Christmas gift to Rusal

The United States' decision to lift sanctions on Russia's Rusal, the world's largest aluminum producer outside of China, is widely seen as a Christmas present to the company, its customers around the world and the Russian stock market.

However, to the co-owner and founder Oleg Deripaska There will be mixed feelings about the decision, given that the deal involves him relinquishing control of his valuable aluminum empire to allow it to return to normal business, while he will remain on a blacklist that also includes the names of some drug lords, writes Reuters .

This is a challenge for Deripaska, who was once the richest man in Russia, since he was never in a position to sell a majority stake. He started building his empire during the "aluminum wars" of the 1990s, in which, after the fall of the Soviet Union, he fought several battles against rivals.

Now it has to reduce the stake in its En+ group from 70% to less than 45% without any compensation.

The market value of En+, which manages a stake in Rusal together with Deripaska's assets, was eight billion dollars a year ago, but has now fallen to around three billion dollars. Deripaska's assets will remain frozen.

"He's not selling, he's giving away," said a Reuters source close to Deripaska.

In eight months, the Russian tycoon reached an agreement with the US Department of Finance to lift the sanctions - which is a short period for a process that could have lasted for years, this source said.

"It's a great result. Hats off to me."

Deripaska's representative declined to comment on the deal.

Deripaska and his biggest companies were blacklisted by the US Treasury Department in April. Washington then announced that several Russian tycoons were profiting from their closeness to the Kremlin, which is conducting "malicious activities" around the world.

Deripaska called the sanctions imposed on him "groundless, ridiculous and absurd."

The sanctions imposed in April are the harshest measures against Moscow since the annexation of Crimea in 2014.

However, the US Department softened them on Wednesday, announcing that it was lifting the measures against Rusal and En+, since Deripaska would cede control of those companies.

The US announcement about Rusal is "the biggest news since 2014," BCS Global Markets said. "It is positive for the Russian market as a whole because it shows that there is a way to lift the sanctions on the companies affected by them," the statement added.

Deripaska did not fight alone during the last eight months. France and Germany made a joint effort to reach a deal, as Rusal has significant assets in Europe, the source added.

Ireland announced on Wednesday that it lobbied intensively to lift sanctions on Rusal in order to protect jobs at a large aluminum plant.

The plan announced on Wednesday was agreed upon a month or two ago, another source familiar with the matter told Reuters. At first there was resistance from Moscow, but a compromise was reached when VTB Bank joined the negotiations.

"This is the best possible deal. It's not ideal, but it's the best possible," said a Reuters source.

Russia has a long history of standing up for large, strategically important groups like Rusal, which employs 62.000 people in Russia and around the world, to prevent them from falling under foreign control.

Russian President Vladimir Putin did not comment on Rusal at the annual marathon press conference on Thursday. However, this deal was most likely approved by Russian officials, he told Reuters Kiril Chujko, head of research at BCS.

"This is a victory... that allows the company to operate normally and Deripaska to continue his fight to be freed from sanctions," he added.

Half of the crew are Americans and British

The agreement on the conditions for the lifting of sanctions is subject to a 30-day review. During that period, the US Congress will decide whether to approve it.

If approved, Deripaska will reduce his stake in En+ by transferring part of it to VTB Bank, Russia's second-largest lender, while donating part of the shares to a charitable foundation. His stake will also be reduced when Swiss company Glencore swaps shares in Rusal for a stake in En+, according to Reuters. Deripaska's voting rights will be limited to 35%. It will be able to have a maximum of four representatives in the new board of directors of En+, which will include eight more independent directors. Half of the crew will be American or British citizens. Shareholders who are related to him will transfer their voting rights to a third party, the US Department of Finance announced.

The mother of Deripaska's children, Polina, and her father, Valentin Yumashev, who was former Russian President Boris Yeltsin's chief of staff, had 6% and 1,8%, respectively, of shares in En+ at the beginning of 2018.

"He's holding back some shares. Rusal will remain in Russia, but will be a little more open to the US," a source familiar with the situation told Reuters.

The Kremlin welcomes the deal

The Kremlin can only welcome the success of the Russian aluminum giant Rusal in reducing the impact of US sanctions, Kremlin spokesman Dmitry Peskov said. Asked whether the Kremlin approved such an agreement, Peskov said that it was an internal matter for the Rusal company. "For sure, Oleg Deripaska is fighting for this company. "It has a significant role not only in Russia, but in the world economy," he added. "If the company manages to take certain actions to mitigate the consequences of illegal restrictive measures ... we can only welcome that."