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Published: Wed, April 11, 2018
Economy | By Melissa Porter

Will Rusal default on some liabilities due to new sanctions?

Will Rusal default on some liabilities due to new sanctions?

Shares of United Company Rusal Plc fell 40 percent in Hong Kong on Monday after it was included in the new list.

EN+, the aluminium to hydropower firm controlled by Mr Deripaska, dived by 25% in London.

The Treasury Department is implementing sanctions authorized by Congress previous year to punish Russian Federation for interfering in the 2016 election.

The sanctions - created to make it nearly impossible for Mr Deripaska's empire to do business in greenback - pose a grave threat to an oligarch who has been seen as one of Russian President Vladimir Putin's closest allies. The latest sanctions affected companies such as Sberbank, whose shares fell 17% in Moscow. "This is an outrageous business from the point of view of illegality, from the point of view of flouting all the norms, and of course careful analysis is needed here", said spokesman Dmitry Peskov.

Deripaska, whose wealth Forbes magazine estimates at $6.7bn, meets Putin regularly and has said his own interests can not be separated from those of the Russian state. Other magnates hit by sanctions include Alexei Miller, director of state-owned energy giant Gazprom.

"What participants on the metal markets are far more concerned about is that the sanctions could also result in supply disruptions", Commerzbank AG analysts including Daniel Briesemann said in a note Monday. The U.S. sanctions explicitly bar U.S. entities from doing business with Rusal, but the impact extended to companies outside the United States too. The state-controlled bank is seen as a barometer for the wider Russian economy. "If end-users make products that sell to the U.S., they might not want to buy Russian aluminium". Rusal, which made Washington's sanctions list last week.

"US investors have to sell their interests in Rusal and En+ among others by 7 May".

The sanctions explicitly bar USA entities from doing business with the named individuals and companies, making it hard for them to conduct business in dollars.

It has also expelled dozens of Russian diplomats in response to the poisoning of a former Russian spy in the UK. On Friday, Deripaska described the USA sanctions as "groundless, ridiculous and absurd".

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