Russia

Russian metals giant Rusal will overhaul its board and management in hopes of persuading the United States to lift sanctions but it may be forced to halt aluminium exports for good if the plan fails, sources close to the company said. Washington this month imposed sanctions on billionaire Oleg Deripaska and several companies in which he is a large shareholder, including Rusal, in response to what the United States called Russia’s “malign activities,” Reuters reported.

Veteran Russia strategist John-Paul Smith has a warning for anyone looking to buy the nation’s stocks on the cheap after this week’s selloff, Bloomberg News reported. “Investors could become collateral damage from the actions of either side in the new cool war,” Smith, a former Deutsche Bank AG strategist and founder of research firm Ecstrat, said in a note published Friday.

Russia’s credit risk jumped above South Africa’s for the first time in more than 18 months. The cost of insuring Russian debt against non-payment, as measured by five-year credit default swaps, has climbed 40 basis points this week to 162 as the stand-off with the U.S. over Syria intensifies, Bloomberg News reported. South Africa’s has risen 8 basis points to 160. Cristian Maggio, head of emerging markets strategy at TD Securities in London, says Russia’s relations with the U.S. have reached a new low.

A consortium led by VTB Group, Russia’s second-largest bank, said it is willing to buy out a local partner to ensure its offer for an indebted Indian steel mill meets government rules, setting up a contest with billionaire Lakshmi Mittal, Bloomberg News reported. Other investors in the group are willing to buy out Rewant Ruia’s stake in investment vehicle Numetal Ltd., Antoine Chemali, senior advisor for Mauritius-based Numetal, said in an interview in Mumbai on Thursday. That’s likely required because Ruia’s father is the founder of Essar Steel India Ltd.

ArcelorMittal and Russia’s state-controlled VTB Group have hit a fresh snag in their pursuit of Essar Steel India Ltd., an insolvent producer that could fetch at least $6 billion, Bloomberg News reported. Advisers evaluating the offers for Essar Steel are recommending that all the bids be disqualified, according to people with knowledge of the matter. A committee of Essar Steel lenders will meet later this week to discuss the eligibility of the proposals, the people said, asking not to be identified because the information is private.

Moody’s Investors Service isn’t too concerned about a classified U.S. Treasury report about sanctions that’s been hanging over Russian bond markets. The ratings agency said that it would consider raising Russia to investment grade even if the nation is burdened with the kind of penalties that have curbed Venezuela’s ability to finance its debts, Bloomberg News reported. Moody’s put Russia on positive outlook last week, setting it on course for a possible raise out of junk in the next 12-18 months.

The Kremlin said yesterday that it hoped an out-of-court settlement reached between Russia’s largest oil producer Rosneft and the Sistema conglomerate would be implemented smoothly, Reuters reported. In a phone call with reporters, spokesman Dmitry Peskov said the Kremlin hoped the settlement, under which Rosneft will receive 100 billion roubles ($1.72 billion) from businessman Yevtushenkov’s Sistema, will not run into any problems.

Russia signed an agreement to restructure $3.15 billion of debt owed by Venezuela, throwing a lifeline to a crisis-wracked ally that’s struggling to repay creditors, Bloomberg News reported. The pact gives Venezuela some much-needed breathing room as it faces the much more complicated task of restructuring its $140 billion of bonds and foreign loans. For Russia, the deal underscores the costs that come with President Vladimir Putin’s geopolitical ambitions across the globe. A $900 million hole had been left in its 2017 budget plan by Venezuela’s failure to pay on time.

Rosneft, the world’s largest listed oil producer, has reported a lower than expected 81 per cent annual rise in net profits in the third quarter and falling free cash flow thanks to a spending spree on acquisitions, the Financial Times reported. The Kremlin-controlled company said net profit rose to Rbs47bn ($792m) in the third quarter, thanks to a rise in global oil prices and an increase in production. But free cash flow fell 83 per cent to just Rbs8bn, because of higher spending and upstream expenses.

Russia risks having to bail out more banks owned by large industrial groups unless there is rapid consolidation, VTB First Deputy Chief Executive Yuri Solovyov said. Two of Russia's biggest banks, Otkritie and B&N, have had to be taken over by the central bank in the past two months after a liquidity squeeze, the International New York Times reported on a Reuters story. Such "pocket banks", a post-Soviet phenomenon which involved industrial groups needing their own banking wings to finance business, are still common in Russia, but some are struggling.