Europe Backs Mnuchin's Bid to Lift Sanctions on Deripaska Firms

(Bloomberg) -- The European Union backed Treasury Secretary Steven Mnuchin’s plan to lift U.S. sanctions on two companies tied to Russian tycoon Oleg Deripaska, as he faces a backlash from Democratic lawmakers suspicious of the Trump administration’s motives.

Democrats are concerned that the administration is easing up pressure on Deripaska, an ally of Vladimir Putin, from sanctions intended to punish the Russian leader for interfering in the 2016 presidential election. Democrat Richard Neal, who heads the House Ways & Means Committee, wrote to Mnuchin Thursday requesting a 28-day extension of a deadline for Congress to consider blocking the de-listing.

Ambassadors to the U.S. representing the U.K., France, Germany and the European Union are among those who wrote a joint letter addressed to Senate Minority Leader Chuck Schumer and House Foreign Affairs Chairman Eliot Engel saying that lifting the sanctions would “safeguard” more than 75,000 workers across the EU’s aluminum industry.

Aluminum prices surged in April when Treasury sanctioned United Co. Rusal and En+ Group Plc for their ties to Deripaska. The U.S. was seeking to punish Russia over election interference. Since then, the prospect of an aluminum shortage and suppliers forced to buy from China has caused swings of as much as 20 percent in prices. Europe, which is heavily exposed to Russia’s metals market, has faced the risk of aluminum plant closures and layoffs.

Europe Backs Mnuchin's Bid to Lift Sanctions on Deripaska Firms

“By preventing serious damage to the European aluminum industry, the de-listing will help preserve existing supply chains which would otherwise likely be rerouted to China, further strengthening its global market position in the industry,” the ambassadors of the countries, which also include Austria, Italy and Sweden, wrote in the letter dated Jan. 4 and obtained by Bloomberg News. The letter was also sent to House Democrats, according to two people familiar with the matter.

Europe Backs Mnuchin's Bid to Lift Sanctions on Deripaska Firms

The ambassadors said that they remain engaged with the U.S. in coordinating sanctions on Russia related to the country’s actions in Ukraine.

Mnuchin on Thursday briefed House lawmakers on Capitol Hill on his plans to de-list Rusal, En+ and a third company, EuroSibEnergo JSC. Lawmakers emerged from the meeting unsatisfied with Mnuchin’s explanation, with House Speaker Nancy Pelosi saying it was “one of the worst” performances she has seen from the Trump administration.

Treasury on Dec. 19 sent Congress a nine-page letter explaining the terms under which it intends to lift the sanctions, which were imposed under legislative authority. Lawmakers have 30 days from that date to call a vote to block Treasury’s action, unless an extension is negotiated.

An extension to Congress’ time to weigh blocking the move could face a legal threat from the companies. The legislative authority under which Treasury sanctioned the companies explicitly provides a 30-day notice regardless of holidays or government shutdowns.

Mnuchin told lawmakers on Thursday he will consider an extension.

The department’s decision to remove the sanctions follows nearly eight months of negotiations to cut the oligarch’s influence over the firms. Under the agreement, Deripaska would remain on the sanctions list and cut his stake in his holding company in En+ to about 45 percent, from about 70 percent. The deal would would mean Deripaska would lose billions of dollars due to the drop in share prices.

Mnuchin did not show signs of backing down from the plans, though he is considering delaying the move to accommodate concerns raised by lawmakers. He has said repeatedly that Deripaska, not the companies, was the target of U.S. sanctions.

Some sanctions experts also support Treasury’s bid to remove sanctions on the three firms. The department’s deal with Deripaska is “among the most robust and verifiable de-listing processes the Treasury has achieved,” wrote Brian O’Toole, a former Treasury sanctions adviser, in an essay for the Atlantic Council.

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