Oleg Deripaska Plans on Keeping Control of Rusal

Oleg Deripaska plans to keep control of United Co. Rusal even as the Russian aluminum giant battles for survival in the face of harsh U.S. sanctions, according to people familiar with the matter.

Deripaska is counting on lobbying by European governments to help ease the U.S. sanctions, said the people, who asked not to be identified. In recent days, he’s reshuffled top managers to focus attention on the sanctions, and plans to be directly involved in the situation, said the people.

The billionaire’s resistance to relinquishing control of Rusal sets up the prospect of a standoff between Rusal and the U.S., with the European aluminum industry warning there will be further chaos if the situation isn’t resolved before a wind down period expires.

While pressure in the global aluminum market has eased this week after the U.S. made clear international companies could continue to deal with Rusal under existing contracts until October, executives and traders are banking on a longer-term resolution before then -- either through Deripaska relinquishing control or through further exemptions from the U.S.

A U.S. Treasury spokesman pointed to an earlier statement from the department declaring that the path to sanctions relief was through divestment and relinquishment of control of Rusal by Deripaska. Measures short of that could leave the company under sanction, he said.

A reduction in the percentage of ownership by a sanctioned individual wasn’t necessarily a basis for de-listing, the spokesman said. The department reviewed the facts in individual cases and didn’t publicly speculate on specific outcomes or scenarios, he said.

Metal Markets

Markets reacted to the prospect that Deripaska could stay, fueling new turmoil in the global supply chain. Alcoa Corp. shares climbed while aluminum rose 1.3 percent. The metal extended gains in Asian trading on Friday, rising a further 0.5 percent to $2,287 a metric ton at 12:53 p.m. Singapore time.

“It will really result in huge damage to Europe if this is not resolved,” said Rob van Gils, chief executive officer of Hammerer Aluminium Industries GmbH, which extrudes aluminum for customers including in the auto industry. “It will probably result in more damage to Europe than it will to Mr. Putin," he said this week at an aluminum conference in London organized by CRU Group.

Still, the U.S. move this week has given Deripaska renewed confidence that he can retain his holding of the company, which he created from the chaos of Russia’s aluminum wars in the 1990s, according to people familiar with the matter. Rusal believes it can work around the sanctions and is trying to find new shipping routes and alternative clients, they said.

Deripaska is ready to consider some kind of compromise, one person said, without giving any detail. His company En+ Group Plc currently owns 48 percent of Rusal.

Read: Rusal Said to Discuss China Deals to Ease Sanctions Crunch

At the government level, the Kremlin isn’t pushing Deripaska to leave and has no plan to nationalize the company. Officials have denounced the U.S. sanctions as unfair economic warfare and giving into pressure to take Rusal out of his hands would be painful politically.

Still, Deripaska’s defiance doesn’t ensure he’ll be able to keep control. It’s possible that other pressures could emerge from inside or outside Russia, especially if Rusal is forced to eventually cut jobs. The company is one of Russia’s biggest employers, with about 60,000 people.

On Tuesday, a Russian official highlighted the possibility that the government could temporarily nationalize the company in order to save it.

“That’s not being ruled out, but there haven’t been any concrete discussions about it,” Industry Minister Denis Manturov said in response to a question about the possibility of a temporary takeover by the state or a government-owned bank.

— With assistance by Jack Farchy, Samuel Dodge, Evgenia Pismennaya, Anna Andrianova, and Saleha Mohsin