RUSSIA
U.S.-Russia Tensions Catch Up With Metals Tyc00n Oleg Deripaska
Proximity to President Vladimir Putin helped billionaire but is now a liability
The U.S. imposed sanctions on Oleg Deripaska—shown here in Russia last year—and eight of his companies this month, among other Russian targets.SIMON DAWSON/BLOOMBERG NEWS
By
Anatoly Kurmanaev in London and
Brett Forrest in Washington
April 16, 2018 5:30 a.m. ET
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Last fall, Oleg Deripaska ramped up Russia’s presence in Western markets when he pulled off London’s second-biggest corporate listing of the year. Now the metals billionaire is on a U.S. sanctions list and that firm has lost roughly half its value.
The reversal of fortune reflects the arc of the Kremlin’s efforts to build political and financial relations with the West over the past two decades.
Mr. Deripaska’s proximity to Russian President Vladimir Putin helped lure Western financiers seeking to invest in Russian commodity riches. He used wealth and influence to build bridges with Western elites, throwing lavish parties at the annual World Economic Forum in Davos, Switzerland, and rubbing elbows with senior politicians, including Sen. John McCain (R., Ariz.) and George Osborne, then British member of parliament and a future chancellor of the exchequer.
On April 6, Mr. Deripaska’s ties to Mr. Putin became his biggest liability.
The Trump administration levied sanctions against him and more than three dozen other Russian officials, tyc00ns and companies in response to what it calls Russia’s “malign activity,” including meddling in U.S. elections, which Russia denies. Mr. Deripaska said the reasons for blacklisting him are “groundless, ridiculous and absurd.”
The measures
hammered Russian assets; Mr. Deripaska, who was sanctioned along with eight of his companies, bore the brunt. His Hong Kong-listed
United Co. Rusal PLC, one of the world’s largest aluminum companies, has lost more than half its value. His En+ Group PLC, which owns a 48% stake in Rusal and major Russian electricity and coal assets, has seen a significant drop in the value of shares that it listed in London months ago for some $1.5 billion.
After the sanctions, Mr. Deripaska warned investors of technical defaults and asked customers to halt payments. Commodities trading giant
Glencore PLC swiftly canceled a planned deal with Mr. Deripaska.
“If I were a Russian oligarch, I would not be sleeping easily,” said a former senior U.S. official.
Russia in the Crosshairs
The U.S. blacklisted dozens of senior Russian government officials, businesses and allies of Vladimir Putin on April 6, citing what it called the country's meddling in U.S. elections, cyberattacks and military actions in Ukraine and Syria.
The Trump administration’s strategy could draw Russian elites closer to Mr. Putin, making them more dependent on state funding, said Sam Greene, head of Russian studies at King’s College London.
“This creates its own risk for the Kremlin,” he said. “When people have nowhere else to go, they also have no one else to blame. It makes the system more brittle.”
Business ties between Russia and the West remain strong despite sanctions, and both sides say they hold out hope for an improvement. President Donald Trump tweeted on Wednesday that “there’s no reason” for relations with the Kremlin to remain strained. The U.S. and Europe’s largest nations saw
trade with Russia expand in 2017 after three years of decline.
Mr. Deripaska had a role in building these Western ties, though one relationship—with
former Trump campaign chairman Paul Manafort—has been a point of inquiry in the U.S. investigation into alleged Russian meddling in the 2016 election, people familiar with the probe said last year. Mr. Manafort worked for Mr. Deripaska in Montenegro and Ukraine; the men eventually had a falling out.
Oleg Deripaska’s United Co. Rusal PLC is one of the world’s largest aluminum companies. Here the businessman visits the Khakas smelter in Siberia in 2009. Photo: Sergei Karpukhin/REUTERS
The U.S. sanctions against Mr. Deripaska and others underline
Russia’s growing isolation. Mr. Deripaska, who is 50 years old, emerged from the violent “aluminum wars” of the 1990s in control of Rusal, the world’s largest aluminum producer at the time. By the peak of the commodities boom in the mid-2000s, Mr. Deripaska was the wealthiest person in Russia.
His rise was underpinned by a tacit understanding that Mr. Putin forged with Russia’s industrialists as he consolidated power in the early 2000s to leave their assets untouched as long as they supported national priorities and buried personal political ambitions.
Tyc00ns helped with flagship national projects, like Mr. Deripaska’s refurbishment of Moscow’s Bolshoi Theater and his $1.38 billion contribution to building facilities for Sochi’s Olympic Winter Games in 2014.
Mr. Putin sometimes demonstrated where the power lay. After workers at Mr. Deripaska’s cement plant protested during an economic crunch in 2009, the president, in a televised exchange, ordered him to sign a contract to get the plant working again.
By the peak of the commodities boom in the mid-2000s, Oleg Deripaska was the wealthiest person in Russia. Here Mr. Deripaska, left, and Roman Abramovich attend a 2006 meeting with leader Vladimir Putin in Moscow. Photo: ALEXEI BOITSOV/Bloomberg News
“Give me back my pen, please,” Mr. Putin told the tyc00n after he finished signing.
Abroad, Mr. Deripaska sought out business contacts and financing. But he had repeated difficulties in getting U.S. visas—despite hiring top lobbying firms and former Sen. Bob Dole—because of his alleged former links to organized crime. Mr. Deripaska has repeatedly denied such connections.
During the George W. Bush administration, according to the former senior U.S. official, Mr. Putin and his foreign minister frequently raised the visa issue with Mr. Bush and Secretary of State Condoleezza Rice. “There was a closer relationship there than people realized,” the official said.
In 2009, after promising to provide information relating to Robert Levinson, a former Federal Bureau of Investigation agent who disappeared in Iran in 2007, Mr. Deripaska received a U.S. visa, according to a person familiar with the matter. The tyc00n never provided the promised information, the person said.
Over two visits to the U.S. in 2009, Mr. Deripaska met with U.S. financiers, including Lloyd Blankfein, the chief executive of Goldman Sachs Group Inc., as well as
General Motors Co. executives in Detroit, according to people familiar with the meetings.
These meetings violated Mr. Deripaska’s agreement with the Justice Department, according to U.S. officials, and he lost his visa once more. Mr. Deripaska’s press office didn’t respond to a request for comment on the businessman’s visas.
Write to Anatoly Kurmanaev at
Anatoly.kurmanaev@wsj.com and Brett Forrest at
brett.forrest@wsj.com
