Deripaska Says His Car Group May Go Bankrupt Under Sanctions

(Bloomberg) -- Oleg Deripaska, the Russian billionaire under U.S. sanctions, said his car business GAZ Group may not survive if the company isn’t removed from the American blacklist.

He said there are currently no talks with U.S. Office of Foreign Assets Control over the terms of lifting the sanctions since the company, Russia’s largest commercial carmaker, filed a proposal in October.

GAZ currently operates with licenses from OFAC that allow other companies to keep working with the carmaker. However, if the licenses expire as scheduled in July, anyone doing business with GAZ will be subject to harsh U.S. penalties.

“It might go bankrupt and may be nationalized," Deripaska said in an interview at the company’s headquarters in Nizhny Novgorod on Tuesday. Even if the company is taken over by the Russian state, thousands of workers will still likely lose their job, he predicted.

‘Low Chance’

Whether GAZ will be subject to the full weight of U.S. sanctions is still an open question. In the case of United Co. Rusal, the aluminum giant that Deripaska previously controlled, the U.S. granted several extensions to avoid disruption in the metals market. Those sanctions were officially lifted in late January after Deripaska agreed to cede control of the companies.

Deripaska said he’s prepared to reduce his influence at GAZ, but admitted that for now there’s a "low chance" of success in the talks with the Treasury.

There’s less incentive for the U.S. to lift the sanctions on GAZ, which operates entirely in Russia, than Rusal, which runs plants around the world. European politicians and lobby groups argued for quick action to be taken to solve the Rusal crisis.

"What they will lose due to GAZ?" he said, referring to European and U.S. lawmakers.

GAZ is still working with Volkswagen AG and the two companies recently held talks to deepen an eight-year-old automaking partnership, according to people familiar with the matter. Early negotiations focus on VW making a substantial investment in Russia, said the people, who asked not to be identified because the discussions are private.

Read: VW Is Said in Discussions With GAZ to Expand in Russia

GAZ has seen other customers withdraw as a result of the sanctions. For example, an assembly line at Nizhny Novgorod for Mercedes-Benz owner Daimler AG was halted a year ago.

The main plant of the group in Nizhniy Novgorod was started in 1932 by the Soviet Union with the help of Ford Motor Co. Deripaska took control of the asset in the 2000s. "GAZ was bombed during the war and Nazis couldn’t destroy it," the tycoon said. Now American sanctions may do it instead, he said.

Deripaska, who is still under personal sanctions, said he doesn’t communicate with anyone at Rusal or En+ Group Plc and obeys the terms of the agreement with OFAC. Still, he finds the situation unfair. He argued that the reasons to impose sanctions were "absurd" and "raving" and has sued the Treasury last month in response.

"The court is the only way to fight," Deripaska said. “The U.S. court system is effective.”

To contact the reporter on this story: Yuliya Fedorinova in Moscow at yfedorinova@bloomberg.net

To contact the editors responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net, Dylan Griffiths

©2019 Bloomberg L.P.