Published: Thu, April 26, 2018
Money | By Wilma Wheeler

Leonid Bershidsky: Rusal is a failure of U.S. sanctions

Leonid Bershidsky: Rusal is a failure of U.S. sanctions

Aluminium's breath-taking rally has been thrown into reverse after the U.S. switched tack, saying on Monday it would provide sanctions relief if Oleg Deripaska relinquishes control of Rusal and extended the deadline for companies to wind down dealings with the producer.

THE United States has indicated it may provide sanctions relief on Rusal - the company that owns Aughinish Alumina in Limerick. Rusal is the world's second largest aluminum producer.

Aluminum steadied after a four-day selloff that accelerated after the US decision to ease sanctions against United Co.

The Office of Foreign Assets Control (OFAC) of the US Treasury extended the deadline for ending transactions with the Russian aluminum producer Rusal until October 23, 2018, the OFAC said.

The value of Rusal's stock by this week had fallen by half, with investors fleeing on fears that the company will be unable to stay in business as customers around the world sever ties because of the sanctions and as the company's financing dries up in US -dominated financial markets. This is clear from publications on the US Treasury.

The Government is relentlessly lobbying the United States (US) Department of State to mitigate the adverse effects of the sanctions against United Company (UC) Rusal, operator of West Indies Alumina Company (WINDALCO), according to the minister of transport and mining.

The news that the company could be saved has caused shares in the company to surge - after Rusal had previously shed half of its value on the stock market, as investors jumped ship following the blacklisting by America. The decision not to impose secondary sanctions particularly benefits European customers of Rusal.

Indian metal stocks also took a hit following this development and stocks such as Hindalco and National Aluminium Company (Nalco) tanked around 10 per cent each in today's trading session.

Mnuchin said in his announcement that he factored the "impact on our partners and allies" into his reprieve.

Aluminum prices pulled back from a seven year-high following statements from the US Treasury which made clear it's not pushing for Rusal's collapse.

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Prices of aluminium have gone up by 30 per cent over the last two weeks post the U.S. sanctions on Rusal, one of the leading manufacturers of the metal globally, the domestic rating agency said in a statement.

Daniel Briesemann, an analyst at German lender Commerzbank, said the Treasury's announcement should calm things down.

Alcoa (AA -14.2%) shares are on track for their biggest one-day loss in nine years, after the U.S.

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