NLMK is afraid of sanctions against Russia

NLMK was the first of the Russian companies to include in its accounting the risk of anti-Russian sanctions. The company receives 14% of its proceeds from its division in the USA – 1,6 billion USD. The other three largest Russian metallurgical companies also own assets in the United States.

Political tension in Ukraine and potential sanctions against Russian authorities may seriously impair the NLMK’s operations, says the company information concerning the financial results of 2013. Vladimir Lisin’s company has a division – NLMK USA, which includes three subsidiaries that produce flat section: NLMK Indiana, NLMK Pennsylvania and Sharon Coating. Their aggregate share of the American market is close to 2%.

Alexander Bolomatov, Partner of YUST, says there are three negative scenarios of sanctions for the business that owns assets abroad – nationalization, forced sale and rupture of production chains, when the company is unable to supply its industry with raw materials or transport products from it. He points out that this may be fought in international arbitration, when parties appoint independent arbitrators. However, according to him, this is only possible if the countries have an agreement on protection of investments. Russia has no such agreement with the USA.