When President Trump’s Treasury Department proposed lifting sanctions on companies tied to the Russian oligarch Oleg Deripaska in December Secretary Steven Mnuchin vowed that the firms would be forced to “significantly diminish Deripaska’s ownership and sever his control.”
But, the New York Times is now reporting that Treasury’s promises were illusory: “The deal contains provisions that free [Deripaska] from hundreds of millions of dollars in debt while leaving him and his allies with majority ownership of his most important company.”
This is a dark twist in a sub-plot of Trump administration’s love story with the Russia of Vladimir Putin. Deripaska has been called “Putin’s favorite industrialist” and also had contentious and longstanding ties to now-jailed former Trump campaign manager Paul Manafort. Manafort — who had received $10 million loan from Deripaska — offered to give the aluminum magnate “private briefings” on the state of the presidential race in the summer of 2016.
In recent days, Deripaska has also been linked to the decision by Russian authorities to arrest the Belarusian model Anastasia Vashukevich in a Moscow airport. Vashukevich had claimed to have information about Deripaska and Russian interference in Trump’s election.
Treasury’s decision to lift sanctions on Deripaska was always suspect. In mid-January, Senate Democrats, joined by 11 Republicans, attempted to override Mnunchin and keep sanctions in place. Sen. Marco Rubio (R-FL) even laid out the math:
Voted against Russia sanctions deal yesterday b/c Deripaska loses stock,but not control.
He keeps 35% of the voting shares, Putin’s bank has 7.35% & company with a long history of corruption & of partnering with Deripaska has 10.55%.
And Russia corp boards have little power.
— Marco Rubio (@marcorubio) January 16, 2019
But Senate Majority Leader Mitch McConnell held together a coalition of 42 Republicans, including erstwhile Russia hawks Mitt Romney (R-UT) and Lindsey Graham (R-SC), to keep the lifting of sanctions on track.
Publicly, Treasury insisted Deripaksa would receive no cash from the companies that reduced his ownership stake. But citing a confidential Treasury document, the Times reveals that Deripaska is instead being rewarded with the cancellation of bank debt that had been secured with shares of the stock he is losing. Moreover, according to the Times, Deripaska and his allies will retain collective control of the company that holds the majority stake in the aluminum giant Rusal, whose shares have surged on the lifting of sanctions.
The former U.S. ambassador to Russia, Michael McFaul, argues that even if the restructuring had been on the level, the Trump approach misses the point of sanctions, which are meant to weaken Putin’s hold on power, not improve corporate governance.
“There seems to be confusion about the purpose of sanctions on Russia,” McFaul tweeted. “They should be designed to change Putin’s belligerent behavior (not ownership restructuring of individual companies).”