Page 21 - RusRPTFeb19

In 2021, the Central Bank plans to sell 15–20% of the merged bank. Privatizing a bank of this magnitude will be difficult, says ACRA analyst Irina Nosova as there are few entities in the market that could find the money.
2.5 USTD backs off imposing Rusal sanctions
The US Treasury Department (USTD) has backed away from imposing harsh sanctions on the assets belonging to Russian oligarch Oleg Deripaska and specifically his Rusal aluminium business that put in place last April. This follows on from a muted response to several other clashes in 2018 that is buoying investor sentiment on Russia.
The harsh April 6 round of sanctions on Rusal banned investors from doing business with Rusal or holding its stocks. That caused chaos on the metal markets where Rusal is a very large supplier. The price aluminium soared inflicting pain on US companies as the negative affects quickly boomeranged back on the US. But the real problem was it also banned them from owning Rusal debt and gave investors only one month to get rid of them. Some funds found themselves in the impossible position of trying to unload millions of dollars of debt into a market that was precluded from buying it.
The USTD was quickly persuaded to push the deadline back to December and suspended the deadline again as 2018 came to a close. Now it appears that the USTD has given up on the sanctions as an unworkable idea.
In general there seems be a softening on Russia in the White House which failed to react strongly to a naval clash between Russian and Ukrainian ships on the Sea of Azov November 25 – the first time a military unit under a Russian flag engaged directly with a military unit under a Ukrainian flag.
In addition the response to the poisoning of former spy Sergei Skripal has drawn criticism from some corners for being mild. Nor has it reacted to claims that Russia interfered in the US mid term elections at the end of last year, although these were not as egregious as what Russia was accused of doing in the 2016 presidential elections.
And a decision to ban Deripaska and some fellow sanctioned oligarchs from the Davos economic conference in Switzerland later this month was also quickly reversed when the Kremlin threatened to boycott the event. Russian president Vladimir Putin has said that he may attend the business event this year, but has yet to confirm his presence.
The Trump administration on Thursday defended its decision to lift sanctions on companies linked to billionaire Deripaska, arguing that the threat of sanctions had fulfilled their purpose but there would be “swift consequences” for any future infractions.
Following the sanctions Deripaska mounted an extensive lobbying campaign in Washington and there is a plan to reduce his shareholding in Rusal to below 50%, with a portion of his shares transferred to Russian state-owned VTB Bank. However, if this scheme is carried through then it will be more of a face saving exercise than anything else as VTB is run by Andrei Kostin who is even closer to Putin than Deripaska.
Just hours before Steven Mnuchin, the Treasury secretary, was set to deliver a classified briefing on Russia sanctions to members of Congress, the department released a statement saying the administration had taken “significant steps” to ensure that Deripaska did not reassert his control over three key companies in his portfolio: EN+, Rusal and JSC EuroSibEnergo.
“These entities are undergoing significant restructuring and governance
21 RUSSIA Country Report February 2019 www.intellinews.com