Japanese industry officials said Monday there was still a possibility that the US Treasury Department's plan to terminate sanctions against Rusal may not receive Congress approval and that it would be prudent to wait until January 28 or later for more clarity.
The US Office of Foreign Assets Control on Saturday said it had sent a notice to Congress on its intent to terminate the 9-months sanctions against Russian aluminum producer Rusal and two other Russian companies, previously owned by a sanctioned individual Oleg Deripaska, within 30 days.
Yugo Konno, Senior Economist at Japan's Mizuho Research Institute, said despite the OFAC statement, it was not yet clear whether the sanctions would be lifted within 30 days as planned, as OFAC has yet to publish an official announcement.
"This is addressed to the US Congress. There will be clarity on the actual sanctions removal only after January 28," said Konno.
Sanctioned Rusal has been granted General Licenses, which allow the company to maintain pre-sanction operations until January 28.
"It will take more time," said one Japanese market participant, who declined to be named. His company has been buying over 500 mt/month of Rusal aluminum billet, slab and foundry alloy products on term contracts before the sanction imposition.
"Some market participants were expecting that January 28 would be the official sanction lift date. But one cannot rule out the possibilities of further extensions of the General Licenses, as it seems their extensions are not that difficult," he added.
A second Japanese buyer in the automotive industry, said the sanction termination was likely on January 28 as the reason for the extension was to execute technical steps toward agreement between Rusal and OFAC.
Last week, the US House of Representatives voted 362-53 against the sanctions termination. The Senate, however, voted 57-42 in favor of the sanction removal.
Mizuho Research Institute's Konno also pointed out that there were proposals for other types of sanctions being debated among US policymakers, including a ban on US financial institutions to purchase Russian sovereign debt.
On April 6, 2018, OFAC sanctioned Deripaska and six Russian individuals, and 12 companies they own, including aluminum producer Rusal and EN+ that run ferromolybdenum smelting and copper mining, allegedly for supporting Russia's involvement in Syria and Ukraine. Rusal and EN+ have reduced Deripaska's stake, reorganized company boards, took other steps in corporate governance and have commit to reporting obligations to OFAC, it said.
Rusal and EN+ have agreed to provide OFAC monthly compliance reports, OFAC said in a letter to US Senate Majority Leader Mitch McConnell.
Separately, shares of Rusal shares on the Hong Kong Stock Exchange traded in the HK$2.70-$2.78 (34-35 cents) range Monday, the highest since April 9, but far below $4-6 levels before the sanctions, according to the exchange data.
