U.S. and UK Restrict Critical Minerals from Russia
April 13, 2024
Late yesterday, in a continued effort to reduce Russia’s export revenues, the United States prohibited imports of Russian aluminum, copper, and nickel and both the United States and the United Kingdom limited the trading of Russian aluminum, copper and nickel trading on their global metal exchanges. The new sanctions follow the G7 February statement vowing to reduce Russia’s revenues from metals.
The sanctions apply to Russia’s production of the metals on or after April 13, 2024, according to news releases by the two governments. To prevent market disruption, the sanctions do not apply to existing stockpiles of Russian metals. The UK estimates that the actions taken will impact US$ 40 billion of Russian export revenue.
https://home.treasury.gov/news/press-releases/jy2249
https://www.gov.uk/government/news/uk-and-us-to-clamp-down-harder-on-the-trade-of-russian-metals
The U.S. announcement came in the form of two determinations, one with respect to the import prohibition and the other with respect to the services limitation. The UK had already prohibited imports of these metals back in December 2023.
In FAQ 1170, OFAC said it would publish regulations formally establishing the scope covered by this new services limitation, but it did not specify a timeline for such action.
In FAQ 1172 , OFAC specifically noted that banks are not prohibited from processing, clearing, or sending of payments related to Russian metals.
It is expected that the trading of the metals going forward will be at a discount, thus reducing Russia’s revenues from the metals. According to press reports, the governments said they would monitor the metals’ trading in other jurisdictions to that end.
The sanctions come almost 6 years after the United States sanctioned Russian aluminum producer Rusal, and then walked those sanctions back months later due to the turmoil caused to global metals markets.
The three metals are considered critical minerals by the United States. According to the U.S International Trade Commission, the United States imports mostly unwrought aluminum from Russia and was the U.S.’s third largest supplier in 2021, but the U.S. has been reducing its aluminum imports in the past few years. Russia is a minor source for U.S. copper imports. Russia accounted for 11% of U.S. nickel imports in 2022.
The UK noted in its announcement that the sanctions do not apply to titanium, platinum or palladium.
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Separately, the United States extended once again (this time until July 11, 2024) its General License 13, which allows U.S. persons to engage in transaction that are “ordinarily incident and necessary” to day-to-day business in Russia.
The action does not block bilateral contracts, which will be able to continue, US and British officials said, speaking on condition of anonymity.
The officials said continued trading of Russian metals off of the exchanges is expected to be at a discount, and that while the action does not restrict supply, it is expected that the amount of revenue Russia can get per trade will be reduced.
Washington and London will monitor the discount at which Russian metal is continuing to be exchanged elsewhere, the officials said.
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This report was prepared by Randi Levinas, Founder & CEO of Levinas Advisory.