The London Metal Exchange will restrict new supplies of copper and zinc from UGMK and its subsidiary Chelyabinsk Zinc Plant. The restrictions are related to the sanctions imposed by the UK against billionaire Iskander Makhmudov, who was the ultimate beneficiary of UGMK until March

The London Metal Exchange (LME) will restrict new shipments of copper and zinc from the Ural Mining and Metallurgical Company (UGMK) and its Chelyabinsk Zinc Smelter. The LME said the restrictions are linked to sanctions imposed by Britain on Sept. 26 against Russian billionaire former UGMK president Iskander Makhmudov. 

The exchange said it was imposing the restrictive measures because the British government views Makhmudov as the owner or controlling shareholder of UGMK (it owns the Chelyabinsk Zinc Plant). UGMK said in March 2022 that Makhmudov was no longer the controlling beneficiary and had left the board of directors, but gave no further details.

Metal from UGMK or its Chelyabinsk zinc smelter may be shipped to LME warehouses as of October 6 only if the owner can prove to the exchange that it was sold before the sanctions against Makhmudov were imposed. UGMK copper, which is registered in the LME warehouse system, is not subject to sanctions, and the LME warehouses do not stock any zinc produced by the Chelyabinsk plant, according to a statement from the exchange. UGMK’s press office did not immediately respond to Bloomberg’s request for comment, sent after hours, the agency said. 

According to Bloomberg, the restrictions imposed by the LME are the most significant for Russian supplies to the global metals market. Metals including copper, zinc and aluminum have so far not been hit by U.S. or European sanctions, but there is growing debate in the industry over whether the LME should block new supplies of Russian raw materials on its own.

Some European buyers are trying to avoid shipments from Russia, and some in the industry have expressed concern that large volumes of unwanted metal could be dumped at the LME, leading to lower and distorted global benchmark prices. The LME, which has previously stipulated that it has no plans to go beyond sanctions, said a week ago that it is considering discussing blocking supplies of metals from Russia to its warehouse network. The decision may be taken on the basis of the results of such discussion. 

On September 26, Great Britain announced personal sanctions against several Russian billionaires, including Makhmudov, the owners of “European” God Nisanov and Zarakh Iliev and the president of the Arete group of companies Igor Makarov. For them a ban is imposed on entry to the UK, their assets in the country are to be frozen. The billionaires are also subject to transport sanctions: yachts, ships and aircraft, which the businessmen own, manage, control or charter, are forbidden to enter ports, fly in the airspace and land at British airports. 

The Ural Mining and Metallurgical Company is ranked 50th in Forbes’ 2021 list of the 200 largest private companies in Russia. UMMC is one of the largest producers of copper, zinc, and precious metals in the country. The structure includes more than 40 enterprises in Russia and abroad, including Kuzbassrazrezugol. UGMK consolidated 100% of Chelyabinsk Zinc Plant in 2015.

Makhmudov ranks 19th in Forbes’ 2021 ranking of Russia’s richest businessmen and 31st in the 2022 ranking. His fortune in the 2022 ranking is estimated at $3.6 billion.