Deal to lift sanctions against Aughinish Alumina refinery at Shannon in the balance
US treasury move against Russian oligarchs has left question mark over future of Limerick plant which employs 450
The Aughinish Alumina refinery on the Shannon Estuary near Foynes, Co Limerick
Earlier this year the US sanctioned 24 Russian oligarchs, including Oleg Deripaska, majority owner of Rusal’s ultimate parent En+, potentially cutting the group off from key markets and threatening up to 100,000 jobs in 14 countries.
The move by the US treasury, meant to punish Moscow for alleged interference in elections, left a question mark over the future of the Rusal plant at Aughinish in Co Limerick, which employs 450 people directly and supports around 2,000 jobs overall in the Republic.
En+ chairman, former UK cabinet member Lord Barker of Battle said at the weekend that time was running out for a deal negotiated with US treasury officials which would cut Mr Deripaska’s stake and indefinitely tie up any future dividends he earns, that is meant to lift the threat of sanctions from the group.
“This is a highly complex set of transactions which can’t sit indefinitely on the table, and which I am doing everything in my power to keep together. So we need to bring this to a conclusion and move on,” Lord Barker said.
He said that the consequences for the group if sanctions were fully imposed on En+ would be “catastrophic”, leading to the closure of manufacturing plants around the world and the loss of thousands of jobs. “But I am determined to do everything in my power to prevent that.”
It was hoped that US treasury secretary Steve Mnuchin would agree to the settlement after last week’s midterm elections. However, Washington has extended the deadline for applying sanctions to the company to January 7th.
While this means that Rusal and its Irish business will not face sanctions at least until then, it also extends uncertainty about the group’s future, and has sparked fears that an opportunity to finalise the settlement could pass.
Mr Deripaska could decide to retain his stake and instead of selling its products to the US, shift its focus to Asian markets such as China, where demand for aluminium is huge. However, this could lead to the closure of plants in the west, including Aughinish.
Lord Barker said that the agreement was unprecedented, and would for the first time separate a Russian oligarch from his assets. “It would deliver the company from the threat of sanctions without in any way compromising US sanctions policy.”
It is understood that the settlement would reduce Mr Deripaska’s holding in En+ to around 45 per cent, while any dividends earned from that remaining holding would be paid to an account controlled by the US treasury until such time as Washington removes the oligarch from its sanctions list.
Along with that Mr Deripaska will only control 35 per cent of the company’s voting rights, and the board will be revamped. The Russian businessman has already resigned as a director.
Calculations of the personal cost to Mr Deripaska run to $3 billion based on the aluminium manufacturer’s value before the threat of sanctions.
Lord Barker did not comment directly on any figures, but noted that the agreement inflicted “significant financial pain” on Mr Deripaska, reduced him to the status of a minority shareholder and locked up the dividend income from his remaining stake for the foreseeable future.
Along with severe job losses, the closure of Aughinish would leave a €130 million dent in the Republic’s economy. Minister for Jobs, Enterprise and Innovation Heather Humphreys and officials from her department have separately been lobbying the US to lift the sanctions threat.
Asked if the Government and the Irish lobby in the US could influence Washington’s final decision, Lord Barker said “independent third-party support for this plan can only be a positive”.
Aughinish is Europe’s biggest aluminium refinery. It is also one of the world’s most energy efficient processors of the metal, which is used in everything from drinks cans to aircraft.