Swiss-based trader Glencore (GLCNF) said on Tuesday it would not "at this time" be swapping its shares in Russian aluminium producer Rusal (0486.HK) for Global Depository Receipts in EN+ due to U.S. sanctions on both firms.
Foreign partners of Russian firms like Rusal, which was hit by new U.S. sanctions on Friday, have a narrow window to ensure they are compliant with the new regulations that generally prohibit U.S. entities from having dealings with sanctioned Russian individuals and firms.
Glencore, under what it said was a non-binding agreement, had previously planned to swap its 8.75 percent stake in Rusal for GDRs in En+ Group, tycoon Oleg Deripaska's holding company.
But in a statement on Tuesday Glencore announced it would no longer be proceeding with the share swap, noting that EN+ had also been sanctioned.
"Glencore is committed to complying with all applicable sanctions in its business and is taking all necessary measures in order to mitigate any risks to Glencore's business as a result of the designation of Rusal and EN+ as SDNs (specially designated nationals), including in respect of secondary sanctions," Glencore said in a statement.
"Glencore will not proceed with the Transaction at this time in light of the designation of Rusal and EN+ as SDNs," it said.
Glencore also said that Ivan Glasenberg, its chief executive, had resigned from his position as a director of Rusal.
Rusal, which has seen its dollar-denominated bonds and Moscow-listed shares fall, said on Friday it was facing possible technical defaults on some of its debt. It will likely need to be bailed out by Russian banks, analysts at TS Lombard say.
According to a Rusal prospectus, its other major customers include Toyota and Rio Tinto Alcan.
Other foreign firms with ties to Deripaska's empire include Austrian construction company Strabag (XD4.F), in which the Russian's firm Rasperia has a blocking stake, and Singapore's Changi Airports International, which is a partner with a Deripaska-owned airports firm.
Reporting by Jack Stubbs