National Security

Treasury may review Russian investment in a Kentucky mill

The Trump administration appeared to acknowledge in a letter to Senate Democrats Tuesday that it has the authority to review a Russian oligarch’s investment in a Kentucky aluminum mill.

It would not say whether or not the investment could be reviewed, in part because Treasury does not discuss the criteria for making such a determination. Treasury maintains that such investigations are kept confidential to protect sensitive and classified matters.

A Treasury Department senior adviser in the Office of Legislative Affairs acknowledged concern raised by congressional Democrats over an investment in the aluminum mill by the Russian firm, Rusal. The Treasury official sent a letter to Sen. Ron Wyden, D-Oregon, the top Democrat on Senate Finance Committee, who shared it with McClatchy.

Rusal, which has pledged a $200 million investment in a Braidy Industries proposed $1.68 billion aluminum mill near Ashland, was recently taken off a Treasury sanctions list, despite assertions that it and a large shareholder, Oleg Deripaska, are closely tied to Russian leader Vladimir Putin.

A spokeswoman for Braidy said the company would review the letter with legal counsel to determine if it was appropriate to comment.

Wyden and seven prominent congressional Democrats wrote to Treasury on May 16, calling on the agency to review the investment using the Committee on Foreign Investment in the United States, which reviews certain transactions involving foreign investment in this country..

Treasury adviser J. Brady Howell stopped short of endorsing a review in the letter, noting that the agency does not comment on whether such a review has occurred or will occur.

The letter noted that the Committee on Foreign Investment is administering a pilot program in advance of formally expanding the scope of transactions subject to national security review. Widen had noted in his letter that the list of pilot project industries included some aluminum production.

“The pilot program expands the scope of transactions subject to review by CFIUS to include non-controlling investments made by any foreign person in U.S. businesses involved in critical technologies related to specific industries,” Howell’s letter said, adding that the committee provides Congress with classified briefings if investigations find areas of concern.

Wyden said he respected the confidentiality of the review process. He said he was “encouraged that the Treasury Department appears to be taking potential harm to national security from Rusal’s proposed investment seriously. Congress strengthened CFIUS precisely to review these types of transactions.”

The plant has been touted by Kentucky officials as a potential lifeline for Eastern Kentucky’s faltering economy.

Kentucky Gov. Matt Bevin, an avid supporter of Braidy Industries, in April predicted that the mill would help spur growth in counties far from the plant. Bevin in 2017 helped coordinate a $15 million direct investment in Braidy, using state tax dollars, making every Kentuckian a partial owner of the company.

The company also benefited from a $4 million Abandoned Mine Lands federal grant that will build support piers and columns at Braidy’s industrial site.

Democrats last month raised the national security concerns in a letter to Treasury Secretary Steve Mnuchin, writing that the proposed investment by Rusal’s parent company, En+ — “a company that is majority-owned by a U.S.-sanctioned Russian national and Russian state bank — in an American aluminum mill, raises serious questions of national security.” They cited “potential risk to the integrity of our defense supply chain,” noting that the company has said it would supply the Department of Defense.

Rusal’s investment in Kentucky came months after Senate Majority Leader Mitch McConnell, R-Kentucky, helped defeat a House-approved measure to keep the sanctions on the Russian entities.

McConnell told reporters last month that his action was “completely unrelated to anything that might happen in my home state.” He said that a number of senators backed the measure to lift the sanctions, as proposed by the administration.

“The administration took the position and I talked to the Secretary of the Treasury about it, that the conditions that they thought needed to be met were met,” McConnell said.

Treasury sanctioned Deripaska, a former business partner of onetime and now convicted Trump campaign chief Paul Manafort, in April 2018. The sanctions targeted so-called oligarchs believed close to Putin and were designed to punish him for subverting Western democracies.

Treasury reversed itself unexpectedly in December, lifting the sanctions because it said Deripaska had significantly reduced his stake in Rusal’s parent company. The decision was puzzling because the other major shareholder in En+ is VTB Bank, a Russian bank still under U.S. sanctions since Russia’s invasion and annexation of Crimea in 2014. Both had been sanctioned due to their ties to the Kremlin, leading to questions about Treasury’s decisions.

Lesley Clark works out of the McClatchy Washington bureau, covering all things Kentucky for McClatchy’s Lexington Herald-Leader. A former reporter for McClatchy’s Miami Herald, she also spent several years covering the White House.
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