US sanctions on Rusal of concern to Guyana and Jamaica

The governments of Guyana and Jamaica have expressed concern about the economic implications for local bauxite and alumina production of the US sanctions recently imposed on Rusal and its owner, Oleg Deripaska.

In Guyana Rusal owns 90% of the Berbice-based Aroaima Bauxite Company of Guyana Inc, producing and shipping 1.5m tonnes of calcined bauxite in 2017 to the Rusal owned Nikolaev refinery in the Ukraine. In Jamaica in 2017, Rusal’s operations produced 1.95m tonnes of bauxite and at its Ewarton refinery produced 0.6m tonnes of alumina. In addition, Rusal agreed in 2016 to sell its Alpart alumina refinery in Jamaica to China’s state-owned JISCO as a way of deepening its business relations with China.

The concern about Rusal’s ability to continue to operate follows a Trump Administration decision on 6 April that imposes a range of sanctions on a number of Russians with close connections to the Kremlin. The sanctions have far-reaching implications on Rusal’s global operations.

The sanctions cover seven individuals including Mr Derpiaska, 12 companies they own or control, and 17 senior Russian government officials. According to the US government, those sanctioned supported the Russian state in ‘malign activities’ around the world.

The Treasury Department warned that US entities would be ‘generally prohibited’ from dealings with the persons and firms on the sanctions list, while adding that companies outside the United States could face sanctions for ‘knowingly facilitating significant transactions for, or on behalf of’, the sanctioned entities.

The ambiguous wording of the decision has led companies around the world from metal exchanges to banks to declare force majeure; withdrawing from their contractual obligations and resigning directorships, with unpredictable consequences for payments to suppliers and the extension of de-risking decisions in future.

Guyana and Jamaica respond

In Guyana, the government has expressed uncertainty about the implications for the company’s operations, noting that it is a significant employer of labour and export earnings. The country’s Minister of Foreign Affairs, Carl Greenidge, was quoted by Stabroek News as saying that government was concerned about the long-term implications but did not have any definitive information. “We are still trying to pluck out of the air the essentials and then to get an informed analysis of what implications this has,” he said.

The Guyana Times reported that locally based members of Rusal’s management said that the company awaiting word from its Moscow office, but that it was too early to ascertain what impact the sanctions could have on the company’s operations in Guyana. According to the publication, stripping and stockpiling of bauxite continues, but the barges which take the product to the coast for shipping out of the country are not being loaded. The company is currently making significant investments to upgrade plant and equipment.

In Jamaica the Minister of Transport and Mining, Robert Montague and officials are trying to ascertain the possible impact of the US decision on WINDALCO, which is 93% owned by UC Rusal. The company mines bauxite and has two alumina plants. Two years ago it sold its Alpart refinery in St Elizabeth to the Chinese company JISCO.

In Jamaica there is also concern that earlier US tariffs on imports on steel and aluminium imports into the US could have direct and indirect economic implications for Jamaica. Opposition figures have questioned whether the US$320m JISCO investment to expand the Alpart alumina plant to establish downstream manufacturing activities and a related economic zone could also be under threat.