Shares in United Co. Rusal PLC dropped to 27.65 Russian rubles on the Moscow Stock Exchange, from 28.19 rubles at market open, amid reports that dividend payments from PJSC Norilsk Nickel Co. may be disrupted by U.S. sanctions.
The slip follows reports from the Financial Times that dividend payments from Russian mining giant Norilsk Nickel may be blocked amid U.S. sanctions on Rusal.
The aluminum producer holds a 27.98% stake in Norilsk Nickel, and the U.S. Office for Foreign Asset Control, or OFAC, said May 25 that companies paying dividends to sanctioned parties could be subject to sanctions themselves. In 2017, the payout from Rusal's stake in Norilsk amounted to more than 48 billion rubles, according to the Financial Times.
If a blocked person or entity holds a share of less than 50% in a foreign company, that company could be penalized if the OFAC deems the dividend transaction "significant," according to a statement published on the U.S. Treasury Department website.
Under sanctions that were initially imposed on Rusal on April 6 for allegedly profiting from the Russian government's "malign activity around the globe", non-U.S. individuals and entities could face sanctions for knowingly facilitating transactions for, or on behalf of, sanctioned parties.
An anonymous source familiar with the matter told the Financial Times that it was not entirely clear if Norilsk Nickel would incur U.S. penalties through its dividend payments to Rusal.
"Prior legal advice was that Norilsk didn't see a direct risk of paying dividends to ... Rusal," said the source, adding that the Russian company was waiting on clarification from the OFAC.
The U.S. targeted Rusal in its sanctions list for its connection with Russian billionaire Oleg Deripaska, who holds the controlling share in the aluminum producer through power company En+ Group PLC. The Treasury Department said Deripaska has been investigated for allegations including money laundering and racketeering and said he must relinquish control of Rusal for sanctions to be lifted.
Deripaska has stepped down as nonexecutive director at Rusal and director at EN+. In addition, the CEO of Rusal and half of the board resigned in moves aimed at appeasing the U.S.
As of May 30, US$1 was equivalent to 62.28 Russian rubles.
