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This page sets out the LME’s understanding of how recent US, UK and EU sanctions against Russia and disputed Ukrainian areas may affect the LME’s market.

Background

  • The LME’s priority in any challenging geopolitical situation is to ensure that an orderly market is maintained, which includes providing a reliable price reflective of global market conditions.
  • We have robust procedures and the necessary powers in place to take any action that may be required to ensure market stability in response to sanctions that impact the LME market.
  • The LME maintains a list of global metals brands, and the metal produced by these brands can be placed on warrant and stored at an LME registered warehouse. A warrant is used to settle a relevant LME contract. In the event that any brand is subject to sanctions, we are in a position to respond swiftly and appropriately to take action in respect of the brand. Such action might include suspending the brand, or suspending production from a certain date. Due to the global nature of the LME brand list, continuity of supply can still be achieved even in the event of some brands being sanctioned due to their location.
  • We are also ready to take the appropriate action should any individual or entity subject to sanctions be active on the LME market.
  • We continue to monitor the developing situation closely.

Brands

President Biden issued an Executive Order on 22 February 2022, which, among other things, prohibits investment into certain Ukranian regions (non government-controlled Donetsk and Luhansk) and also the importation of goods from those regions. The EU has taken similar action in respect of these regions, and the LME understands that the UK will follow suit in the coming days. There is one aluminium alloy brand URV produced by “TPK Urksplav” Ltd in one of these regions, however the brand is currently suspended and there is no stock on LME warrant. For completeness, we note that there are also two lead brands produced by CJSC "SVINETS" in Donetsk but these are not produced in the affected part of Donetsk and are therefore not impacted by the Executive Order. Further, in the event of sanctions in respect of Belarus, the LME has no Belarussian brands.

Further, the LME notes the sanctions announced by the EU on 28 February against Mr Alisher Usmanov and by the UK on 10 March against Mr Oleg Deripaska. Our understanding is that these sanctions do not impact any of the LME’s listed brands.

The LME also notes the Russian restrictions on exports and imports introduced on 8 March. It is our understanding that these restrictions do not include metals and therefore do not affect LME brands. 

The EU recently imposed further sanctions on Russia through Regulation (EU) 2022/428, which, amongst other things, imposes prohibitions relating to purchasing, transporting or importing certain iron and steel products which are located in, or originate from, Russia. The LME understands that these sanctions will not impact any of the LME physically deliverable contracts and we are in the process of working with index providers to determine whether they will have any impact on LME steel contracts.

EU Council Regulation No. 833/2014, which came into effect on 8 April 2022, states that it is prohibited (effective 9 April) to purchase, import, or transfer, directly or indirectly, certain listed items including "unwrought lead" into the EU, if they originate in Russia or are exported from Russia. In view of the potentially broad nature of the restrictive measures (outlined in Notice 22/136), and the potential application of those measures to those subject to the jurisdiction of the EU, the LME considers that as a precautionary matter it is appropriate to suspend with immediate effect all deliveries of Russian lead into all LME warehouses. There are currently no warrants in the LME’s electronic warrant transfer system related to lead of Russian origin or lead which has been exported from Russia; however, there is one listed Russian lead brand: FRGT PB985R produced by Fregat LLC. Further information can be found in Notice 22/136.

As a result of the UK government’s decision to place 35% additional duties on imports of Russian copper, lead, primary aluminium and aluminium alloy, we have announced an immediate suspension (see notice 22/097)  on placing Russian brands on warrant in LME-listed UK warehouses unless exported from Russia prior to 25 March 2022.

While we do not currently have any Russian metal on warrant in LME-listed UK warehouses, the additional duties would mean that any Russian metal delivered into LME-listed UK warehouses could not then be removed from warrant and imported into the UK or shipped elsewhere without significant additional cost, which could introduce significant risk of price dislocation and disorderly market conditions.

Counterparties

Starting 22 February 2022, the US, EU and UK have announced widespread sanctions against Russian entities and individuals. Neither the LME nor LME Clear have any Russian entities as members. The LME understands that a small number of members may have open positions, directly or indirectly, with Russian individuals or entities which have become subject to sanctions. Where this is the case, the member must ensure that it takes immediate action to achieve sanctions compliance, including ensuring that no payments are made to any sanctioned person. We would make the following points in relation to this:

  • It is essential that members undertake their own checks against relevant sanctions lists;
  • The US sanctions include certain general licences authorising wind-down activities in derivative contracts. The UK has also issued a general licence authorising the wind down of any transactions involving sanctioned individuals and entities. The UK sanctions require that funds or economic resources owned, held or controlled (directly or indirectly) by a sanctioned person or entity are frozen and there is also a prohibition on making funds or economic resources available directly or indirectly to or for the benefit of a designated person or entity. Accordingly, if a member is holding a position with or on behalf of a designated person or entity, any payments must be frozen, unless the member obtains a specific licence. The member will need to consider what other action needs to be taken in respect of the position, in accordance with the relevant terms of business;
  • Members are reminded of their contractual obligations under the LME and LME Clear Rules to comply with all relevant sanctions requirements and to ensure that any business conducted by or through them does not cause the LME or LME Clear to be in breach of any relevant sanctions requirements;
  • Members who have positions with or for the benefit of any sanctioned entity should contact the LME without delay to confirm the positions they hold and confirm the action they are taking. Currently, we anticipate taking the following action:
    • LME Clear removing the “auto-repay” function for the relevant account within LMEmercury so that the member makes manual withdrawals from the account. This should assist with sanctions compliance by ensuring no relevant payments are made automatically: the member can ensure any payments due relating to a position with a sanctioned entity are blocked;
    • Re-confirming to the LME and LME Clear that the member will comply with all relevant sanctions requirements and will ensure that any business conducted by or through them does not cause the LME or LME Clear to be in breach of any relevant sanctions requirements (all relevant members will be required to provide a standard form of undertaking wording);

The EU has recently introduced sanctions in relation to Belarus, however the LME and LME Clear do not have any Belarussian entities as members. The LME also understands that its members do not have any open positions, directly or indirectly, with Belarussian individuals or entities which have become subject to sanctions.

We do not believe that the exclusion of some Russian and Belarussian entities from Swift will have any direct impact on the LME’s market, and the existing stock of metal on warrant will be unaffected.

This page will be updated from time to time and any questions should be directed to RM@lme.com

Note – this web page is intended for information only, does not constitute legal advice and should not be relied upon by any person. Any party that may be affected by the sanctions should obtain their own legal advice.

 

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Resources

22 049 Russian Sanctions - Further Updates (PDF)

22 048 Russian Sanctions - Updates (PDF)