US sanctions against the Russian Oligarch Oleg Deripaska, an influential supporter of President Putin, were imposed primarily because his companies have been manufacturing aluminium powder for military purposes.

The new tough sanctions ban Americans from dealing with Deripaska’s companies, notably United Rusal, and prevent him from participating in the global dollar economy. The impact was immediate and devastating. Investors dumped stock and aluminium traders refused to buy Rusal’s metal.

The use of aluminium powder for defence purposes is a highly sensitive issue for the billionaire Russian tycoon whose company En+ Group was recently floated on the UK Stock Exchange.  We can reveal that the reference to the product being used for the military was quietly and recently removed from the company’s website.

Russian weapon manufacturers are subject to previous US and EU sanctions for their role in supporting the illegal invasion of Crimea and Ukraine. The new sanctions have been implemented after an investigation by the US Treasury Financial Intelligence Unit.

US Treasury officials were alerted to the fact that United Rusal, the aluminium producer and owned by En+ Group, is a primary supplier of raw materials for weapons and yet avoided sanctions when they were imposed in June 2014.

These raw materials are used in most Russian fighter aircrafts manufactured by the sanctioned Russian Aircraft Corporaiton MiG.  The aluminium is the component of the propellants used in missile and rocket fuel.  It is likely – although not officially confirmed – that the Russian state-owned defence firm Almaz-Antey Air and Space Defence Corporation uses Rusal-produced aluminium powder in its fuel for its anti-aircraft defence systems.

Deripaska also owns a machine-building business called Russkie Mashiny which has had contracts with 32 Russian government departments as part of an armaments programme which includes the Defence Ministry, Ministry of Internal Affairs and FSB.  A book about Deripaska, published by ‘Kommersant’ stated that production facilities owned by VPK, a subsidiary of Russkie Mashiny, “carried out the full cycle of necessary work related to military procurement (research, development, production, servicing and utilisation”.  VPK later won a contract to develop the military vehicle ‘Boomerang’.

More recently, in August 2014, the Defence Minister of the Donetsk People’s Republic in Ukraine, alleged that another Deripaska-owned company called Yaroslavsky Equipment Plant, was supplying engines which were being used by the Ukrainian army in Donbas. And more recently on 30 September 2017, Deripaska visited his plant in Khakassia owned by his company Russkie Mashiny that produces pre-fabricated accommodation modules for the Russian Ministry of Defence.

Until last November, Rusal’s own website acknowledged its supply to defence firms:  “Aluminium course and fine powder are widely used in metals and mining, chemical, energy and construction industries.  They are also applied in the production of military equipment”.

But then following a series of edits to the relevant web page in November, shortly after the flotation of its holding company EN+ Group on the London Stock Exchange, the reference to the military use of the powder was mysteriously removed.

The new US sanctions are highly embarrassing for London as a financial centre.  UK regulators are already being criticised for their weak approach to Russian Oligarch money being laundered via offshore companies and banks and then parked in London.

As the majority shareholder of En+, Deripaska could himself be subject to secondary sanctions. A report by the law firm White and Case stated that any person engaged in “significant” transactions with the designated firms, notably the Russian defence entities, could face personal sanctions.

The Rusal owner has long been regarded as being very close to President Putin.  Leaked US diplomatic cables described Deripaska as “among the two to three oligarchs Putin turns to on a regular basis” and is “a more-or-less permanent fixture on Putin’s trips abroad”

The Oligarch is also at the centre of allegations that Russia meddled and interfered in the 2016 US Presidential election.  Leaked documents revealed that Deripaska hired Paul Manafort, the campaign manager of Donald Trump for part of the election, as a lobbyist to promote Russian interests in the US a decade ago.  It has been reported that Deripaska retained links to Trump’s campaign via Manafort who allegedly shared information with his former client.

Manaport, who has been indicted by the US special prosecutor for money laundering and fraud on behalf of the corrupt former Ukrainian President Yanukovich, denies the claims.  Deripaska also denies the allegations but offered to testify about alleged Russia-Trump collusion before the US Intelligence Committee in exchange for immunity.  His offer was declined.

Deripaska’s relationship with the US has been problematic for many years.  He was repeatedly refused a visa to travel to the US because of allegations of his past relationship with the Russian Mafia which have been repeated in international civil court filings. In announcing the new sanctions, the US Treasury referred to “allegations that Deripaska bribed a government official, ordered the murder of a businessman and had links to Russian organized crime”.

The Kremlin responded by awarding the Oligarch a diplomatic passport and the Russian Foreign Minister has asked successive US Secretaries of State, as recently as last year, to secure him a US visa.

In the UK Deripaska, who owns a $60 million historic London mansion on Belgrave Square and a $20 million country house in Weybridge, Surrey, has a multiple entry visa. He has long forged close relations with the British ruling elite. He retains Finsbury Communications, the lobbying and PR firm managed by Roland Rudd, brother of the Home Secretary Amber Rudd. He also retains Lord Mandelson, the former EU Trade Commissioner, as a strategic consultant via his firm Global Counsel. And his long-term financial and banking advisor has been Nat Rothschild.

However, in 2008 Deripaska’s attempts to ingratiate himself with the British Establishment backfired after hosting a notorious party on his yacht for Lord Mandelson, Nat Rothschild and George Osborne, then Shadow Chancellor, off the coast of Corfu.  It was claimed by Rothschild in a letter to ‘The Times’ that Osborne tried to solicit a donation to the Conservative Party from the Oligarch at the party which was also attended by Lord Feldman, head of fundraising for the Conservative Party. Osborne denied the allegation, but the episode damaged Deripaska’s reputation in the UK.

Now the Oligarch has more serious problems. The day after the US sanctions were announced, Rusal’s shares collapsed, falling 50 per cent in Hong Kong. The company warned that the sanctions could trigger technical defaults on its loans and told international clients to stop payments. Ironically the previous day was the 18th birthday of the company but there was not much to celebrate.

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