Russia's Deripaska ready to give up control of van maker GAZ as sanctions bite

Russian tycoon Oleg Deripaska is seen here at the Kremlin in Moscow June 22, 2018. ― Reuters file pic
Russian tycoon Oleg Deripaska is seen here at the Kremlin in Moscow June 22, 2018. ― Reuters file pic

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NIZHNY NOVGOROD, April 17 — Germany's Daimler and some others have stopped dealing with sanctions-hit van maker GAZ, controlled by Russian businessman Oleg Deripaska, he told reporters, adding he was ready to give up control of the company.

Deripaska and some of the businesses which he controls were hit by US sanctions a year ago, when Washington imposed sweeping measures on some of Russia's biggest companies and business figures to punish Moscow for its alleged meddling in the 2016 US election and other “malign activity.”

Sanctions against GAZ, Russia's biggest van maker, have not yet taken full effect due to licences for extensions issued by Washington, but are impacting the company, Deripaska said.

“It's a tough time,” he told reporters yesterday on a visit to the GAZ factory in Russia's central region of Nizhny Novgorod.

If sanctions are not lifted, he said, there was no chance GAZ would survive, even if the company is granted another extension in early July, because these extensions “do not give you full freedom.”

A lot of suppliers and partners have stopped working with GAZ due to the risk of secondary sanctions, Deripaska said, adding there was also huge pressure on GAZ from its banks.

GAZ, which competes with a joint venture between Ford and its Russian partner Sollers among others, mainly sells its vehicles in Russia and the former Soviet Union, making it less dependent on dollar sales.

Market share

However, GAZ has contracts with Western partners and relies on vital supplies of foreign components. Along with Daimler, Volkswagen and US-based Cummins have contracts with GAZ.

Volkswagen, Daimler and Cummins did not reply to a Reuters' request for comment.

The company is also losing market share to rivals like Toyota and Ford, Deripaska added.

GAZ did not disclose its 2018 sales. According to the AEB lobby group, its sales of light commercial vehicles, or vans and minibuses, rose 4 per cent in 2018 to 60,677.

The US Treasury said in March it was extending by four months to July 6 a deadline for investors to divest from GAZ, giving Deripaska more time to lower his stake and potentially allowing the company to be removed from the US sanctions list.

Washington lifted sanctions on Deripaska's main assets — aluminium maker Rusal and its parent En+ — in January after he dropped control in them. Asked if he was ready to give up control of GAZ, Deripaska said: “Yes, as it was done in En+.”

Yet GAZ does not have such weight in global markets as Rusal and En+, so talks on any deal are slower and more difficult, sources close to GAZ previously told Reuters.

Deripaska himself remains blacklisted and is suing the United States, alleging it had overstepped its legal powers in imposing sanctions on him.

He admits his suit against Washington “would be a difficult case” but still hopes his name will eventually be cleared, he told reporters. — Reuters

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