Glencore's Glasenberg Quits Rusal Board as U.S. Sanctions Bite -- 2nd Update

By Scott Patterson and Oliver Griffin

Glencore PLC Chief Executive Ivan Glasenberg has resigned as a director of United Co. Rusal PLC, as fresh U.S. sanctions against Russia ensnarl one of the world's largest multinationals.

The Swiss commodities giant said Tuesday it was committed to complying with all sanctions and taking steps to mitigate risks to its business. Its moves come after aluminum producer Rusal and its controlling shareholder, EN+ Group PLC, were added to the sanctions list Friday because of their connection to Russian billionaire Oleg Deripaska.

The fresh sanctions rocked Russian financial markets Monday, with the ruble and stocks falling sharply, while Hong Kong-listed shares in Rusal lost half their value. The ruble, and Rusal's stock, fell further Tuesday.

U.S. sanctions in the past have curbed Western investment in Russia, but Friday's measures took direct aim at a group of businesses and their owners that have long been viewed as relatively safe political bets. Mr. Deripaska, for instance, has long been viewed as part of Russian President Vladimir Putin's inner circle, which has made him a potential target for sanctions. But he and his companies have exhibited enough transparency -- with global stock market listings, for instance -- that western partners have viewed them as dependable partners.

Mr. Glasenberg has been a board member of Rusal since 2007 soon after Glencore agreed to sell its alumina assets to Mr. Deripaska's company, helping make the Russian firm one of the world's biggest producer of the metal.

Mr. Glasenberg has leveraged Glencore's ties to Rusal to become its biggest aluminum customer. Glencore purchased $2.4 billion worth of the Russian company's metal in 2017, up from $2.3 billion the previous year, according to Rusal's corporate filings.

Glencore has a long history of doing business in Russia. Marc Rich, the financier who started the company that went on to become Glencore, bartered Russian oil for Cuban sugar in the early post-Soviet period.

Glencore said it was evaluating contracts with Rusal for the purchase of aluminum and alumina but said they aren't financially material to the company.

Glencore also said it would no longer go ahead with a planned deal to swap its shares in Rusal for global depository receipts in EN+ Group. Glencore holds an 8.75% stake in Rusal, valued at $933 million at the end of 2017.

On Monday, EN+ Group said its inclusion on the sanctions list would likely be materially adverse. Its shares were suspended from trading in London.

If Glencore's stake in Rusal was entirely wiped out, it would account for about 1.3% of Glencore's market value, according to Sanford C Bernstein analyst Paul Gait.

He also noted that Glencore could potential benefit from its 47.5% stake in U.S. aluminum producer Century Aluminum Co., which could benefit if Rusal's exports to the U.S. stop. Century's shares jumped 12% on Monday.

Glencore's Rusal headache marks the second time in the several months that sanctions have forced it to evaluate its ties to a controversial business partner. In December, The Treasury Department placed sanctions on Israeli billionaire Dan Gertler for his alleged corruption in the Democratic Republic of Congo. Mr. Gertler has denied charges of corruption.

Mr. Gertler was a partner with Glencore as it built a dominant position in copper and cobalt in Congo, where Mr. Gertler maintained close ties to senior government officials.

Glencore said at the time that it was "considering its position in relation to its pre-existing contractual obligations to companies owned by Mr. Gertler."

The company declined to comment further on the issue Tuesday.

Write to Scott Patterson at [email protected]