Russia to curb aluminum import to back sanctions-affected Rusal

Russia to curb aluminum import to back sanctions-affected Rusal
Photo: Ilya Naymushin / Reuters

It is planned to increase aluminum products import tariffs and oblige state companies to purchase aluminum from Russian enterprises. UC Rusal is the only primary aluminum producer in the country.

The government of the Russian Federation has approved a roadmap for the development of the aluminum industry in the country until 2023, Kommersant reports citing Deputy Prime Minister Dmitry Kozak and unnamed sources. According to the publication, it was Kozak that held a meeting on June 27 involving spokespersons of Oleg Deripaska’s US-sanctions-affected company UC Rusal, at which the document was welcomed.

The program implies an increase in domestic demand for aluminum in Russia to back Rusal, which is the only primary aluminum producer in the country. In 2017, the company exported roughly 80% of aluminum. In a year, about 3.6 million tons of metal were produced. The company sold up to 1 million tons to the domestic market.

It is reported that some provisions of the roadmap imply a direct limitation and reduction of aluminum import. In particular, by October 15, an initiative to upsurge import duties for aluminum above the level of WTO binding is to be prepared and submitted to the government. Currently, within the framework of the Eurasian Economic Union (EAEC), these tariffs are from 5 to 15%.

According to the data of EAEC’s base, in 2017 183 thousand tons of aluminum products worth $930 million by codes TNVED 7603-7616 were imported to Russia. UC Rusal previously claimed that the real potential for import phase-out in the country is 500 thousand tons per year. Measured in primary aluminum, this is 750 thousand tons per year.

The action plan also provides for the need to oblige state companies to add the annexes related to the procurement of aluminum products from Russian enterprises to their profile documents, as well as the possible prohibition or restriction of state and municipal purchases of separate imported aluminum products.

Besides, the program involves amendments to the government decree as of 2015, which stipulates the technical operations, the compliance with which provides machine builders with access to subsidies. It is planned to add requirements for the production or use of components from Russian aluminum alloys to it. According to the proposal of the meeting participants, by late 2019 the government is be provided with measures to reach 90% of the localization of such components. GAZ Group, controlled by Deripaska, already purchases only Russian aluminum.

Moreover, the roadmap timeline requires a ban on the import of wheels completed with tires. The producers of agricultural machinery were offered to expand the terms of subsidies provided they use more home-produced aluminum. The program also assumes incentives and subsidies for manufacturers and users of aluminum wagons.

UC Rusal, En+, GAZ Group and other companies of Oleg Deripaska fell under US sanctions in April. The US Treasury permitted the softening of restrictions in case the businessman ceases to control them. Pressurized by the US authorities, Deripaska left the Board of Directors of En+ on May 18, and on May 26 resigned from the Board of Directors of UC Rusal.

Despite this, the government of the Russian Federation continued to implement the plan to support the companies controlled by Deripaska. GAZ Group and UC Rusal under this program were to receive loans from Promsvyazbank, but on June 29 it became known that they refused this due to enslaving terms of assistance.

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