EghtesadOnline: The London Metal Exchange is maintaining the status quo on its treatment of Iranian aluminum brand IRALCO after the United States said this week it will reintroduce nuclear-related sanctions on Iran, the bourse said in a notice to members on May 10.
“The LME does not propose any action in respect of IRALCO brand metal at this time. The LME will continue to monitor the situation and may issue further communications if the situation changes,” LME Chief Executive Officer Matthew Chamberlain said.
The suspension of deliveries of primary aluminum brand IRALCO, produced by Iran Aluminum Company, which was announced in December 2011 and became effective in January 2012, remains in effect, Financial Tribune reported.
“Despite the suspension of deliveries in, a small amount of metal remains on warrant,” the LME said.
US President Donald Trump announced on May 8 that he will withdraw the United States from a nuclear agreement with Iran and reimpose economic sanctions that were waived when the deal was signed in 2015.
LME said the announcement did not change its understanding of the regulations introduced in 1995 by the US Treasury Department’s Office of Foreign Assets Control and subsequently renamed the Iranian Transactions and Sanctions Regulations.
The ITSR prohibit the involvement of US persons, US owned or controlled persons or US territory in unlicensed dealings, globally, in metals of Iranian origin, including IRALCO metal.
However, OFAC can give specific licenses to enable trading by a US person in Iranian-origin aluminum if those trades do not involve the government of Iran or any other Iranian counterparties and at the time of the trades the applicant could not have known that the metal was of Iranian origin.
This exemption applies to LME warrants because only a small proportion of the LME aluminum stocks is of Iranian origin and warrants are randomly allocated when futures positions become prompt. Indeed, a number of LME members have received a license from OFAC in respect of a US person handling Iralco warrants, LME said.
IRALCO has been an LME-listed brand since 1979.
On April 10, LME introduced a “temporary conditional suspension” on placing Russian aluminum Rusal metal on-warrant, effective April 17, following the announcement that the US had sanctioned and frozen the assets of Oleg Deripaska and UC Rusal.
A large proportion of LME aluminum stocks, about 20% according to traders, is of Rusal brand.