Vladimir Potanin, co-owner of Norilsk Nickel, attends an agreement signing ceremony with the Krasnoyarsk region's government, in Moscow
Vladimir Potanin, co-owner of Norilsk Nickel, attends an agreement signing ceremony with the Krasnoyarsk region's government, in Moscow, Russia December 12, 2017.

Russian businessman Vladimir Potanin is likely to be the biggest barrier to a potential $60 billion merger between Russia's largest metals producers Nornickel and Rusal, two sources with direct knowledge of the matter said.

Potanin has said a tie-up could strengthen the companies' defences against any sanctions the West might impose on them, and in an interview with Russian media indicated he would not step down as CEO.

The two sources, asking not to be named because of the sensitivity of the issue, said any deal was unlikely as long as Potanin remained Nornickel's boss and major shareholder.

"Until he bites the bullet, steps down as CEO and sells down his stake to become a minority shareholder, no deal is possible," one of the sources said.

"Even if the companies are not under international sanctions, there will be a de facto global international finance ban on them as a result of the UK sanctions on Potanin".

Britain last week placed sanctions on Potanin.

Neither company has been directly targeted by Western sanctions imposed on Russia over the war in Ukraine, but Rusal was subject to U.S. sanctions between April 2018 and early 2019 until its founder Oleg Deripaska agreed to relinquish control.

The Interros Group, which manages Potanin's assets, and Rusal's majority shareholder EN+ Group did not comment. Rusal did not respond to a request for comment.

Rusal is the world's largest aluminium producer outside China, while Nornickel's palladium and nickel account for 40% and 7% of global mined supplies respectively.

Adding weight to Potanin's comments in this week's interview that a merger could offer shelter from sanctions, analysts say the combined clout of the two companies, most of whose customers are in Europe and the Americas, would leave the West wary of sending prices soaring for metals that are critical to its own industries.

Already energy prices have hit record levels in Europe following the West's efforts to wean itself off Russian gas.

The London Metal Exchange is looking into what UK sanctions on Potanin mean for it, its participants and for Nornickel's brands traded on the bourse.


The two producers are intertwined because Potanin and Rusal own 36% and 26% respectively of Nornickel.

Relationships between the two sides, however, have long been marked by disputes and it is unclear whether a new agreement can be reached on dividend payouts once the existing deal expires on Jan. 1, 2023.

"A merger could discourage Nornickel from paying dividends in the coming years," said Kirill Komarov, an analyst at Tinkoff Investments.

Potanin, Rusal and other Nornickel shareholders in 2012 signed the existing 10-year agreement on the size of the payouts to end a previous long-standing dispute.

A third source with direct knowledge said they were unaware talks were taking place and that Potanin's interview was posturing ahead of negotiations to replace the dividend payment agreement once it expires.