Glencore Plc, the world’s largest commodities trader, has followed some of the world’s biggest companies in examining their trade links with Russia as the fallout from the invasion of Ukraine intensifies in global commodity markets.
While Glencore has failed to divest from its investments, the company has stated that it is reviewing its stakes in two of Russia’s largest companies as well as its broader business operations in the country.
This is a dramatic turning point for a company that has long been comfortable operating in the most challenging jurisdictions and whose former chief executive received an Order of Friendship from President Vladimir Putin.
The list of companies severing ties or reviewing their operations has grown since the weekend as foreign governments tighten sanctions against Russia and pressure businesses to cut ties. Oil majors BP Plc and Shell Plc have already announced their intention to sever links with Russian partners after facing increasing pressure from the British government.
Glencore currently holds a 10.55% stake in En+ Group International PJSC, the majority shareholder of aluminum giant United Co. Rusal International PJSC. It also holds a small stake of less than 1% in
Russian oil giant Rosneft PJSC. The fair value of the investments at the end of 2021 was $789 million and $485 million respectively, Glencore said in its earnings statement last month.
“We have no operational footprint in Russia and our trading exposure is not significant for Glencore,” the company said in a statement Tuesday. “We are reviewing all our business activities in the country, including our stakes in En+ and Rosneft.”
The company also stated that it condemned the Russian government’s actions against the Ukrainian people. Glencore had established lucrative business relationships in Russia, purchasing aluminum and oil from one of the world’s largest producers of natural resources. The company secured the oil supply after the Russian government scrambled in 2016 to finalize
the planned sale of a 19.5% stake in Rosneft in order to reduce the budget deficit.
Glasenberg, which is still Glencore’s second-largest shareholder, also served on Rusal’s board until 2018, when the company began to loosen its ties with the aluminum producer amid a previous wave of US sanctions.
Aluminum is one of the few commodities traded by Glencore that is not supported by large-scale production from its own industrial assets. Glencore and Rusal are long-standing partners in the sector, and its sourcing from Russia has helped solidify its position as the world’s largest metals trader.
Rusal announced a $16 billion deal to sell aluminum to Glencore in 2020, which would allow it to sell about a third of its production to the trader. The deal was to run until 2024, with an option to extend it to 2025, Rusal said at the time. It also buys oil from Rosneft, although it does not publicly disclose the volumes it trades.
The Glencore review is likely to add further turbulence to the aluminum market, with prices for the metal already at record highs. Shipper AP Moller-Maersk A/S announced it was halting vessel bookings to and from Russia, exacerbating supply disruptions for buyers already facing critical shortages.
By MNM and Thomas Biesheuvel with Bloomberg
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