WASHINGTON – The Treasury Department removed Russian aluminum company Rusal on Sunday from its sanctions list after a blacklisted billionaire and close ally of President Vladimir Putin, Oleg Deripaska, delivered on a promised plan to divest his majority ownership stake, the office said.
The issue had become a political controversy amid concerns the Trump administration was going easy on Russia, but many former Treasury officials and other sanctions experts said the move was made following longstanding policies under which the office does its work.
The delisting will likely reassure aluminum markets concerned that the world’s second-largest producer would cut off a critical source of the metal, especially for the European companies to which Rusal sells.
Under a deal Treasury agreed with the board of Rusal’s holding company, EN+ Group Plc, Deripaska cut his shares to below the 50% threshold designated in Treasury’s sanctions guidelines. Another firm controlled by EN+, energy company JSC EuroSibEnergo, also was removed from the blacklist as part of the deal. None of the companies were accused of conduct that would give rise to sanctions; they were targeted because of Deripaska’s ownership.
“The action ensures that the majority of directors on the EN+ and Rusal boards will be independent directors – including U.S. and European persons – who have no business, professional, or family ties to Deripaska or any other” blacklisted entity, Treasury said in a statement.
“The companies have also agreed to unprecedented transparency for Treasury into their operations by undertaking extensive, ongoing auditing, certification, and reporting requirements.”
The sanctions on the companies were never fully implemented, as the U.S. repeatedly issued licenses allowing certain business activity while the two sides tried to work out a deal. The final licenses were set to expire on Monday.
Deripaska, however, remains under sanctions; he was added to the blacklist in April as part of a broader package targeting Russian meddling in U.S. elections, cyberattacks and other provocations.
Democratic-led efforts in Congress to block the move delisting the companies failed earlier this month after they couldn’t secure enough Republicans in the Senate to join the effort. The House of Representatives passed a resolution disapproving of the deal.
Rep. Lloyd Doggett, a Texas Democrat who has played a leading role in pushing back against the Treasury’s deal, said the department ignored the House’s vote. “This represents just one more step in undermining the sanctions law, which President Trump has obstructed at every opportunity, while Russian aggression remains unabated,” he said in an emailed statement.
Under the deal, Deripaska’s stake in EN+ drops to 44.95%, down from 70%. He can only vote 35% of those shares. EN+ also is required to replace its board with members approved by the U.S. Treasury and to allow the U.S. to see internal company documents, including earnings reports and board minutes.
EN+ and Rusal announced several governance and investment changes following the sanctions removals, including the departure, at the Treasury’s request, of Jean-Pierre Thomas as Rusal’s chairman.
Another Rusal director stepped down, as did seven board members of EN+. Among the seven new directors announced by EN+ are Christopher B. Burnham, chairman and chief executive of private investment firm Cambridge Global Capital LLC; and Nicholas Jordan, who once was co-chief of the Russian units of Goldman Sachs and of UBS AG.
EN+ Chairman Lord Barker said the sanctions removals mark a turning point for the company, calling the moves “a clear victory for muscular corporate governance.”
The broad contours of the deal were released to the public in a letter to Congress. But Treasury didn’t release the full agreement, and a department spokesman said last week that it generally doesn’t do so because “they can contain proprietary information or be otherwise privileged.”
A recent New York Times article raised questions about the deal, citing the full agreement, including the allegation that Deripaska will retain control of the company by combining his stake with investments held by his allies, including members of his family.
The Treasury spokesman said there is no truth to the assertion, threatening sanctions designations on any shareholder who might knowingly facilitate significant transactions for Deripaska, or on his behalf.
“Furthermore, in instances where there could be a perception that a shareholder may not be independent of Deripaska, Treasury required that shareholder to assign their voting rights to an independent third party,” he said. “In a large publicly traded company, it is the shareholder voting rights through which the shareholder exerts control and influence.”