By Gabrielle fitzpatrick
The new CEO of Braidy Industries, Don Foster, reaffirms the company’s plans to build an aluminum plant with over $200 million in Russian investment in Senator McConnell’s home state.
Braidy Industries’ new CEO, Don Foster, believes that the company’s $1.7 billion project for an aluminum mill in Ashland, KY, may get the momentum it needs with a growing demand for rolled aluminum products in the wake of COVID- 19. Braidy Industries makes aluminum alloy sheets, used to manufacture cars, cans, trains, planes, and anything in between. Despite Foster’s optimism about the plant’s future, lawmakers continue to voice concerns over the project’s $200 million investment from a Kremlin-linked aluminum company, Rusal.
Rusal was at one point the largest aluminum company in the world until it was surpassed by the Chinese company Hongqiao in 2015, then bumped down to third by another Chinese company, Chalco, three years later. The company was founded in 2007 by Oleg Deripaska, a Russian oligarch with close ties to Russian President Vladimir Putin.
Deripaska is a former client of lobbyist Paul Manafort, who served as chairman of the Trump campaign and is currently serving a 7.5-year sentence for crimes including tax fraud and foreign lobbying. Mueller’s investigation also uncovered that Manafort struck an agreement with Deripaska, dictating that he would use his role within the Trump administration to pay off his outstanding debts with the aluminum tycoon.
National security experts have been quick to point out that the disproportionate presence of Russian oligarchs in U.S. industries like aluminum and steel–which are also instrumental to national defense–is not arbitrary. Tech has emerged as another target of Russian investment in the U.S. In 2015, a private equity firm by the name of Altpoint Capital acquired another company that had the contract to store Maryland’s statewide voter data. Three years later, the FBI informed Maryland’s Governor Larry Hogan that Altpoint Capital’s owner is Russian billionaire Vladimir Potanin, another long-time friend of Putin.
By insinuating themselves into our economy, many fear that Russian companies (and thereby, Russia) will become ‘too big to sanction’, and wield too strong an influence over American politics. While Facebook, Twitter, and other social platforms have proven themselves meaningful tools for election meddling–they account for only a sliver of the broad range of political and economic tools the Kremlin has employed to expand its influence in the U.S.
In early April of 2018, the U.S. Treasury announced its designation of “seven Russian oligarchs and 12 companies they own or control, 17 senior Russian government officials, and a state-owned Russian weapons trading company and its subsidiary, a Russian bank,” to the U.S. sanctions list. Rusal and then CEO Oleg Deripaska were among those entities after former Special Counsel Robert Mueller’s investigation of Russian meddling in the 2016 U.S. Presidential election revealed that Deripaska was laundering money on Putin’s behalf.
Deripaska created his first business, VTK, in 1993 when he was twenty-five. VTK was a company that represented smaller companies which bought and sold raw metals. Within a decade of the Soviet Union’s collapse, he had amassed a fortune through export arbitrage, buying cheap Russian metals and selling them abroad for a significant markup. When he spoke about his beginnings in an interview with Metal Bulletin in 2013, he said this:
“I started my business at an unusual moment in history. The country in which I was born and raised had disappeared, although the new country was not fully formed. The first one gave me an excellent education; the second one gave me the chance of success.”
It is safe to say that he made good on that chance of success: born the son of farmers, by 2008, Deripaska was Russia’s richest man until he lost a significant portion of his wealth in the global financial crisis that same year.
Deripaska’s rise through the ranks of Russian politics began in the early nineties, after the Soviet Union’s disintegration. In a period sometimes referred to as the “aluminum wars”, many Russian entrepreneurs clamored to seize control of former Soviet assets, including the many Siberian smelters that had previously been state-controlled. In this period, Deripaska had garnered notoriety for his ruthlessness: he came out of the 1990s as the victor of these so-called aluminum wars, characterized by their violence and enmeshment with organized crime. Not far behind trailed a slew of accusations against the up and coming industry magnate–ranging from theft, bribery, intimidation, and murder.
Shortly after the U.S. Treasury imposed sanctions on Rusal, a TIME magazine report found that Deripaska’s company had already assembled a team of lobbyists to wage a full-scale campaign on Washington in order to get the sanctions lifted. In January of 2019, Rusal’s lobbying campaign paid off, thanks in large part to Republican House Speaker Mitch McConnell, whose home state of Kentucky was to be the site of Braidy Industries’ proposed aluminum-rolling mill. TIME also reported that one of Rusal’s major shareholders, Len Blavatnik, made contributions to a GOP campaign fund linked to McConnell in excess of $1 million. By May of 2019, two of McConnell’s staffers were lobbying congress on behalf of Braidy Industries.
Senator McConnell maintains that his support for the lifting of U.S. sanctions on Rusal had nothing to do with the company’s plans to invest in Braidy Industries’ Ashland plant and that he had no knowledge of Rusal’s intention to invest in Braidy Industries before voting to lift sanctions on the Russian company. Conversely, his opponents have suggested that the Republican Speaker has put short-term political gains ahead of national security. It is not hard to imagine why McConnell would be so keen on Braidy’s Ashland Plant opening. Days leading up to the project’s unveiling in April of 2017, a poll by the Economist and YouGov put McConnell’s approval rating at just 24%.
McConnell’s seat is up for re-election this coming November, and his Democratic opponent, retired US Marine Corps Lieutenant Colonel Amy McGrath, is running on an anti-corruption ticket. McGrath has out-fundraised McConnell’s by nearly $10 million. However, despite the money flooding into McGrath’s campaign (roughly half of which is from out-of-state donors), McConnell remains in the lead by a comfortable margin.
Less than a year after the Trump administration lifted sanctions on Rusal and its parent company EN+, Braidy Industries’ former CEO, Craig Bouchard, announced that Rusal had bought a 40% stake in the plant for $200 million. In a telephone interview with the Ohio Valley Resource, Bouchard was taken to task about the less-than-outstanding record of Rusal’s CEO. This was his response:
“Dereg Olipaska [sic] is someone I’ve never met, never talked with, don’t know at all.”
The lifting of U.S. sanctions and green-lighting of Rusal’s investment in Braidy Industries came with concessions. Deripaska significantly reduced his stake in Rusal, although many of his shares went to companies with which he maintains close ties: some went to Glencore, a Swiss commodities firm whose CEO used to sit on Rusal’s board; VTB, also known as Putin’s piggy bank, received another portion; and lastly, roughly $78 million worth of Deripaska’s shares went to his children. Under these circumstances, many saw Deripaska’s retreat as performative– expressing skepticism in the notion that he no longer wields influence over Rusal.
Braidy’s fall from grace
In 2018, the U.S. Census Bureau ranked the state fifth in the United States in persons living below the poverty line, at roughly seventeen percent. Thus, Braidy Industries’ proposal to build a plant in Ashland, KY, was initially received with much enthusiasm from McConnell’s constituency. As years passed, however, their hopes were extinguished with uncertainty, and to some, even feelings of betrayal. Kentucky has been blighted by economic depression with the closure of several manufacturing and processing plants since the early 1990s. After the creation of NATO, more companies opted to offshore their operations–a crisis that McConnell sought to remedy by enacting Right To Work (RTW) legislation. Unfortunately, research from the Kentucky Center for Economic Policy (KCEP) suggests that the RTW laws have only exacerbated the diminution of the quality and security of jobs in the state.
Braidy Industries’ former CEO, Craig Bouchard, has some culpability in the public’s loss of faith. His infractions, which ranged from understating the project’s cost by about $600 million to investors; fabricating documents which exaggerated investors’ interest; arranging a groundbreaking ceremony in 2018, which turned out to be fake; and finally, spending $100 thousand to build a fence around the site in order to conceal the absence of any construction.
The state’s former Governor Matt Bevin can take some of the blame, too. Thanks to a deal coordinated by Bevin, the project’s earliest investors were the working people of Kentucky. In a unanimous decision, Kentucky lawmakers voted to allocate $15 million of taxpayer money to the project in 2017 through the state’s Commonwealth Seed Capital LLC, which it set up to inject capital into local high-risk business ventures.
All dressed up with nowhere to go?
It remains uncertain whether the aluminum mill (still set to be operational by 2021) will secure the $500 million in investment needed to complete construction, despite the significant makeover at Braidy, Rusal, and at Kentucky’s state-level.
Craig Bouchard was ousted as CEO earlier this year and has severed all ties with Braidy Industries (named after his daughter). Shortly thereafter, the company paid Bouchard a $6 million settlement for a termination that came, in his claim, “without notice or explanation.” Bevin, instead, lost his seat to current democratic Governor Andy Beshear (a loss he only conceded after a recanvass of votes).
Rusal has also undergone administrative changes, appointing British MP and Rusal board member Lord Gregory Barker as its new CEO.
Barker’s relationship with Moscow goes back to the late nineties when he began working as head of communications for the Anglo-Siberian Oil Company, and later for Sibneft Oil Group. Barker’s lobbying efforts were instrumental to the removal of Rusal from the U.S. sanctions list. In 2019, Bloomberg reported that Barker received a $4 million bonus as a result of his lobbying campaign’s success.
Two years ago, Mark Galeotti of The Guardian published a damning account of the Russian state’s fertile pasture for organized crime; he discusses their inextricable link:
“A key characteristic of organized crime in today’s Russia is the depth of its interconnectedness with the legitimate economy. Unpicking dirty from clean money in Russia is a hopeless task…”
The ethical quandaries that come with accepting large sums of Russian cash are by no means new. As the longest-serving U.S. Senator, Mitch McConnell understands the vast chasm that divides American and Russian interests–and yet, he has opened up Kentucky’s back door to Russian meddling.