Rusal shares plunged on Monday, losing 50 percent in Hong Kong
Kremlin is considering ways to support sanctioned companies
At Davos this year, Oleg Deripaska hurled a party with champagne, Russian folk dancers and a performance by Enrique Iglesias. Now the Russian billionaire is on an international blacklist usually reserved for terrorists and warlords.
On Friday, the U.S. aimed its toughest sanctions at Deripaska's metals empire, banning Americans from dealing with companies including United Co. Rusal. As the drastic nature of Washington's move became clear on Monday, the biggest aluminum producer outside China lost half its value in one day.
“This is economic assassination of the company, ” according to a senior executive at a trading home, who asked not to be identified talking about a customer.
In essence, the sanctions barred Deripaska from participating in the global dollar economy and the effects was immediate: international investors dumped stock and bonds issued by his companies as aluminum traders refused to buy Rusal's metal.
The potency of the U.S.'s measures sent shock waves through Russia's financial markets as merchants fretted the corporate empires controlled by other tycoons could come under attack.
Moscow-traded stocks fell the most in four years, the currency slid the most in the world and the nation's credit danger rose. Investors dumped companies with ties to major Russian oligarchs. MMC Norilsk Nickel PJSC, controlled under Vladimir Potanin, plunged 19 percentage in London, the most since 2008.
Rusal now faces these new challenges of operating a business with customers like Toyota Motor Corp. while being blacklisted by the Western fiscal system. While the Kremlin has tried to provide reassurance, its options are limited. The government hasn't settled on what form assist will take, according to a senior official involved in the process.
For Deripaska, long seen as one of the most controversial oligarchs closely connected to President Vladimir Putin, the sanctions represent a fall from the Western business circles he cultivated for decades. The tycoon is well known for his annual parties at Davos and made headlines in the U.S. last year for links to Donald Trump's former campaign manager Paul Manafort.
The 50 -year-old executive rose up through the famously bloody chaos of the Russian aluminum industry of the 1990 s. Dozens died in the conflict and many more were wounded, including two of Deripaska's managers.
He has long been dogged by accusations from that epoch, but they have never been substantiated in tribunal. In announcing international sanctions, the U.S. Treasury referred to “allegations that Deripaska bribed a government official, ordered the murder of a businessman, and had links to a Russian organized crime.”
He spearheaded consolidation in Russia's aluminum industry. After a 2007 consolidation with OAO Sual Group and assets from Glencore Plc, his predominance was complete and Rusal was the world's largest producer of the metal.
” Deripaska has always been the face of Russian metals globally ,” said Livia Paggi, a director for political danger at consultancy GPW& Co. in London.” He might be able to continue to do business in Russia, but his businesses in the Western marketplace have been severely impacted this week .”
Deripaska called the reasons for the sanctions as” groundless, ridiculous and absurd ,” in a statement, issued by his press service. The billionaire has previously said his business was prospering long before Putin came to power and repeatedly denied any wrongdoing.
On the day the U.S. sanctions were announced, Rusal posted a photo on Facebook celebrating the company's 18 th birthday, complete with gift pouches and red and white balloons.
” Happy Birthday, Rusal !” the company said on Facebook.” No matter how many years old, the company will always be energetic and charged for success .”
Rusal shares collapsed the next trading day, falling 50 percent in Hong Kong. The company warned that the sanctions could trigger technical defaults on its loans and told international clients to stop payments.
As Deripaska flounders, attention is now focused on whether the U.S. Treasury will stiffen the noose on Putin's inner circle of oligarchs. As well as Norilsk Nickel's Potanin, investors insure dangers for Roman Abramovich, the billionaire best known outside Russia for owning English football champs Chelsea FC. His steelmaker Evraz Plc fell 14 percent in London on Monday.
” Investors are afraid that now any Russian company is at risk of sanctions ,” said Vadim Bit-Avragim, a money administrator at Kapital Asset Management LLC in Moscow.