At a time when a new source of misunderstanding is emerging between the Western world and the rest of the world concerning the crisis in the Middle East and, more specifically, the position taken on Israeli conduct in the Gaza Strip, the Russian issue resurfaces. The values of freedom and human rights advocated by Secretary Antony Blinken are confronted with the reality of the market economy.

Nearly two years after the invasion of Ukraine, a handful of companies, such as Citigroup and Trafigura Group, are increasingly willing to enter into new contracts for Russian metals. At a time when many struggle to make money in the metal trade, transactions involving Russian supplies are one of the few areas where solid profits can be made.

There are no general restrictions from Western governments on the trade of Russian metal, and the agreements do not involve companies subject to American or European sanctions. However, the status of Russian materials remains a sensitive subject.

In the world of metals, many Western buyers have withdrawn from the market. Today, uncertainty regarding the legal and moral status of the trade in Russian metals has given way to a new reality.
Major metal traders have taken varied positions. Glencore announced in March 2022 that it “would not engage in any new commercial activity related to Russian-origin raw materials,” although it still has a significant long-term contract to purchase aluminum from Rusal. The company has also continued to buy copper from Russia and supply alumina to Russia since the start of the war. “These transactions are part of contracts in force before the outbreak of the war in Ukraine and are in line with our policy regarding Russian business activities implemented at the end of March 2022,” said a spokesperson for the group. “Glencore has undertaken no new business activities with Russian companies since the start of the war.”

Trafigura, on the other hand, is actively seeking new contracts in the Russian metallurgical industry, according to several people close to the matter who requested not to be identified as the discussions are sensitive. It has entered into a forward agreement to purchase over 100,000 tonnes of copper from MMC Norilsk Nickel PJSC and has also bought significant quantities of nickel from the Russian company, making it one of the largest customers of the mining giant. The trader is also attempting to secure a long-term contract to purchase zinc ore produced by the vast Ozernoye mine in Siberia, which is expected to start production in the coming months and become one of the world’s largest zinc mines.

In the banking sector, subject to sanctions, some groups have clearly changed their positions. Very few banks are willing to finance the purchase of Russian metals directly from a Russian company due to concerns ranging from potential exposure to sanctions to logistical difficulties and issues of ethics and reputation. However, once Russian metal has been delivered to the LME (London Metal Exchange), some banks have been willing to buy Russian metals, arguing that there is a difference between financing a transaction involving a Russian entity and buying metal through the world’s primary exchange.

Citi has been one of the most active buyers of Russian aluminum at the LME in recent months. The bank had until recently avoided metal produced by Rusal, but things have changed. Other major banks in the metals markets that have adopted a similar stance include ICBC Standard Bank and Macquarie Group, both willing to finance Russian metal if it is delivered to the LME.

Nevertheless, some banks have taken a much more cautious approach. Banque de Montréal (BMO) refuses to finance Russian metals. If the bank’s traders are allocated warrants for Russian metals in the LME settlement system, they immediately sell them. It’s not just banks buying Russian metal at the LME: the hedge fund Squarepoint has purchased around 50,000 tonnes of aluminium, primarily Russian, to bet on the market.

So far, like Iranian oil passing through Malaysia, Western governments have turned a blind eye to these transactions that do not comply with international sanctions. However, in the current context, in both cases, it seems difficult for Westerners to continue to ignore what is clearly a violation of sanctions, according to many experts.