(Bloomberg) -- For two decades, Oleg Deripaska pursued one of the few things he couldn’t buy—American acceptance—with all the tenacity you’d expect from a man who built what was once the world’s ninth-largest fortune.
The Russian billionaire hired Wall Street lawyers and K Street lobbyists, bought a Washington mansion on Embassy Row and even offered to help find a missing American spy in Iran. But each attempt to obtain a basic U.S. travel visa was ultimately rejected over his alleged brutality in amassing the wealth that opened so many doors elsewhere, including to Vladimir Putin’s Kremlin.
The U.S. on Friday hit Deripaska with what may end up being the most costly sanctions ever imposed on a businessman and his publicly traded companies. He was singled out probably because he tried to get a visa so many times that U.S. officials have investigated him more deeply than any other Russian tycoon, according to Anders Aslund, a senior fellow who studies the Russian economy at the Atlantic Council in Washington.
“He had too high a profile,” Aslund said. “The higher your profile, the more likely you are to get caught in the crossfire.”
The measures imposed amount to what Treasury officials refer to privately as the nuclear option—shutting Deripaska and his companies out of the dollar economy, which halved the market value of his aluminum giant United Co. Rusal overnight. The sanctions were a response to Putin’s “malign activity” in general and Deripaska’s alleged crimes specifically, Treasury said.
Deripaska’s ties to Putin and dealings with Paul Manafort, the former Trump campaign chairman who was indicted for money laundering as part of Special Counsel Robert Mueller’s investigation into election meddling, only add to concerns about the billionaire’s actions and intentions, according to Dan Fried, sanctions coordinator at the State Department during the Obama administration.
“Deripaska had it coming,” Fried said. “It wasn’t only the long-standing corruption allegations. It felt like he was messing with our system too much.”
While the Obama administration considered adding Deripaska, 50, to the first round of Russian sanctions, imposed over Ukraine in 2014, it opted to squeeze individuals and entities more directly tied to the government or personally to Putin. Now, though, President Donald Trump, whose relations with Russia are being scrutinized by Mueller, has political reasons to turn the Putin ally into a pariah.
The penalties slapped on Rusal and other Deripaska companies effectively ban aluminum imports from Russia, which account for 14 percent of U.S. consumption. The move comes as Trump introduces tariffs on aluminum and other products from abroad to honor protectionist pledges. Alcoa Corp., Rusal’s largest U.S. competitor, jumped 6.7 percent Monday, the most in a year.
Fried said “some knowledgeable people” in the Trump administration are referring to the decision to punish both a close Putin associate and the largest aluminum supplier outside of China as a “twofer.” Aslund said it’s clear that the drafters of the sanctions at Treasury knew they’d be “taking out” Rusal and therefore about 7 percent of the world’s aluminum production.
While the U.S. included six other so-called oligarchs in the latest round of penalties, it reserved its harshest words for Deripaska. A former Red Army conscript with a physics degree, he got his start in business scooping up newly issued worker shares in Siberian smelters in the 1990s and emerged victorious from the bloody and gangster-ridden aluminum wars.
“Deripaska has been investigated for money laundering and has been accused of threatening the lives of business rivals, illegally wiretapping a government official and taking part in extortion and racketeering,” Treasury said. “There are allegations that Deripaska bribed a government official, ordered the murder of a businessman, and had links to a Russian organized crime group.”
Deripaska said the allegations were “groundless, ridiculous and absurd.” In an interview with Bloomberg in Moscow in 2011, he spoke with pride of centralizing the bulk of the Soviet Union’s aluminum sector. “Rusal is not a company, it’s an industry in Russia,” he said at the time.
Other Russians added to the list include Kirill Shamalov, who married Putin’s youngest daughter about five years ago, and Viktor Vekselberg, a minority Rusal shareholder who attended Trump’s inauguration, but those penalties pale in comparison, according to Adam Smith, a former Treasury official who’s now a partner at Gibson Dunn & Crutcher in Washington.
“It’s pretty rare” to blacklist two public companies—Hong Kong-listed Rusal and EN+, which trades in London, Smith said. “This is an escalation that’s important to recognize.”
David Kramer, a State Department official under President George W. Bush, said he was surprised by the exclusion of two billionaires close to Putin in particular—Alisher Usmanov, who controls Russia’s largest iron ore producer, and Roman Abramovich, the largest shareholder in steelmaker Evraz.
“Still, it was a great list that took some swings at oligarchs close to Putin,” said Kramer, now a senior fellow at Florida International University in Miami. “They clearly wanted to leave room for adding more names.”
Abramovich, a former Deripaska partner, told a London court in 2011 that the aluminum wars were a bloody chapter in corporate Russian history in which “every three days, someone was being murdered.”
Deripaska has admitted in court documents to paying $254 million in protection money back then to a man he alleged was part of a criminal group that extorted money. The events of that period continued to be cited as reasons for rejecting Deripaska’s visa overtures in the U.S. more than a decade later.
The FBI angered the State Department in 2009 by allowing Deripaska to enter the U.S. twice after he offered to help locate a retired agent, Robert Levinson, who had disappeared in Iran. The FBI ended the special arrangement after concluding that Deripaska was bluffing, further eroding his relations with U.S. officials, according to two people familiar with the matter.
Even an unusually personal request to help Deripaska from Russian Foreign Minister Sergei Lavrov was rejected in 2010. Since then, Deripaska has entered the U.S. almost a dozen times on a Russian diplomatic passport, court filings show. He’s also acquired citizenship in Cyprus, a European Union member.
Last year, Deripaska offered to testify to congressional panels investigating Russian election interference about his relationship with Manafort in exchange for immunity—and a visa.
His ties to Manafort are still being scrutinized by Mueller. The former partners had a falling out over $18.9 million that Deripaska invested with Manafort in a Ukrainian company in 2007. After years of squabbling, Deripaska filed a lawsuit in January in New York, claiming Manafort defrauded him.
Manafort offered through an intermediary to provide briefings on the Trump campaign to Deripaska in an effort to resolve their dispute. Both men deny the briefings ever occurred.
What matters now from the U.S. perspective is that Deripaska is made to suffer financially to demonstrate resolve and reach, according to George Voloshin, who runs the Paris office of Aperio Intelligence Ltd., a financial crimes and business intelligence firm.
“The ultimate goal is to strike his empire and wreak havoc,” Voloshin said. “It sends a signal to other oligarchs that they could be next.”
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