US Opens The Door For Rio Over Rusal Sanctions
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Rio Tinto off the hook, jobs saved in Gladstone in central Queensland?
Rio had been facing increasing pressure on its aluminium and alumina business because of close ties to Rusal, the big Russian-owned aluminium and alumina group. These include the 20% stake Rusal owns in Rio’s Gladstone alumina refinery and supply deals for bauxite and alumina, as well as metal with other buyers.
Rio, as well as Glencore, another global commodities giant, had been forced to declare force majeure on supply deals involving Rusal for fear of breaching the initial round of sanctions.
Countries and companies from around the world have been lobbying the US government to soften the sanctions against Rusal because it was increasing clear they were causing severe disruption to global commodity markets, not only for aluminium, alumina and bauxite. Nickel prices had started rising as some traders looked for the sanctions to start impacting Russian-based producers of that metal.
World aluminium prices dropped 10% and alumina prices fell after the Trump Administration unexpectedly watered down tough economic sanctions against Rusal on Monday. The US Treasury said it was extending the time limit for winding up business with Rusal and hinted at easing restrictions on the company that have upended metals from Russia, to Australia, China and Europe.
The US Treasury also said that if Russian oligarch Oleg Deripaska sold the company, it could “provide sanctions relief”. Aluminium prices on the London Metal Exchange, which had been up more than 3% in morning trading, rapidly reversed course to trade down more than 6% - a 10% overall movement after a 30% surge since earlier this month when the sanctions were first announced.
“Rusal has felt the impact of US sanctions because of its entanglement with Oleg Deripaska, but the US government is not targeting the hardworking people who depend on Rusal and its subsidiaries,” said Treasury Secretary Steven Mnuchin.
“Rusal has approached us to petition for delisting. Given the impact on our partners and allies, we are issuing a general license extending the maintenance and wind-down period while we consider RUSAL’s petition.”
The Treasury said both US citizens and non-US citizens were now authorised to engage in “specified transactions related to winding down or maintaining business” with Rusal and its subsidiaries until October 23.
That clears the way for Rio and Glencore to resume their dealings and withdraw their declarations of force majeure.
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.