Leading Congressional Democrats Request National Security Review of Russian Investment in Kentucky Aluminium Mill
Members raise alarm about Rusal investment proposed months after Treasury lifts sanctions
Washington, D.C.–Leading Congressional Democrats today requested that the Committee on Foreign Investment in the United States (CFIUS) review Rusal’s proposed $200 million investment in Braidy Atlas, a Kentucky aluminum rolling mill, for potential threats to national security.
The letter, led by Senate Finance Committee Ranking Member Ron Wyden, D-Ore., is signed by Senate Banking Committee Ranking Member Sherrod Brown, D-Ohio, House Intelligence Committee Chairman Adam Schiff, D-Calif., House Financial Services Committee Chairwoman Maxine Waters, D-Calif., House Foreign Affairs Committee Chairman Eliot Engel, D-N.Y., House Oversight and Reform Committee Chairman Elijah E. Cummings D-Md., Congressman Jim Himes, D-Ct., and Congressman Lloyd Doggett, D-Texas.
Rusal is a subsidiary of En+, which is substantially owned by individuals and entities with close ties to the Russian government, including Oleg Deripaska and VTB Bank. The Treasury Department announced in December 2018 that it would lift sanctions on Rusal and En+, and Rusal in April 2019 announced its intent to invest in Braidy Atlas.
Legislation enacted in 2018 significantly expanded CFIUS’ authority to review proposed foreign investment in the United States for national security concerns.
“Russia remains a central threat to U.S. national security and prosperity and is, along with China, one of our most aggressive and capable adversaries. The proposed investment by En+—a company that is majority owned by a U.S.-sanctioned Russian national and Russian state bank—in an American aluminum mill, raises serious questions of national security, particularly given the mill promises to supply materials to the Department of Defense,” the Senators and Congressmembers wrote. “Any efforts by En+ to expand its influence in our economy, or access technologies critical to our national security, must be closely scrutinized by CFIUS. This immediate review is all the more necessary, since President Trump relied upon national security as the reason for imposing tariffs on imported aluminum under Section 232 of the Trade Expansion Act of 1962.”
The letter to Secretary Mnuchin is available here, and text follows:
The Honorable Steven Mnuchin
Secretary of the Treasury
U.S. Department of the Treasury
1500 Pennsylvania Avenue NW
Washington, D.C. 20220
May 16, 2019
The Honorable Steven Mnuchin
Secretary of the Treasury
U.S. Department of the Treasury
1500 Pennsylvania Avenue NW
Washington, D.C. 20220
Dear Secretary Mnuchin:
We write to you regarding En+ Group PLC’s (En+) proposed investment in Braidy Atlas, a Kentucky rolling mill that would be the largest new aluminum plant built in the United States in decades. United Company Rusal PLC (Rusal), a Russian subsidiary of En+, will obtain a 40-percent stake in the project in exchange for its proposed investment of $200 million, according to the letter of intent it signed with Braidy Industries, Inc. (Braidy). Given that En+ is a company substantially owned by individuals and entities with close ties to the Russian government, we believe the proposed transaction warrants immediate review by the Committee on Foreign Investment in the United States (CFIUS).
In April 2018, the Treasury Department imposed sanctions against Oleg Deripaska and a host of other senior Russian government officials, oligarchs, and companies they own or control for their role in supporting the Russian government’s malign activities around the globe, including attempts to subvert Western democracies. The Treasury also imposed sanctions on Mr. Deripaska’s companies, En+ and Rusal.
In December 2018, the Treasury Department’s Office of Foreign Assets Control (OFAC) notified Congress of its intention to lift sanctions imposed on En+ and Rusal. OFAC claimed that its decision was based on the reduction of Mr. Deripaska’s nearly 70 percent share of En+. Notwithstanding this reduction, the two largest shareholders in En+ are Mr. Deripaska, with a 45-percent stake, and VTB Bank (VTB), with a 24-percent stake. VTB is owned and controlled by the Russian government and was placed under U.S. sanctions in 2014 in response to Russia’s annexation of Crimea. Senior VTB executives have close ties with Russian President Vladimir Putin; indeed, the bank has been referred to as “Putin’s piggy bank.” An investigation revealed that members of Putin’s inner circle used offshore entities to move vast sums of money through a subsidiary of VTB.
Accordingly, we were deeply alarmed to learn of efforts by En+, through its subsidiary Rusal—both companies in which Mr. Deripaska continues to play a key role—to jointly construct and operate the Braidy Atlas flat-rolled aluminum rolling plant in Ashland, Kentucky. Rusal will invest $200 million in Braidy Atlas for a 40-percent stake in the project, with the remaining ownership held by Braidy. Braidy announced that it is applying to the U.S. Department of Energy and the German National equipment finance programs to fund the debt portion of its capital structure. Public reports indicate the plant will make “unspecified materials for the Department of Defense,” among other products. The letter of intent signed between En+ and Braidy specifies that Rusal will serve as Braidy’s exclusive supplier of imported aluminum, providing close to two million metric tons over ten years. Braidy’s press release states that this will be “the world’s largest order for one mill of high-quality, pre-alloyed and low-carbon primary aluminum slabs.”
As you are aware, the Treasury Department’s Office of Investment Security issued an interim rule in October 2018 implementing provisions of the Foreign Investment Risk Review Modernization Act (FIRRMA), which expanded the scope of transactions subject to review by CFIUS and requires mandatory declarations for certain transactions. The interim rule acknowledges that “certain strategically motivated foreign investment could pose a threat to U.S. technological superiority and national security.” The list of pilot program industries included in the rule and subject to mandatory declaration requirements was carefully developed to target industries facing imminent threats of erosion of technological superiority from foreign direct investment.
Notably, the list of pilot program industries includes “Alumina Refining and Primary Aluminum Production” and “Secondary Smelting and Alloying of Aluminum” as critical technologies. The interim rule also makes clear that foreign investors do not need to acquire a controlling interest in order to affect decisions made by, or to obtain certain sensitive information from, a U.S. business with respect to the use, development, acquisition, or release of critical technology, and that such investment from a foreign investor can take non-controlling and non-passive forms.
Russia remains a central threat to U.S. national security and prosperity and is, along with China, one of our most aggressive and capable adversaries. The proposed investment by En+—a company that is majority owned by a U.S.-sanctioned Russian national and Russian state bank—in an American aluminum mill, raises serious questions of national security, particularly given the mill promises to supply materials to the Department of Defense. Any efforts by En+ to expand its influence in our economy, or access technologies critical to our national security, must be closely scrutinized by CFIUS. This immediate review is all the more necessary, since President Trump relied upon national security as the reason for imposing tariffs on imported aluminum under Section 232 of the Trade Expansion Act of 1962.
Accordingly, we request that CFIUS undertake an immediate review of En+’s proposed investment in the Braidy Atlas mill to assess, among other things, potential risks to the integrity of our defense supply chain and whether Russia could obtain access to sensitive technologies impacting U.S. national security.
Thank you for your attention to this matter.
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