Russian aluminium major Rusal warned that new sanctions slapped on it and its owner Oleg Deripaska last week, "may result in technical defaults in relation to certain credit obligations" the company said in filing to the Hong Kong stock exchange on April 9 where its shares are listed.

The news sent the stock tumbling by about 50% in Hong Kong and 20% in Moscow, causing the Moscow Exchange placing Rusal in special trading mode. Rusal and other major businesses of Deripaska were hit the hardest in the latest US sanctions update of April 6, possibly becoming the most painful round of economic sanctions yet. 

"The events of this morning are very sad, but not unexpected. Of course, my inclusion in the US sanctions list is unreasonable, ridiculous and absurd. I am going to celebrate the Orthodox Easter on Sunday and then to analyze the situation with our lawyers early next week and give some comments," the businessman said following the announcement of the sanction details, as quoted by his representative.

Rusal also added that under "initial assessment... it is highly likely that the impact may be materially adverse to the business and prospects of the Group."

In the meantime Rusal's main shareholder En+, which successfully held a $1.5bn IPO in London last year, saw trading in its GDRs suspended on the London Stock Exchange (LSE) by the UK's Financial Conduct Authority for the session of April 9. Citi Treasury also blocked all operations with En+ GDRs.

The capitalisation of Deripaska's energy and metals major En+ dropped by 30% after the inclusion in the US Treasury’s SDN List. In Moscow, the name lost 20% as of noon on April 9.

Another Russian tycoon hit by the sanctions Viktor Vekselberg, together with his investment vehicle Renova. On April 6 Renova said it will cut the stake in the capital of Swiss machinery and industrial major Sulzer from 63.42% to 48.83%, to minimise possible consequences from sanctions, according to Vedomosti daily.

Renova owns shares in other Swiss businesses, such as OC Oerlikon and Schmolz + Bickenbach, but does not own majority stakes, which would not apply the US sanctions automatically. Reprotedly Vekselberg also owns shares in Swiss real estate company Zublin.

Deputy Prime Minister Arcady Dvorkovich said on April 9 that the government has already discussed supporting the sanctioned companies. However, the upcoming change of the government post presidential re-election could slow down any potential moves to help the damaged companies.

According to the announcement of the US Treasury, "Deripaska has said that he does not separate himself from the Russian state," while having "acknowledged possessing a Russian diplomatic passport, and claims have represented the Russian government in other countries." 

The treasury department alleges that "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." 

As for Viktor Vekselberg he is being sanctioned for "operating in the energy sector of the Russian Federation economy," while reminding that "in 2016, Russian prosecutors raided Renova’s offices and arrested two associates of Vekselberg, including the company’s chief managing director and another top executive, for bribing officials connected to a power generation project in Russia."

Besides Deripaska and Vekselberg the most notable names on the latest update on the SDN list are Federation Council member and businessman Suleiman Kerimov, son of oligarch Igor Rotenberg, the head of oil company Surgutneftegaz Vladimir Bogdanov, the head of Russian natural gas giant Gazprom Alexei Miller, the head of Gazprombank Andrey Akimov, and the head of Russia's largest state-controlled bank VTB Andrei Kostin.

While the allegations posed by the Treasury against Russian tycoons and officials counter intuitively have a rather domestic than international nature, the new logic of the sanctions was summed up by the US Treasury Secretary Steven Mnuchin.

"The Russian government operates for the disproportionate benefit of oligarchs and government elites,” he said in a statement on April 6 adding that Russians “who profit from this corrupt system will no longer be insulated from the consequences of their government’s destabilizing activities.”

BCS Global Markets chief economist Vladimir Tikhomirov commented on April 6 that the "Treasury was careful NOT to include into these latest sanctions companies like Gazprom, Rosneft or VTB because if it did that could pose big problems for the Europeans and could trigger counter-reaction from EU."

Perhaps another possible degree of escalation would be direct sanctions against Russian state owned behemoths.

"Against sanguine market expectations, Russia – Western relations continue to deteriorate, with little sign of a let up, or de-escalation," Tim Ash of Bluebay Asset Manage commented on April 9, arguing that "expectations of sanctions being eased back by the US or the EU have proven wrong, and sanctions are if anything being tightened."

Nevertheless, at the moment "the overall reaction of the Russian market was rather calm: except for En+ and Rusal, there has been no effect on other public companies' business (only some top-managers were sanctioned)," Aton Equity commented on April 9. 

For Rusal and En+ Aton expects clarification from the companies and their beneficial owner (Deripaska), "which could shed light on the potential scale of the negative effect and possible actions to minimize it."