פארוואס אַ סיקוואַל צו סאַנגשאַנז אויף # רוסאַל סקערז מארקפלעצער

Even though sanctions on Russian aluminium giant Rusal were relieved in January, disputes about the United States Treasury’s Office of Foreign Assets Control (OFAC) decision continue to develop on both sides of the Atlantic. In an unlikely display of shared goals, the United States Democratic Party and Russia’s Communist Party have made bedfellows in recent months and are clamouring to reverse the Treasury’s decision. But such a decision would roil aluminium markets, deal a massive blow to Europe’s aluminium industry and would most likely result in Rusal’s nationalisation, the world’s second largest producer of the silver metal. 

Rusal spent the majority of last year struggling under the thumb of sanctions levied upon it by OFAC. Changes sought (and ultimately received) by OFAC consisted of a wide range of sweeping corporate governance reforms to the firm and the way in which it conducts business.

While Rusal was negotiating with OFAC, global aluminium market suffered. Characterized by one commentator as “far and away the most significant sanctions action against Russia since the imposition of sectoral sanctions in 2014,” the sanctions disrupted business far afield of Rusal’s corporate headquarters. With operations in a dozen countries, the sudden shock sent aluminium prices flying. Anglo-Australian mining titan Rio Tinto Group declared a force majeure, disrupting bauxite supplies in Europe and around the world. Many manufacturers suffered from the loss of Rusal’s aluminium, from small aluminium foil repackaging operations to large producers of automotive and aerospace parts. In addition to aluminium, Europe was also facing the prospect of losing a significant portion of its supply of alumina should Rusal’s operations at Aughinish be shuttered. The plant supplies fully a third of the continent’s need for alumina, a key precursor to aluminium.

After months of talks, OFAC rescinded sanctions in January, allowing Rusal to begin the task of patching up holes in the business that developed during the course of the restrictions. However, OFAC’s decision was questioned by Democrats who launched a barrage of questions at Treasury Secretary Steven Mnuchin seeking to determine what, if any, effect alleged ties between Donald Trump and Vladimir Putin had upon the termination of sanctions. They later followed with two letters citing alleged conflicts of interest between Mnuchin and Rusal and inquiring as to the possible influence such ties may have had in dismissing the sanctions.

Over in Moscow, the Russian Communist Party (the country’s second largest party) led by its long-standing leader Gennady Zyuganov, has been striking a similar tone. Assailing Rusal as “the biggest scam,” Zyuganov chided the firm for stripping power from founder Oleg Deripaska and making its board “subordinate to the Anglo-Saxons” instead of Russians. Zyuganov even suggested that the board of directors should be reshuffled, which would essentially put Rusal in OFAC’s firing line again. Per the agreement sealed late last year, the Treasury asked the company to create an independent board of directors staffed by a dozen individuals, eight of whom would not be aligned with Deripaska and half of whom would hail from the U.S. or the United Kingdom.

But the return of sanctions would be a pain for everyone involved. Any change to the Rusal’s board would result in an OFAC decision to blacklist the company, which would make nationalisation the only solution to keeping it operational. The Russian state would then find itself the proud owner of a company that would barely have any market for its products. Either scenario will spawn a restructuring of the global aluminium trade that few, if any, market players wish to see. The metal would be blocked from making its way to European consumers and international markets, while sales to Russia only account for a quarter of total revenue. Tens of thousands of workers, as well as its operations in countries such as שוועדן און אירלאנד, would be on the line.

אַדווערטייזמאַנט

The nationalisation scenario has already been called “odious” by the US-based think tank The Atlantic Council. If implemented, it would lead to permanent damages to supply chains all over the world. Over 3.5 million tonnes of aluminium would be removed from the market overnight. Last year’s crisis has shown that replacing the Russian metal was nigh on impossible for European companies, and any further disruptions to aluminium markets would lead to prices skyrocketing, affecting a whole plethora of industries.

Short-sighted populism and political vendettas are threatening the fate of one of the world’s most used materials. Barely out of the frying pan, Europe’s embattled supply chains are now staring at the fire. One can hope that, faced with the far-reaching economic consequences of nationalizing Rusal, cool heads will prevail in the end.

 

שער דעם אַרטיקל: