(Bloomberg) -- The U.S. isn’t seeking to put Russian aluminum giant United Co. Rusal (HK:0486) out of business by sanctioning the company, Treasury Secretary Steven Mnuchin said, but its majority owner Oleg Deripaska must reduce his stake to less than 50 percent.
“The first aspect would be that he sells down below 50 percent,” Mnuchin told Bloomberg TV in an interview on Monday in Los Angeles, calling discussions with the company about avoiding U.S. sanctions “encouraging.”
“Our objective was not to put Rusal out of business and that’s why we extended the license,” Mnuchin said.
The U.S. announced sanctions April 6 against Rusal, targeting Deripaska under a law that ordered the Trump administration to punish Russia for its alleged meddling in the 2016 election. Deripaska was identified in a January Treasury report as a so-called Russian oligarch close to the country’s president, Vladimir Putin.
Rusal has applied to be delisted from the U.S. sanctions and last week the Treasury Department for the first time described a path for the company to escape the penalties. Deripaska has agreed “in principle” to cut his stake in London-based En+ Group Plc, the holding company through which he controls Rusal.
Treasury also extended the deadline for companies to wind-down dealings with Rusal by almost five months to October. The move sparked a plunge in aluminum prices as traders speculated that supply disruptions could ease. Washington’s clarification follows two weeks of chaos in global metals markets following the announcement of the sanctions.
Deripaska’s name has surfaced in the U.S. investigation into Russian meddling in the 2016 election over his business ties to former Trump campaign chairman Paul Manafort. Deripaska controls Rusal through a shareholder agreement with others including Glencore (LON:GLEN) Plc and Viktor Vekselberg, who is also under sanctions.
Deripaska has been said to plan on keeping control of Rusal, which is battling for survival in the face of the U.S. sanctions. Any resistance from the billionaire to relinquishing control sets up the prospect of a standoff between Rusal and the U.S. The European aluminum industry has warned there will be further chaos if the situation isn’t resolved before a wind down period expires.
Despite Mnuchin’s conciliatory tone, sanctions experts have warned that negotiations between the Treasury and Rusal could take some time.
"This will take several iterations," said Brian O’Toole, senior fellow at the Atlantic Council who previously worked in the Treasury’s sanctions unit, pointing to a 2016 sanctions case involving the sale of Panamanian newspapers that took more than a year to resolve.
(Updates with comment from sanctions expert in final paragraph.)