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Russian steelmaker Evraz looks to sell Canadian, U.S. assets amid sanctions

·3 min read
TURKEY-UKRAINE-RUSSIA-UN-DIPLOMACY-AGRICULTURE-CONFLICT-WAR
TURKEY-UKRAINE-RUSSIA-UN-DIPLOMACY-AGRICULTURE-CONFLICT-WAR

Embattled Russian steelmaker Evraz PLC says it is looking to sell its North American assets, including operations in Alberta and Saskatchewan, amid heightened scrutiny and sanctions resulting from Russia’s invasion of Ukraine.

The company, whose largest shareholder is sanctioned Russian billionaire Roman Abramovich, said Wednesday that it has launched a process to solicit proposals for the acquisition of its North American subsidiaries.

Abramovich, who owns a 28.6 per cent stake in Evraz, is among dozens of Russian elites who have faced sanctions from western governments since Russia’s invasion of Ukraine in February. Best known as the longtime owner of famous football club Chelsea FC, Abramovich was forced to sell the club and saw many of his other assets sold or frozen over his links to Russian President Vladimir Putin.

The U.K. government has also placed sanctions on the multinational company which is headquartered in London. Canada has not applied sanctions to the company.

It’s unclear how the sanctions may have indirectly impacted Evraz North America, which operates as a wholly owned subsidiary, with operations in Regina, Sask. and Calgary, Camrose and Red Deer, Alta., as well as in Oregon and Colorado. The company is one of the largest North American producers in the rail and large-diameter pipe markets and a key supplier to the Canadian oilpatch.

The giant steelmaker has provided around 58 per cent of the pipe to Trans Mountain Corp.’s pipeline expansion project through an agreement struck with original pipeline owner Kinder Morgan Inc. before sanctions were in place against Russia.

The company employs about 1,800 people in Canada.

A spokesperson for Global Affairs Canada said Thursday that the department was aware of Evraz’s intentions to sell and monitoring the situation closely.

“We are imposing severe costs on the Russian regime for their unjustified and unprovoked invasion of Ukraine,” James Emmanuel Wanki said in an email. “We will continue to suffocate the Russian regime, while protecting Canadian workers from the consequences of Putin’s war.”

A sale would “unlock the stand-alone value of the North American business,” the company said in a release.

Since it's pretty well dead capital, it might as well sell it

Bernard Wolf

The move seems clearly related to the sanctions that have prevented the multinational from operating normally, said Bernard Wolf, professor emeritus of economics and international business at York University’s Schulich School of Business.

“The firm is really in limbo and can’t do business properly. It just can’t function effectively,” Wolf said. “Since it’s pretty well dead capital, it might as well sell it.

“This is another disruption that has been caused by the conflict.”

Evraz acknowledged in a June letter to shareholders that it was struggling due to the sanctions, and was having problems with international and U.K. consulting firms refusing to work with the company.

“We regret to inform that in light of recent events, the company is facing serious challenges in its corporate governance and operating environment,” Evraz chief executive Aleksey Ivanov wrote in a letter to shareholders on June 8. “All independent directors resigned from the company’s board of directors on 10 March 2022, and our sanctioned status poses a significant hurdle to re-establish a board that is majority independent.

“Geopolitical situation, evolving economic pressure and immense sanctions continue to be outside of our control. What we can do is to adapt our business to the new reality,” Ivanov wrote.

The company did not respond to a request for comment before press time.

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