Russian sanctions

President Biden issued an Executive Order on 22 February 2022, which, among other things, prohibited investment into certain Ukrainian regions (non-Ukrainian government-controlled Donetsk and Luhansk) and also the importation of goods from those regions. The EU and UK subsequently implemented similar sanctions in respect of these regions. There is one aluminium alloy brand URV produced by “TPK Urksplav” Ltd in one of these regions; however, the brand was suspended on 1 July 2019 and there is no stock on warrant. For completeness, the LME notes 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.

In response to the announcement by the US government on 24 February 2023 which imposed additional tariffs on imports of certain Russian metals, the LME on 28 February 2023 implemented a suspension on the placing onto warrant of Russian-branded primary aluminium, NASAAC, copper, lead and nickel in US LME-listed warehouses, in order to minimise the risk of price dislocation. When the LME implemented the aforementioned suspension, there was no Russian-branded primary aluminium, copper, lead or nickel on warrant in LME-listed US warehouses, although at the time there was 400 tonnes of NASAAC on warrant. Therefore, in order to further mitigate against the risk of market disorderliness, the LME also prevented Russian-branded NASAAC from being used in respect of deliveries against NASAAC. For further information on the above measures, please see LME notice 23/034.

Since the LME published notice 23/034, further guidance on the additional tariffs in respect of certain Russian metals was issued by the US government and the LME understands that Russian-branded primary aluminium and aluminium alloy (in the form of NASAAC) each have a cumulative tariff rate of 270%. The requirements pursuant to notice 23/034 remains in effect, however it should be noted that the tariff rates referred to in the notice for primary aluminium and NASAAC branded metal do not reflect the cumulative tariff rates.

The LME is aware that the US Treasury’s Office of Foreign Assets Control (“OFAC”) issued on 24 February 2023 a “Determination Pursuant to Section 1(a)(i) of Executive Order 14024" (the "Determination"), which states that the prohibitions in the Executive Order 14024 would apply to Russia’s metals and mining sectors and authorises OFAC to impose asset-freezing sanctions on any person determined to operate or have operated in the metals and mining sector of the Russian economy. OFAC's guidance in FAQ 1115 indicates that the term “metals and mining” sector would be broadly defined to include not only the extraction of minerals and geological materials in Russia but also "any act of procuring, processing, manufacturing, or refining such geological materials, or transporting them to, from, or within the Russian Federation." As confirmed by OFAC's guidance in FAQ 1116, OFAC's designation of a sector (such as metals and mining) of Russian economy under EO 14024 does not automatically impose U.S. sanctions on all companies operating in that sector. The LME notes that only one of its producers in Russia has been designated by OFAC as a Specially Designated National and Blocked Person ("SDN") pursuant to this authority (please see the section on UMMC below). The LME understands that it is not impacted itself by the Determination as the LME does not operate in the designated sector of Russia’s economy. The LME also understands that the Determination does not impact the trading of Russian-origin metal on the Exchange that does not involve SDNs such as UMMC. However, we strongly encourage Members and other market participants who obtain metals from Russian producers to seek legal advice in order to understand their own exposure to sanctions risks and to monitor future sanctions developments.

On 9 April 2022, EU Council Regulation No. 833/2014 came into force which prohibited purchasing, importing, or transferring (directly or indirectly) certain listed items including "unwrought lead" into the EU, if they originated in Russia or were exported from Russia. In view of the potentially broad nature of the restrictive measures and the potential application of those measures to those subject to the jurisdiction of the EU, the LME considered that as a precautionary matter it was appropriate to suspend all warranting of Russian lead in any LME-listed warehouses, effective from 4 May 2022 (pursuant to notice 22/136). As at 4 May 2022, there were no warrants in the LMEsword related to lead of Russian origin or lead which had been exported from Russia. However, it should be noted that there is one listed Russian lead brand: FRGT PB985R produced by Fregat LLC. Further information regarding the above measures can be found in notice 22/136.

The LME is aware that on 18 December 2023 the European Council adopted a twelfth package of sanctions which target the Russian economy. As part of these sanctions, the EU imposed restrictions on imports of various Russian goods, including copper wires and aluminium wires, however copper and aluminium in these forms cannot be traded on the LME. Therefore, the LME notes that the EU’s recent sanction measures have no impact on the LME.

The LME notes that in 2022 a number of nations, including the US, EU, UK and other G7 countries, revoked Russia’s most-favoured-nation (“MFN”) trade status. The LME closely monitored whether the revocation of Russia’s MFN status by certain States would have an impact on the LME, its members or LME-listed warehouses. Following the revocation of Russian’s MFN by the UK, the UK government in March 2022 announced the introduction of 35% additional duties on imports of Russian copper, lead, primary aluminium and aluminium alloy. As a result of this announcement, the LME introduced on 1 April 2022 a suspension on placing Russian brands on warrant in LME-listed UK warehouses unless exported from Russia prior to 25 March 2022 (see notice 22/097). Although the LME did not have any Russian metal on warrant in LME-listed UK warehouses when it imposed the suspension, the additional duties would have meant that any Russian metal delivered into LME-listed UK warehouses could not have then be removed from warrant and imported into the UK or shipped elsewhere without significant additional cost, which could have introduced a significant risk of price dislocation and disorderly market conditions.

Following the announcement by the UK government in July 2022 of a 35% additional duty on imports of Russian nickel, the LME announced on 16 August 2022 a suspension on placing Russian nickel brands on warrant in LME-listed UK warehouses unless exported from Russia prior to 20 July 2022 (see notice 22/200). This measure was an extension of the warranting restrictions which the LME had implemented in respect of Russian produced copper, lead and aluminium in LME-listed warehouses in the UK. As noted above, the LME undertook this action in order to minimise the risk of any price dislocation, market disruption or disorderly market conditions as a consequence of the increased tariff. The LME did not have any Russian nickel on warrant in UK LME-listed warehouses when the suspension was introduced.

On 14 December 2023 the UK Government introduced amendments to the Russia (Sanctions) (EU Exit) Regulations 2019 ("regulations") which restricted UK persons acquiring, importing, supplying and delivering Russian-origin metal, with the regulations coming into force on 15 December 2023. These sanctions reflect the UK Government’s policy to restrict UK persons from engaging with Russian metals.

On 12 April 2024, the UK and US Governments announced new sanctions in respect of Russian metal, which introduce restrictions on the acquisition of Russian metal produced on or after 13 April 2024. In response to this, the LME has issued a market notice imposing an immediate suspension on the warranting of Russian metal produced on or after 13 April 2024. Russian metal warrants issued on or after 13 April 2024 (for metal produced before 13 April 2024), are still subject to restrictions that prevent UK LME Members and Clients from cancelling or withdrawing the corresponding metal unless they are doing so for the account of a non-UK Client. However, all existing Russian warrants (as at the end of 12 April 2024) are now again eligible to be cancelled and withdrawn by UK persons.

Therefore, the effect of the amended UK sanctions package is to divide Russian warrants (irrespective of the production date of the Relevant Metal, which in all cases must be before 13 April 2024) into two types:

• “Type 1 Russian Warrants” – Russian warrants in existence at the end of 12 April 2024. For Type 1 Russian Warrants, the restrictions applying to UK persons under the original sanctions package in respect of cancellation and withdrawal of the metal underlying Russian warrants (although subject to record keeping and notification requirements) will cease to apply from 13 April 2024. As a further result, Type 1 Russian Warrants can be re-warranted at the same warehouse and the underlying metal can be moved between warehouses subject to the conditions below.

• “Type 2 Russian Warrants” – Russian warrants issued on or after 13 April 2024. Type 2 Russian Warrants will be subject to the same restrictions for UK persons as currently exist under the original sanctions package. UK Members and UK Clients will not be able to cancel or withdraw the metal underlying Type 2 Russian Warrants for their own account (or request or order the cancellation or withdrawal of) Russian warrants in order to take physical delivery of the metal for their own account, or change the location of the metal to which the warrant related. UK Members could cancel or withdraw the metal underlying Type 2 Russian Warrants for the account of a non-UK Client.

Further information including the effect of the amended sanctions package on market participants and related record-keeping requirements can be found in Notice 24/171.

Further to Notice 24/171, the LME issued additional details on 23 April 2024 (Notice 24/174) regarding some refinements to its approach, with the aim of ensuring fairness, reducing administrative burden and facilitating the circulation of globally usable metal without compromising the protection of its market from potential breaches of UK sanctions.

The LME notes that neither Notice 24/171 nor Notice 24/174 constitute legal advice and that individual and/or entities should seek independent legal advice and conduct their own assessment as to the applicability of the sanctions to their operations.

The LME notes that on 29 June 2022 the UK government announced sanctions against Vladimir Potanin – who is CEO of, and an indirect minority shareholder in, MMC Norilsk Nickel, the LME assessed the detail of the sanctions and their impact on the LME, its participants, and Norilsk brands. On the basis of the information available to the LME, the LME determined that Vladimir Potanin does not appear to control the day to day affairs of Norilsk for the purposes of the sanctions. The LME continues to monitor the situation and will act accordingly in the event that new information comes to light or further guidance on these sanctions is issued.

Following the sanctions announced by the UK government on 26 September 2022 in respect of Mr Makhmudov, the LME Special Committee, pursuant to its powers under Regulation 17 of Part 3 of the LME Rulebook, introduced from 5 October 2022, a temporary imposition of conditions on placing Ural Mining and Metallurgical Company (“UMMC”) and Joint Stock Company Chelyabinsk Zinc Plant (“Chelyabinsk”) branded metals on warrant. UMMC or Chelyabinsk branded metals can only be placed on warrant if the metal owner can demonstrate to the satisfaction of the LME that placing UMMC or Chelyabinsk branded metal on warrant will not constitute a breach of the sanctions. For further details please see notice 22/239. The LME also notes that the EU imposed sanctions against Andrey Kozitsyn, co-founder and CEO of UMMC, on 22 July 2022. The LME understood that the sanctions did not extend to UMMC itself as Mr Kozitsyn does not own or control UMMC for the purpose of the EU sanctions.

On 20 July 2023, the US government introduced sanctions in respect of UMMC prohibiting US persons from dealing with the assets and other economic interests of UMMC. As a result of UMMC having more than a 50% shareholding in Chelyabinsk, Chelyabinsk is also subject to US blocking measures. The LME notes that there is currently no UMMC or Chelyabinsk produced metal on warrant. Additionally, in light of the action already taken on 22 July 2022 (see above), the LME is not proposing to undertake any further action at this time in respect of UMMC and Chelyabinsk produced metal.

On 22 February 2024, the UK Government introduced additional sanctions which included imposing certain metals related sanctions. The LME notes that the majority of the metals related sanctions were not in relation to LME listed producers, apart from the sanctions on the owners of UMMC. However as noted above, the LME previously imposed a conditional suspension on the warranting of metal produced by UMMC, and metal produced by its subsidiary Chelyabinsk, as detailed in notice 22/239.