal sold to end users and 56% - through traders. The five largest buyers of UC Rusal in 2016 included the Glencore commodity trader, the Toyota car manufacturer, the private Swiss trader Mechem, the Savelovsky machine-building plant (manufactures machines for the Russian defense industry) and the Kamensk-Urals metallurgical plant (produces aluminum semi-finished products) - together they gave 42% of revenue, of which Glencore - 31%, follows from the disclosure of the main shareholder of the aluminum company, En +. If the company fails to extend the seven-year contract with Glencore (expiring at the end of 2018), this will significantly affect the financial and operating condition of UC Rusal, the company's shareholder wrote in the prospectus to last year's IPO.
The representative of Glencore did not answer whether the trader would renew the expiring seven-year contract for the purchase of aluminum from UC Rusal. A representative of UC Rusal declined to comment.
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