Trump administration lifts sanctions against Russian oligarch and Putin ally Oleg Deripaska’s business empire

The Trump administration announced Wednesday that it intends to lift sanctions against the business empire of Oleg Deripaska, one of Russia’s most influential oligarchs, after an aggressive lobbying campaign by Mr Deripaska’s companies.

The Treasury Department’s decision, which had been postponed for months, was both politically and economically sensitive, and drew criticism from some Democrats and foreign policy analysts that the administration was sending the wrong signal to Moscow about its conduct towards the United States.

The companies are among the biggest in the aluminium industry, and questions about their fate had roiled global metals markets. And Mr Deripaska’s stature in Russia made any decision seen to be in his favour tricky for the administration at a time when President Donald Trump is under investigation by the special counsel in connection with Russian interference in the 2016 election.

Mr Deripaska and his businesses — including the world’s second-largest aluminium company, Rusal — were hit with sanctions in April in retaliation for Russian interference in the election and other hostile acts by Moscow.

The companies responded with a sophisticated and expensive lobbying and legal campaign seeking to delay and ultimately remove the sanctions in exchange for promises from Mr Deripaska to give up majority ownership and control of EN+, the holding company that controls Rusal.

The lobbying effort had cast the sanctions as having unintended ripple effects on companies in the United States, Ireland, Sweden, Jamaica, Guinea and elsewhere, with potential job losses and other negative economic impacts.

Andrea M Gacki, director of the Treasury’s Office of Foreign Assets Control, cited those economic effects in a letter notifying congressional leaders of the administration’s intent to lift the sanctions against EN+, Rusal and a third Deripaska company, JSC EuroSibEnergo.

Ms Gacki said Mr Deripaska himself would remain on the sanctions list. As long as that was the case, she said, Mr Deripaska would be unable to gain access to the proceeds from selling off his shares to reduce his stake.

Ms Gacki said Mr Deripaska and his companies “have agreed to undertake significant restructuring and corporate governance changes to address the circumstances that led to their designation.” The changes would include reducing his stake in the companies to below 50 per cent and overhauling their boards, including ensuring half of EN+'s directors will be US or British citizens.

Unless Congress tries to block the move by passing a joint resolution of disapproval within 30 days — an unlikely outcome given the impending end of the congressional session and the swearing-in of a new Congress next month — the sanctions will automatically be lifted.

Representative Lloyd Doggett, D-Texas, who has criticised the administration for being soft on Rusal, said the move to lift sanctions amounted to Mr Trump “sliding another big gift under Vladimir Putin’s Christmas tree.”

Saying the plan “appears to be a shell game brokered by a sanctioned Russian bank, VTB Bank, involving one of Putin’s closest buddies, Oleg Deripaska,” Mr Doggett said it “only encourages Putin to pursue his destabilising activities around the world.”

He called for a rigorous congressional review of the deal, and said if it “is what it appears — a Rusal ruse — then we should reject this latest Trump scam.”

The administration appeared to take pains to head off criticism that it was letting up on Moscow or Mr Deripaska.

The decision was disclosed on the same day that the Treasury Department announced new sanctions against a former Russian military intelligence officer who it said works for Mr Deripaska, as well as several Russian intelligence officers and entities linked to Russian meddling in the 2016 presidential election.

Regardless of the concessions from Mr Deripaska and the new sanctions, David Merkel, who worked on Russia-related issues in President George W Bush’s White House and State Department, said lifting sanctions against Mr Deripaska’s companies “sends the wrong signal.”

Noting that the moves came less than a month after Russia seized three small Ukrainian naval vessels and 23 sailors in a shared waterway, Mr Merkel said “the timing is unfortunate, because this will be seen as walking back sanctions on someone who is close to Putin.”

In a statement justifying the move, Steven Mnuchin, the Treasury secretary, said the companies had been punished because of Mr Deripaska’s ownership and control, “not for the conduct of the companies themselves.”

The Treasury Department said it had reached a “binding agreement” with Mr Deripaska’s companies after eight months of “detailed negotiations” with lawyers and other representatives from the companies.

The team was led by Gregory Barker, a British lord who was appointed last year as chairman of EN+. He retained lobbyists with ties to the Trump administration as well as law firms and public relations experts to make the case that Mr Deripaska was truly committed to giving up control of his companies, and was not merely staging a sham divestiture, as some critics suspected.

Under the deal, which is subject to continued monitoring, Mr Deripaska will reduce his stake in EN+ to less than 45 per cent from approximately 70 per cent. Any proceeds from stock sales or future dividends from his remaining stock “will be placed into a blocked account,” to which Mr Deripaska will not have access, according to Ms Gacki’s letter.

Ms Gacki suggested Mr Deripaska’s stake in EN+ would be further reduced through a donation of some shares to an unspecified charitable foundation and by allowing some shares to be controlled by VTB Bank, which is controlled by the Kremlin and subject to US sanctions — raising red flags for sceptics.

“I’m uncomfortable that this leaves open the possibility of ownership being moved to Russia at some point,” Mr Merkel said.

Peter Harrell, who worked on sanctions issues in the State Department during the Obama administration, said the agreement looked like a “classic compromise.”

Mr Harrell said Mr Deripaska was “playing the long game” and may ultimately recoup some of his short-term losses.

The New York Times