Oleg Deripaska. Picture: REUTERS/RUBEN SPRICH
Oleg Deripaska. Picture: REUTERS/RUBEN SPRICH

London — Glencore, the world’s largest commodities trader, started to loosen ties with Russian aluminium tycoon Oleg Deripaska after the US imposed harsh sanctions against his business empire.

Glencore would not proceed with a plan to swap its 8.75% stake in aluminium producer United Company Rusal for shares in another one of Deripaska’s companies, London-listed En+ Group. CEO Ivan Glasenberg has also resigned from Rusal’s board.

In an indication that the sanctions will continue to reverberate through the global commodity market, the Swiss-based commodities giant said in a statement on Tuesday that it was evaluating other contracts with Rusal. The trader has a multi-year deal to buy Rusal’s metal, an arrangement that was worth $2.4bn in 2017.

"Glencore is still evaluating the position under its contracts with Rusal, but notes that these contracts are not financially material to Glencore," it said in the statement.

Shares in Glencore fell on Monday because of concern that the fallout from Washington’s decision to target Deripaska would spill over into Glencore’s aluminium business.

Paul Gait, a mining analyst at Sanford C Bernstein in London, said the worries were probably overdone. In a worst case scenario, forgoing the aluminium deal with Rusal would see Glencore lose less than 1% of the company’s likely 2018 earnings, he said in a note on Tuesday. Even if Glencore was forced to write down the value of the Rusal stake to zero, it accounts for 1.3% of the company’s market cap, he said. "We think the market over-reacted."

Glencore’s shares rallied as much as 4.6% in London on Tuesday.

Glencore’s interest in Rusal goes back to at least 2007, when Deripaska and fellow billionaire Viktor Vekselberg, who was also sanctioned on Friday, merged their companies with Glencore’s alumina plants.

In October, when Deripaska wanted to list holding company En+ Group in London, Glencore stepped in as a cornerstone investor, pledging to swap its 8.75% stake in Rusal for En+ shares.

The penalties announced on Friday prohibit US individuals and companies from doing business with Deripaska and the affected firms. While Glencore is not considered a US company for the purposes of sanctions enforcement, the action will make it complicated for anyone, anywhere to continue to work with the oligarch.

Deripaska has called the sanctions "groundless, ridiculous and absurd".