U.S. Adds Russian Steel Company MMK to Sanctions List

The United States officially imposed sanctions on Russia’s second biggest steelmaker Magnitogorsk Iron & Steel (MMK) and its chairman Rashnikov on August 2. The move is another punitive measure against Russia in response to its invasion of Ukraine. The U.S. intends to place more economic pain on the Kremlin. The announcement was made by U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) as a new wave of sanctions against entities and individuals close to the Kremlin. OFAC added that Rashnikov was also sanctioned by the EU, the UK, Australia, Canada and Switzerland.

MMK manufacturing plant, one of the world’s largest, is another major taxpayer which helps Moscow in its Ukraine invasion, according to OFAC. The sanctions give parties until Sep. 2 to wind down any current transactions with MMK or its subsidiaries. This includes any asset in which the Russian company holds a 50% stake or more, be it directly or indirectly.

MMK produced almost 14 million tonnes of crude steel last year, with a significant 17% increase year on year. Most of this is cast into billets and slabs for sale or rolled into various flats and longs products. The company also reported a full-year EBITDA of $4.29 billion, up by 188% from the nearly $1.5 billion it earned in 2020.

Revenues in 2021 were 85.6% higher ($11.9 billion) than in 2020, when the company brought in $6.4 billion.

MMK said in a statement on Aug. 3 that it considers the sanctions “unreasonable and counterproductive.” “The company is studying the decision taken by the US authorities, assessing its potential effect and the possibility of challenging the imposed sanctions by all available means,” MMK added.

The U.S. sanctions are not expected to have a massive impact on the company’s revenues, as its presence in the United States was almost non-existent. The distance from Magnitogorsk to the United States makes logistics difficult, whereas rail connections to China make it an attractive export market for the steelmaker.

MMK is in Russia’s Chelyabinsk region, which is about 2,650 kilometers away from ports like St. Petersburg, Kaliningrad, and Novorossiysk on Russia’s Baltic and Black Sea coasts. These are the nearest places where the Russian steel gets transferred to ships for further transport. And given these logistical demands, it’s not surprising that the U.S. doesn’t see much of the company’s product.

It’s also worth noting that back in April, MMK announced plans to increase cooperation with markets in Central and Southeast Asia. Here, as in China, the risk of sanctions is virtually nonexistent.

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