U.S. Says GAZ Group Must Split With Deripaska to Avoid Sanctions

(Bloomberg) -- The U.S. Treasury Department said it may lift sanctions on Russian vehicle maker GAZ Group and related companies if it severs ties with billionaire Oleg Deripaska.

Treasury issued an update to its Russian sanctions program on Tuesday directed at GAZ, which Deripaska controls. “Parties may be removed by demonstrating a change in the circumstances that led to their designation,” the notice posted on the department’s website said. GAZ’s removal depends on “divestment and relinquishment of control of GAZ Group by” any sanctioned individuals, “including Oleg Deripaska,” Treasury said.

Deripaska among a group of Russian tycoons, companies and other people with ties to Russian President Vladimir Putin who were hit with U.S. sanctions April 6 in retribution for the Kremlin’s alleged meddling in the 2016 presidential election.

The sanctions initially caused disruption in the global supply chain for aluminum because the targets included United Co. Rusal, a Deripaska-linked company that is Russia’s largest producer of the metal. Prices for aluminum surged when Rusal was sanctioned, then fell last week after EN+ Group Plc., the holding company through which Deripaska has maintained his interest in Rusal, announced the billionaire is stepping down from the board of EN+ and intends to leave Rusal’s board.

Treasury also said on Tuesday that it will give GAZ and any entities in which the company has a 50 percent or greater stake until Oct. 23 to wind down activities and comply with U.S. sanctions. Treasury is also giving those with existing contracts with Rusal and its entities until October to wind down and comply with sanctions.

Deripaska once engaged as a political consultant former Trump campaign chairman Paul Manafort, who has been charged in the special counsel investigation with financial crimes and failing to disclose the lobbying work he did on behalf of a former president of Ukraine, a Putin ally.

Deripaska later invested $18.9 million with Manafort in a cable-television venture in Ukraine, and paid him $7.35 million in management fees. The deal ultimately soured, and Deripaska sued to try to get an accounting of the money.

A Treasury spokesman did not reply to a request for further clarification of Tuesday’s guidance.

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