Russian aluminium giant cut out of Queensland operation to abide by sanctions, Rio Tinto says

theguardian.com:

Rio Tinto says it would have breached sanctions and illegally increased the wealth of two Russian oligarchs if it had not taken the dramatic step of cutting a Russian corporate giant out of a major Queensland alumina operation.

The Australian government’s sanctions against Russian billionaires Oleg Deripaska and Viktor Vekselberg, both allies of the Russian president, Vladimir Putin, prompted a swift response from the Australian mining giant earlier this year.

Both Vekselberg and Deripaska hold interests in Rusal, the Russian aluminium giant, which partnered with Rio Tinto to operate an alumina refinery in Gladstone, Queensland; Rio Tinto is a major employer in the region and a significant contributor to the state’s economy.

Fearing the arrangement would put it in breach of the Australian sanctions, Rio Tinto froze out Rusal’s subsidiary – a British Virgin Islands-based company named Alumina and Bauxite Company (ABC) – from the Gladstone operation.

The move triggered a lawsuit from Rusal’s subsidiary, which asked the federal court to restore its rights and privileges under the joint venture deal. It told the court it had “ringfenced” its operations to ensure that Deripaska and Vekselberg did not stand to benefit from ABC.

It also said it told Rio Tinto that it would “not supply or sell alumina to the Russian Federation” and was “not taxable in the Russian Federation”.

“In these circumstances ABC is not subject to the Personal Sanctions or the Export Sanctions,” the company said in its court filing.

The deal between Rusal and Rio Tinto saw the Gladstone refinery used to process bauxite into alumina. Rusal’s subsidiary delivered about 20% of the bauxite the refinery needs to make alumina, and the Russian operation got an equal