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Oleg Deripaska is a buddy of Vladimir Putin, a de facto arm of the Russian government, and allegedly mixed up with organized crime, according to the Trump administration. But late Sunday the Treasury Department lifted sanctions on three companies linked to him. So is the Trump administration cutting a Putin crony tied up in the Russia investigation some suspicious slack or are Democrats a little out over the skis on this one?
Cop-out or precedent? The answer is that is it all depends. The sanctions applied to Deripaska target the companies he has an interest in. So what separates an interest you can sanction a company for from one you can’t? According to OFAC, the 50-percent rule applies, meaning a company is fair game for sanctions if a sanctioned individual has a 50 percent or greater interest in it. Under the deal negotiated by Treasury, Deripaska will sell off some of his interest in En+ to take him down from a 70-percent to a roughly 45-percent interest.
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Norms: The Daily Beast spoke to a former sanctions officials who both said that a 50-percent stake is the norm in sanctions programs when deciding whether sanctions apply to a designated person. “It would certainly seem that Deripaska is retaining a healthy amount of control. That being said, so long as he has less than 50 percent, the entities can be removed,” one former official said. Congressional Democrats may have been hoping that Treasury would go for the throat and demand that Deripaska have no interest in the company but that would be a “baseless standard and “an expectation entirely divorced from standard OFAC practice,” another former official said.
Objections: So if 50 percent is the norm, why did Democrats try and throw a challenge flag? Sen. Mark Warner, the top Democrats on the senate intelligence, and Senate Minority Leader Chuck Schumer have offered the most detailed explanations of their party’s objections. They boil down to a dispute about the letter vs. the spirit of our norms.
Warner’s initial reaction to the Deripaska deal announced in December was somewhat muted but he came out swinging on CNN earlier in January against the Trump administration’s “scheme” to take Deripaska’s ownership stake down from 70 percent to somewhere in the 40s. “If I have still got my whole management team in there, and I'm still the largest shareholder at 40 or 45 percent,” Warner told CNN, “I'm going to still control that company.”
Interest by proxy: Schumer’s broadside against the deal was more specific and noted that the deal allows “shareholders with family and business ties,” including Deripaska’s ex-wife and father-in-law,” and that “many American companies are controlled with far less.” In other words, Democrats argue that Deripaska can still carry on business more or less as usual with a 45 percent interest in EN+.
Treasury’s Office of Foreign Asset Control disagrees. In its December letter to Senate Majority Leader Mitch McConnell, OFAC director Andrea Gacki addressed the proxy issue. She wrote that OFAC had “identified several shareholders with professional or family ties to Deripaska” and got the company to transfer the voting rights associated with their shares to “an independent third party with no personal or professional ties to Deripaska.”
Under MAGA management: As part of the change in ownership structure, EN+ brought in some new directors. One of those new directors is Christopher Burnham, a former member of the Trump transition team. That’s certain to raise a few eyebrows around Congressional Democrats. They definitely wouldn’t have liked one of the other new faces around Rusal, incoming chairman Jean-Pierre Thomas. As The Daily Beast reported, Thomas is a big fan of the Russian annexation of Crimea—part of the motivation for sanctioning Deripaska—and created a Putin-approved “Friends of Crimea” group to trumpet the legitimacy of Russia’s claims to the newly-annexed province and attract investment. Thomas, however, resigned as chairman of Rusal as part of negotiations for lifting sanctions.*
Correction: An earlier version of this article mistakenly stated that Thomas remained chairman of Rusal. He has since resigned.
—with additional reporting by Erin Banco
