Regarding metal prices, the US is wary of possible sanctions against Usmanov companies

FILE PHOTO: A view shows a Kola Mining and Metallurgical Company nickel electrolysis shop in Monchegorsk
FILE PHOTO: An employee works at a nickel electrolysis workshop of Kola Mining and Metallurgical Company (Kola MMC), a subsidiary of Nornickel Metals and Mining Company, in the city of Monchegorsk in the Murmansk region, Russia, February 25, 2021. REUTERS/Evgenia Novozhenina /File Photo

March 8, 2022

By Daphne Psaledakis and Echo Wang

WASHINGTON/NEW YORK (Reuters) – The United States and its allies will look at ways to impose sanctions on companies controlled by Russian metals and telecoms magnate Alisher Usmanov without raising commodity prices, a US Treasury Department spokesman told Tuesday Reuters.

The United States last week imposed sanctions on the billionaire, including Russian President Vladimir Putin, as part of several rounds of measures taken by Washington after Russian forces invaded Ukraine in the biggest attack on a European state since World War II . Moscow calls the attack a “special operation”.

The action, similar to the sanctions imposed on Usmanov by the European Union, blocked his assets, including his yacht and private jet.

But the Ministry of Finance exempted companies it controlled from the sanctions by issuing a so-called general license. The spokesman said the Treasury Department’s sanctions are consistent with those imposed by international partners, including the EU.

“To prevent the flight of assets, the US and EU acted swiftly to freeze Usmanov’s personal assets. The Treasury’s appointment of Usmanov puts us in a position to now target companies under his control,” the spokesman said on condition of anonymity.

“We will work with our allies and partners to develop a suite of countermeasures that will allow us to attack companies under Usmanov’s control without driving up the price of commodities like nickel, which could unintentionally enrich it,” he said spokesman.

Nickel prices started rising after major producer Russia invaded Ukraine and Western sanctions threatened supply. Trading in the base metal was suspended in London on Tuesday after prices doubled in a matter of hours.

Russia supplies about 10% of the world’s nickel.

Washington commercial attorney Doug Jacobson said that under the license issued by the Treasury Department, if Usmanov owns 50% or more of a company, it will not be blocked unless specifically identified.

A 50% or greater ownership of a company by a US-sanctioned party is generally the threshold at which the company is also generally suspended.

But Usmanov’s property, including his plane, yacht and any bank accounts or property in the United States, remains locked under Thursday’s measure, Jacobson said.

“As a result of this action, they are severing him from his business interests,” he said. “You’re trying to avoid a Rusal situation, I would imagine.”

In 2018, the US Treasury Department imposed sanctions on Russian billionaire Oleg Deripaska, Rusal, En+ and other companies he had interests in, citing “malicious activities” by Russia, causing turmoil in global aluminum markets.

The US later lifted sanctions on En+ and aluminum giant Rusal.

“We have said repeatedly that we will calibrate our sanctions to inflict maximum pain on Putin and his cronies while minimizing the impact on the global economy,” the Treasury Department spokesman said on Tuesday.

Usmanov, founder of Russian mining company Metalloinvest, owns 49% of USM Holdings, the Treasury said in a statement last week. USM’s assets include Metalloinvest, mobile operator MegaFon and Russia’s largest copper deposits operator, Udokan Copper, according to its website.

According to media reports, some of Usmanov’s investments in US and Chinese tech companies were made through Yuri Milner’s DST and his own company USM. He is also an investor in Silicon Valley VC fund Rising Tide, according to filings with the Securities and Exchange Commission.

In a statement to Reuters, a DST spokesman said Usmanov’s last investment in DST Global funds was in 2011 and DST Global funds have not raised capital from Russian investors since that year. He added that all but one of the portfolio companies in the DST fund have been divested and the remaining company is illiquid and of limited value.

USM and Rising Tide did not immediately respond to requests for comment.

Usmanov also acquired the Russian newspaper Kommersant, a leading business paper, in 2006.

(Reporting by Daphne Psaledakis in Washington and Echo Wang in New York; Additional reporting by Pratima Desai in London; Editing by Mary Milliken and Alistair Bell) Regarding metal prices, the US is wary of possible sanctions against Usmanov companies

Caroline Bleakley

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