On January 23, Nornickel president and largest shareholder Vladimir Potanin announced the company’s intent to build closer partnerships with China, Turkey, Morocco and other Arab states in light of western sanctions. While Nornickel is not a direct subject of western sanctions, Potanin noted the sanctions’ impact on equipment purchases and payment systems as a hinderance to company operations. The U.S. Treasury Department added Potanin to its OFAC SDN sanctions list in December 2022. The news comes as the U.S. contemplates invoking a tariff against Russian-made aluminum, which Russia is the world’s second largest producer.
Why it matters: Nornickel is the world’s largest producer of palladium, used for catalytic converters, and refined nickel, used for stainless steel and EV batteries. U.S. and western officials have sought to limit Russia’s influence in critical minerals markets without unduly disrupting American and western consumers. The U.S.’s ill-fated 2018 sanctions on Russian aluminum producer Rusal contributed to a 10% commodity price increase before being lifted in less than a year. But Potanin’s admission shows these latest sanctions, even on individual executives, can influence the plans of major Russian corporations. Nornickel’s shift toward China and the Arab World is likely a symptom of lost markets in Europe. A U.S. tariff on Russian aluminum
may effectively curtail U.S. imports, partly because Russia’s market share of U.S. imports has fallen from 10% to 3% as competitors like Australia have filled the void, according to U.S. ITA data. As Russia seeks to alter its energy export patterns, critical mineral mining and refining seems likely to be another important source of exports and of influence in the global energy transition.