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Mnuchin defends lifting sanctions on firms linked to Putin ally

Saleha Mohsin and Billy House, Bloomberg News on

Published in Business News

WASHINGTON -- Treasury Secretary Steven Mnuchin defended plans to lift U.S. sanctions on companies tied to Russian billionaire Oleg Deripaska ahead of a closed-door meeting on Capitol Hill to discuss the matter Thursday.

Mnuchin said in a statement that the companies -- United Co. Rusal, En Group Plc and EuroSibEnergo JSC -- 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, an ally of Russian leader Vladimir Putin, may continue to be a major shareholder but no longer hold a majority of stock in the companies.

"Treasury will be vigilant in ensuring that En and Rusal meet these commitments," Mnuchin said in a statement. "If these companies fail to comply with the terms, they will face very real and swift consequences, including the reimposition of sanctions."

Key lawmakers are raising 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 election. Treasury has targeted several entities with ties to the Kremlin, including Deripaska.

In a letter this week, seven House Democratic committee heads said that Treasury's decision appears to keep Deripaska's significant ownership of EN intact, while reportedly 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.

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

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

Lawmakers' jitters over the Trump's Russia policy is driven by concerns that the president will not be tough enough on Putin and his allies. Several bill proposals emerged with methods to force the administration to ramp-up sanctions on Russia after Trump stood next to Putin in a press conference in July in Helsinki, denouncing what U.S. intelligence officials have said about Russia's election meddling.

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

"The risk is that targets of U.S. 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 LLP in Washington who previously worked in Treasury's sanctions unit.

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