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Mnuchin defends lifting sanctions on firms tied to Putin ally

11th January 2019 BY: Bloomberg

WASHINGTON – Treasury Secretary Steven Mnuchin signaled he won’t back down from plans to lift sanctions on three companies tied to an ally of Russian President Vladimir Putin even as he said the Trump administration would consider delaying the move to accommodate concerns raised by lawmakers.

Mnuchin denied the action was intended to help the Kremlin, telling reporters Thursday after a closed briefing with lawmakers that the Treasury Department’s decision to lift restrictions on companies tied to Russian billionaire Oleg Deripaska are “not politically motivated.” The companies play a major role in the aluminum markets.


“Treasury has made it’s best judgment for applying the law and regulations for us to have effective sanctions programs,” Mnuchin said. “We both have to have a way that companies that are affected by ownership and control will be picked up and then a fair way that they’ll be de-listed.”

House Speaker Nancy Pelosi dismissed Mnuchin’s defense as “one of the worst” performances she has seen from the Trump administration. Pelosi, who left before the session ended, said the Treasury secretary “barely testified” in the classified briefing and was “wasting the time of members of Congress.”


Democrats, who are now in control of the House, tied their scrutiny of Mnuchin’s decision to continuing efforts to investigate the response to Russian interference in the 2016 election. Their demand to hear directly from Mnuchin on the department’s reasoning signals a new era of congressional scrutiny of President Donald Trump’s cabinet officers and his administration’s decisions.

The Treasury plan to lift sanctions on the companies – United Co. Rusal, En+ Group Plc and EuroSibEnergo JSC – could take effect as early as Jan. 19 unless Congress blocks it, though Mnuchin said he would consider extending the timeline.

Several key lawmakers have raised concerns about Treasury’s intention to lift sanctions on the three companies after Congress forced the administration to take action related to Russian interference in the 2016 presidential election.

One of those lawmakers, House Intelligence Committee Chairman Adam Schiff of California, also expressed skepticism about Mnuchin’s reasoning for providing sanctions relief. “Deripaska was sanctioned for his role in Russia’s malign activities and I have yet to see how this deal advances the objective of deterring further malevolent conduct,” he said in a statement released after the briefing.

“It will be incumbent upon Congress to maintain pressure on the Treasury to explain its reversal of course and why Deripaska or his companies are suddenly deserving of this relief,” Schiff added.

Congress currently has until Jan. 18 to vote to block the move, though Democrats have asked for more time. Last week, Senate Minority Leader Chuck Schumer of New York introduced a measure to overturn Treasury’s decision.

Mnuchin said in a statement released before the briefing that the companies had undertaken significant restructuring and governance changes to sever Deripaska’s control, and committed to “an unprecedented level of transparency” to ensure he doesn’t reassert himself.

Deripaska may continue to be a major shareholder but no longer hold a majority of stock in the companies.

In a letter this week, seven House Democratic committee heads said that Treasury’s decision appears to keep Deripaska’s significant ownership of En+ Group Plc intact, while transferring some shares and financial interests to the Kremlin-linked Russian bank VTB, which is also under sanction.

Representatives of the three companies spent nearly eight months negotiating with Treasury on how significantly Deripaska’s influence needed to be decreased in order to lift the sanctions. The effort was accompanied by a multi-million dollar lobbying campaign targeting the Trump administration and Capitol Hill.

Treasury said last month that Deripaska himself will remain sanctioned. Removing the ban from Rusal is expected to relieve pressure from the global aluminum markets, which have whipsawed since the sanctions were imposed in April.

Lawmakers’ jitters over Trump’s Russia policy are driven by concerns that the president will not be tough enough on Putin and his allies. Several legislative proposals emerged with methods to force the administration to escalate sanctions on Russia after Trump stood next to Putin in a press conference last July in Helsinki, denouncing what intelligence officials have said about Russia’s election interference.

Congressional scrutiny of the Treasury decision has also stirred some concern that those who might face sanctions may not take the administration’s negotiations seriously if political pressure from Capitol Hill could alter the outcome.

“The risk is that targets of sanctions are now serving two masters, which will reduce the incentive for them to change their behavior because they cannot be certain of the payoff,” said Sean Kane, a lawyer at Dechert in Washington who previously worked in Treasury’s sanctions unit. 

EDITED BY: Bloomberg
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