Sanctions against individual Russian oligarchs work, at least according to a lawsuit filed by Kremlin friend Oleg Deripaska, claiming that he’s lost billions, and decrying the fact that he is officially referred to as an “oligarch”.
According to the civil lawsuit, Deripaska—a metals magnate who essentially created the entire aluminum industry in Russia—has lost $7.5 billion of his net worth because of U.S. sanctions, which forced international businesses to steer clear of him and banks to stop issuing credit.
In fact, the lawsuit claims that sanctions have led to the “utter devastation” of Deripaska’s wealth and reputation.
Deripaska, in his attempt to sue the United States, says he is a victim of American “political infighting” and that the sanctions against him have created an atmosphere of “general hysteria” that has rendered him and his businesses toxic. Now he’s seeking “simple justice”.
He takes issue with the fact that he’s is referred to as an oligarch in this age of oligarch re-invention. The dictionary definition of “oligarch” is “a very rich business leader with a great deal of political influence”. Deripaska argues that he doesn’t have close ties to Vladimir Putin, even though he is the founder of two massive aluminum producers—En+ Group and United Co. Rusal.
In April 2018, OFAC placed Deripaska on its list of “Designated Russian Oligarchs”, saying that he acted on behalf of a senior Russian government official, and accusing him of money laundering and threatening the lives of business rivals, among other nefarious activities. Related: U.S. Tech Stocks Look Increasingly Vulnerable
In January, headlines were awash with news that the Trump administration was lifting sanctions against Deripaska and his companies, with scathing criticism of the administration’s weakness in the face of the Russian oligarchy. However, that move only lifted sanctions against En+ Group, and not against Deripaska himself, who remains toxic and, according to the lawsuit, shut of out international business.
While Deripaska--whose wealth originates from the free-for-all privatization of the 1990s, like every other Russian “oligarch”—says he is interested to see whether the U.S. justice system can deliver true justice in this case, it’s not his first rodeo here.
Let’s not forget about former Trump campaign manager Paul Manafort, who has been convicted of fraud and sentenced to seven-and-a-half years behind bars. Deripaska sued him, too. Manafort used to serve as Deripaska’s political consultant, and that “consulting” led the metals magnate to invest nearly $19 million with Manafort in a cable TV deal in Ukraine. Manafort charged him $7.35 million in management fees, according to Bloomberg. Deripaska has sued both Manafort and his lackey, Rick Gates (who has also pleaded for fraud).
Deripaska insists that the sanctions against him represent the weaponization of finance, and that this is about American politics under Trump.
Well, of course, he is correct.
The market would surely agree. Deripaska’s Rusal is the second-largest producer of aluminum in the world, and when the U.S. slapped sanctions on the behemoth, the immediate response was a panic that supply would become abruptly short, sending aluminum prices soaring.
When the U.S. Treasury starts playing around with oligarchs in the age of globalization, the ripples are huge. The only way to avoid unsettling the aluminum markets (and any other add-on ripples) was to backtrack a bit and give companies more time to find alternative suppliers, and then not long after that, to announce that sanctions would be lifted on Rusal (though not on Deripaska himself).
Deripaska’s point that this was a political game and financial warfare against Russia is also clearly justified. The other activities he is accused of, including money laundering and threatening business rivals, were known of long before the sanctions. As such, the sanctions were a direct response to Russian meddling in the U.S. elections, which Deripaska insists has nothing to do with him.
But at some point, if you’re a Russian “oligarch”—even in the age of re-invention—you must pay the piper. And this era of globalization means that the biggest weapons of mass destruction are financial. There is no more separating politics and finance, and oligarchs must surely understand this better than anyone.
What Deripaska is really fighting against is this: The lifting of sanctions against Rusal in January came with a weighty condition—that he reduce his “direct and indirect shareholding stake in these companies and severed his control”.
By David Craggen for Safehaven.com