Andrew Tillett and Peter Ker

Mar 18, 2022

Rio Tinto and Origin Energy are scrambling to clarify if they will have to freeze out two Russian oligarchs who are their business partners in local resources projects after the Morrison government slapped sanctions on them.

Oleg Deripaska and Viktor Vekselberg were added to the Department of Foreign Affairs and Trade’s sanctions list on Friday morning, along with a number of Russian banks, Russia’s Finance Ministry and its sovereign wealth fund.

Foreign Minister Marise Payne said Australia’s sanctions now covered most of Russia’s banking sector and all entities responsible for managing Russia’s sovereign debt.

The government had been criticised for not sanctioning Mr Deripaska and Mr Vekselberg sooner, who are both minority shareholders in aluminium producer Rusal.

Rusal owns 20 per cent of Queensland Alumina, with Rio Tinto owning the remaining 80 per cent. The joint venture operates a refinery in Gladstone, with Rusal entitled to 20 per cent of the output.

Rio Tinto declined to comment on Friday on whether the new sanctions on Mr Deripaska would force changes at its Queensland Alumina joint venture with Russian company Rusal.

Rusal was the subject of US sanctions in 2018 which complicated the management of the Queensland alumina refinery.

It is believed the 2018 experience prompted Rio and Rusal to agree to a formula for how any future sanctions would be managed to ensure maintenance spending and daily operations at the refinery were not hampered by sanctions.

The agreement would allow Rio to “step in” and run the refinery while Rusal was sanctioned, but given Friday’s sanctions were placed on Mr Deripaska rather than Rusal directly, it was unclear whether the legal trigger for Rio to “step in” had occurred.

Rio said last week that it would sever “all” commercial ties with Russia, suggesting that it will change the arrangements at Queensland alumina even if Friday’s sanctions do not affect Rusal.

Rio’s vow to sever all Russian links will require its Mongolian copper mine to stop buying some supplies from Russia. Rio is also believed to have a joint venture business in Canada with Russian company JSC Acron, with the joint venture studying several potash leases in Saskatchewan province.

Mr Deripaska owns 44.95 per cent of the London listed company EN+ Group PLC, which in turn controls Rusal through a 56.9 per cent stake. His fortune was estimated last year to be worth $US4.1 billion, and he has been described as Russian President Vladimir Putin’s “favourite industrialist” over his close ties to the Kremlin.

Mr Vekselberg owns 32.3 per cent of Rusal International PJSC through subsidiary companies SUAL Partners Ltd and Zonoville Investments Ltd.

In addition, Mr Vekselberg owns 16 per cent of Falcon Oil & Gas Ltd through subsidiary company Lamesa Group Holding. Falcon in turn owns 22.5 per cent of the proposed Beetaloo Basin gasfield, with Origin Energy owning the remaining 77.5 per cent.

The gasfield is yet to go into production and Mr Vekselberg is an indirect minority shareholder, but Origin said it was seeking clarification from DFAT over the ramifications.

“Neither Lamesa Holdings nor Mr Vekselberg are a party to the Beetaloo Basin joint venture,” Origin said in a statement.

“They have no role in, involvement or dealings with, Origin or the Beetaloo Basin joint venture. Origin reiterates that it is appalled by the Russian invasion of Ukraine and will comply with all Australian rules and laws.”

The Australasian Centre for Corporate Responsibility, which had campaigned to sanction the two men, said Rusal should also be hit with sanctions directly and expected Rio Tinto to take full control of Queensland Alumina.

“Both Origin Energy and Rio Tinto must take every possible step to ensure that neither Deripaska nor Vekselberg financially benefits in any way from the respective joint ventures,” director of climate and environment Dan Gocher said.

“Alumina exports from Queensland to Russia must be stopped immediately, to prevent the possibility of Australian alumina being used in munitions manufacturing.”

Clancy Moore from not-for-profit group Publish What You Pay said it was strange Mr Deripaska was not among those initially sanctioned.

“The involvement of two Russian oligarchs in Australia’s resources sector is a gigantic red flag for voters, investors and government regulators,” he said.

“It’s in Australia’s national interest to have the highest standards of transparency and integrity in how we manage our resources sector.”