Glencore shares down as US hits Western investment with Russia sanctions

This represents a “tactical escalation” of the U.S. sanctions program, said Max Hess, political risk analyst at AKE Group. Russia has derided the measures as a hostile act, and is currently formulating a response, according to the country’s Foreign Ministry.

Shares of aluminum-producing giant Rusal tanked 50 percent in Hong Kong trading amid fears over the company’s future trading abilities. The measures aim to make it as hard as possible for Deripaska, and other select oligarchs with extensive involvement in global capital markets, to do business internationally.

Deripaska, who was accused in the Treasury’s statement of being involved in Russia’s “malign” activities, called the claims “groundless” and “absurd.”

Deripaska’s $11 billion holding company En+, which owns a majority stake in Rusal, was down 17 percent in Monday morning trading. It issued a statement saying that “it is highly likely” that the sanctions’ impact “may be materially adverse to the business and prospects of the group.”

The shockwaves reverberating across Russia’s oligarch community as its stock market contracts is evidence of the U.S. Treasury’s aim to “introduce a degree of unpredictability to the sanctions regime going forward,” according to Ash. And he recommends expecting more sanctions to come, not less. Essentially, the message being sent by Washington is that no one is safe.

Investors are wary, therefore, wary of who to do business with — because you never know who will be sanctioned next. In this particular case, many of the oligarchs in question are central conduits of Western money into Russia. The result will be squeezed financing around Russia, which certainly won’t help the country’s already slow growth.

Glencore is the biggest buyer of Rusal’s metal; now questions abound as to the fate of the companies’ relations going forward. The firm had previously planned to swap its Rusal shares for a stake in EN+, but that deal may no longer be feasible, according to AKE’s Hess.

Glencore had no comment on the matter at time of writing.

However Russia chooses to respond, it is clear the sanctions have had a palpable effect on the elite circle controlling many of Russia’s business entities central to Putin and his allies’ hold on power.

“The U.S. Treasury has now introduced the element of unpredictability in dealing with Russia,” Ash said, “which could ultimately prove to be its secret weapon.”

Correction: This story has been updated to accurately indicate where Glencore is based.