By: Natalie Scott-Gray, Senior Metals Demand Analyst, EMEA and Asia region
On 26th September, the UK Government announced 92 sanctions on Russia in response to the move by President Putin imposing referendums on four regions of Ukraine. On 5th October, the LME released a notice (overnight) for the “warranting of Ural Mining and Metallurgical company (UMMC) and Join Stock Company Chelyabinsk Metals in LME Warehouses” (please click here to read full document).
What You Need to Know:
• The UK Government Imposes Sanctions on Russia
On 26th September, the UK Government outlined 92 sanctions targeting Russia, following steps taken by President Putin over the move to hold referendums on a decision over the annexation of four regions of Ukraine (Kherson, Zaporizhzhia, Donetsk and Luhansk), which make up ~15% of the country. On 5th October, President Putin signed into law the annexation and warned the West that he was not bluffing when it came to using nuclear weapons to defend Russia. “If the territorial integrity of our country is threatened, we will without doubt use all available means to protect Russia and our people - this is not a bluff” – President Putin – Televised Address.
MAP OF UKRAINIAN ANNEXED TERRITORIES
UK Government Sanctions:
33 Individuals
• Sergei Yeliseyev: the Head of Government in Kherson, recently installed by the Russian Government and Vice Admiral in the Russian Navy. Since defecting from the Ukrainian navy in 2014, Yeliseyev is reported to have continued to undermine the independence of Ukraine
• Ivan Kusov: the Minister of Education and Science of the so-called Luhansk People’s Republic and tasked with “helping our educational institutions to seamlessly blend in the educational system of Russia” by Pasechnik - leader of the LPR
• Yevhen Balytskyi: the Russian installed head of the so-called Government in Zaporizhzhia, who has been supporting the Russian invasion since March through public statements of support. In August, Balytskyi reportedly signed a decree to allow a referendum on Zaporizhzhia joining the Russian Federation
• Evgeniy Solntsev: the Deputy Chairman of the so-called Donetsk People’s Republic
Four Oligarchs
• God Nisanov and Zarakh Iliev: known as the ‘Kings of Russian real estate’, and with a joint global net worth of £2 billion, the pair own and control the Kievskaya Ploshchad Group, a major construction company operating across Russia
• Iskander Makhmudov: President and founder of Ural Mining and Metallurgic Company. A major metals magnate, Makhmudov has an estimated global net worth of £2.7 billion
• Igor Makarov: President and owner of ARETI International Group, a major investor in the oil and gas sector, and founder of Itera, Russia’s first independent gas company before being bought by state-owned Rosneft. Makarov is worth an estimated £1.6 Bn ($1.8Bn)
55 Board Members from State-Linked Organisations
• 3 individuals from the Gazprombank Board of Directors and Management Board
• 16 members of the Sberbank Supervisory Board, Executive Board, and other Directors
• 10 individuals from Sovcombank, including the Deputy Chairman and members of the Supervisory Board and Management Board
Other Sanctions
• IMA Consulting (President Putin’s “favourite” PR Agency)
• Goznak (a security documents company)
Please note, by 26th September, the UK had sanctioned over 1,200 individuals and over 120 entities, including over 120 oligarchs with an estimated combined global net worth of over £130 billion ($146bn).
• The LME Releases a Notice on the Impact of UK Government Sanctions
“The LME understands, through publicly available information, that through a corporate structure Mr Makhmudov majority owns the holding company (which in turn majority owns the holding company which owns more than a 50% share in UMMC). Mr Makhmudov is also the President of UMMC. UMMC in turn has a 97.78% shareholding in Chelyabinsk. UMMC is an LME listed producer of the copper brands listed in appendix 1 and Chelyabinsk is an LME listed producer of the zinc brand listed in appendix 1”.
Appendix 1
What to Expect?
• Starting immediately, metal from UMMC (copper) or its Chelyabinck zinc unit can only be delivered to LME warehouses if the owner can prove to the Exchange that it will not constitute a breach of sanctions (and that neither company would have any economic benefit in the metals).
• Please note, UMMC Copper within LME listed warehouses (prior to 26th September) is not subject to the sanctions and no zinc (produced by Chelyabinsk) is held within LME warehouses.
What Have We Seen?
This latest move from the LME has resulted in price volatility across the suite, with each metal lifting in morning trading upon concerns that sanctions could move to other Russian produced metals, such as nickel or aluminium (which are responsible for 9% and 6% of global refined supply respectively). Indeed, uncertainty developed over the last week following the release of a statement from LME CEO Matthew Chamberland, in which he announced that a discussion paper could be released over the acceptability of Russian metal in the broader physical market.
LME NOTICE – 29th SEPTEMBER – SPECULATION AROUND CONSULTATIONS ON ONGOING WARRANTABILITY OF RUSSIA ORIGIN METAL
LME INTRA-DAY PRICE PERFORMANCE
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