In a surprise move the US Treasury Department (USTD) has relaxed some of the sanctions on Russian aluminium major Rusal and suggested that it would lift them completely if the company’s owner and Kremlin-insider Oleg Deripaska sold his shares.

USTD released a statement on April 23 following up on April 6 sanctions that directly targeted, among others, Deripaska and his Rusal. In an unprecedented move the Treasury scaled back the sanctions by extending the deadline for companies to wind down dealings with Rusal by five months and said it would relieve the sanctions should Deripaska give up his control in the company.

One motive for extending the time to sell shares is US investors holding Rusal shares and bonds have been put in an impossible situation: on the one hand they were told to sell but thanks to the sanctions there are no buyers. Investors were offering as little as 20 cents on the dollar but there were still no takers. That put major US investment banks and funds in the position where they were exposed to being punished for holding Rusal assets as the clock ticked down to May 6 deadline.

“Three weeks ago if you had asked who will be sanctioned you would not have picked Rusal. It is not a surprise but it was also not obvious. Now I’m told that I have to sell Rusal and I can’t. We asked the regulator and they just said: “That's your problem”,” says Stefan Benedetti, portfolio manager at Pioneer Investment.

The statement follows turbulent two weeks during which Russian ruble and equity markets sustained increased volatility and global metals markets faced uncertainty over the faith of one of the largest global aluminium player. Aluminium prices dropped by over 8% on the news.

Most recent reports claimed that lobbyists push the governments in Paris, Berlin, London and Rome to make a joint representation in Washington, fearing that the latest sanctions damaging Rusal could have consequences on key EU industries from cars to aerospace. 

"The first response was constructive," unnamed source in the French Ministry of Finance told Reuters on April 23 referring to contacts with the Treasury on the sanctions.

On April 6 the US Treasury for the first time targeted Russian publicly listed companies with global presence, making the most damaging sanction round since 2014. However, after a number of conflicting announcements, the US stopped short of imposing even more sanctions on April 16, with reports suggesting that the US President Donald Trump is looking to walk back the tensions with Russia.

Now the US Treasury Secretary Steve Mnuchin seems to be throwing Rusal a lifeline and said that his department is reviewing a petition from the company asking to lift the sanctions. The company's shares have stopped the free fall and jumped by 34% on the opening at HKEX on April 24. 

“Rusal has felt the impact of US sanctions because of its entanglement with Oleg Deripaska, but the US government is not targeting the hardworking people who depend on Rusal and its subsidiaries,” he added, as cited by Bloomberg.

This is a stark contrast to previous Mnuchin's statement, that on April 6 claimed "the Russian government operates for the disproportionate benefit of oligarchs and government elites,” and that Russians “who profit from this corrupt system will no longer be insulated from the consequences of their government’s destabilizing activities.”

The dovish follow-up from the Treasury will considerably release the pressure on Russia, with some analysts previously taking the sanctions against Rusal and Deripaska as a game changer in the sanction regime, wondering which of Russian influential billionaires could be targeted next.

The Russian government and Kremlin have already considered nationalisation of Rusal that employs over 60,000 people as one of the ways of rescuing the company and the latest Treasury announcement makes removal of Deripaska from Rusal highly likely. 

Siluanov "thinks" that bailed out Promsvyazbank slated to become the state "defence bank" could provide support, as cited by Tass. However, the government will stop short of providing equity injections and does not intend to reserve a special item in the 2018 federal budget for the companies under the sanctions.