Minor Loosening Of U.S. Sanctions On Rusal May Have Major Repercussions

Minor Loosening Of U.S. Sanctions On Rusal May Have Major Repercussions

A minor adjustment to the sanctions imposed upon Russian aluminium giant U.C. Rusal by the Trump administration may portend potentially major changes in the measure that has hobbled the firm and sent a tsunami of chaos and uncertainty throughout the global aluminium trade.

On Friday the United States Treasury Department’s Office of Foreign Asset Control (OFAC) introduced a modification of the rules governing sanctions against the Russian firm by stating that existing customers would be permitted to negotiate new contracts after the October deadline by which the rest of the world will be liable for sanctions should they conduct business with Rusal.

While seemingly minor, experts see this move as the first ray of hope for the struggling aluminium and alumina titan.

“Particularly in alumina where you could have had a major crisis, this takes the grenade off the table,” opined CRU Group analyst Eoin Dinsmore.

Though the modification gives Rusal a slight respite from the sanctions’ full weight, the firm continues to navigate dire straits. September represents the industry’s “mating season” and, according to sources, the likelihood of the firm securing an appreciable quantity of contracts for the coming year.

However, Friday’s move may prove to be the thinnest of lifelines for Rusal, as it leaves open a window for continued supply of the firm’s alumina operations in Ireland. As a result, Rusal will continue to have alumina stocks on hand for sale when sanctions are ultimately relaxed.

Though the move may reassure some buyers, not all interested parties see the tweak as a reason to re-engage Rusal in business. According to sources who spoke with Bloomberg, banks are likely to continue to give Rusal the cold shoulder until sanctions are at least substantially loosened.

The sanctions, which were put into place in April due to allegations by the United States government that Rusal, En+ Group, and Oleg Deripaska were part of a group engaged in activities to destabilize governments around the globe, are expected to account for a drop in sales of up to 800 thousand metric tons for the year. Rusal’s total aluminium production was 3.7 million metric tons last year.