Rusal and its parent company En+ were hit with U.S. sanctions in April when Washington blacklisted billionaire Deripaska along with several other influential Russians because of their ties to Russian President Vladimir Putin.
After months of negotiations, Deripaska agreed in late 2018 to reduce his stake in En+ to 44.95 percent from 70 percent in a deal with the U.S. Treasury Department that allowed the punitive measures against Rusal and En+ to be lifted.
While the announcement was a relief to major companies that depend on aluminum, U.S. congressional Democrats demanded further legislation to ensure that Deripaska abides by the deal "in letter and in spirit".
They believe U.S. President Donald Trump let Deripaska off the hook following intense lobbying by some European companies and governments worried about the impact of high aluminum prices and the fate of workers at Rusal's operations in Europe.
While the voting rights in En+ under Deripaska's control are now capped at 35 percent, votes controlled by potential allies could boost that percentage above 50 and allow the Russian tycoon to influence strategic decisions.
Under the new structure, Deripaska's long-term partner Glencore, a Swiss-based commodities trading company, gets 10.55 percent of the votes while Kremlin-controlled bank VTB holds onto 7.35 percent, according to the voting structure published by En+.
As part of the deal, four U.S.-nominated independent trustees now control the voting rights for another 37.7 percent of En+ shares held by Deripaska, former family members, his charitable foundation, VTB and some other shareholders.
The remaining votes in En+, which will have a 56.9 percent stake in Rusal once the ownership restructuring is complete, are controlled by institutional and retail investors.
GRAPHIC - En+ shareholder structure :
The deal contains multiple measures, including the threat of sanctions, to prevent a scenario in which Deripaska could exercise control over the companies at board level by acting in concert with other shareholders.
But many of those measures operate on the basis of self-reporting: the companies must inform the U.S. Treasury's Office of Foreign Assets Control (OFAC) of any attempt by Deripaska and other shareholders to form a coalition.
Elizabeth Rosenberg, a former U.S. Treasury official at the Center for a New American Security think-tank, said OFAC, which administers U.S. sanctions regimes against Iran, Venezuela and elsewhere, may not have the resources to track Deripaska's role.
"I am worried that, in fact, the task may be beyond them and that in fact they are stretched extremely thin, with an array of other priorities ... and that they won't have the bandwidth to follow up adequately," Rosenberg said.
A U.S. Treasury Department spokesman who spoke on condition of anonymity said the deal was robust enough to sever Deripaska's control over Rusal, En+ and power company ESE - as well as block any attempts to circumvent the rules.
"Those who transact business for or on his behalf run the risk of being sanctioned themselves, including VTB Bank or Glencore should they choose to work on Deripaska's behalf," said the spokesman.
Deripaska's representative, VTB and Glencore declined to comment.
While the threat of new sanctions is potentially serious for international companies, one European diplomat, who declined to be named, said the risk of being hit by OFAC penalties may have little impact on Russians with limited ties to the West.
"If you are a Russian, living in Russia ... why would you care?" the diplomat
Deripaska, who created his empire after coming out on top in the brutal Russian aluminum wars of the 1990s, is known in the Russian business world as a fighter who never gives up - regardless of the domestic or global balance of power.
He has spent the past two decades carefully building his chain of assets, hand-picking management teams going back to when he took control of his first Siberian smelters. And until he agreed to cut his stake in En+ under the U.S. deal, he had never sold a major asset in his life.
The U.S. Treasury spokesman said Deripaska had contractually committed not to try to exercise control over En+ or companies it owns or controls, including their boards or management.
The deal also requires En+ and its companies to maintain records of any contacts between Deripaska and the boards, management, employees, or agents of En+, the spokesman said, adding that managers who engage in any contacts that are inappropriate under the agreement must be removed.
Asked what mechanism OFAC would use to police compliance and how much capacity it had for independent checks, the spokesman said information provided by En+ and its companies would supplement and be confirmed by a team of U.S. investigators.
"This team will review all submissions to OFAC from En+, Rusal and ESE, in addition to using other resources to monitor the actions of Deripaska, the companies, and their board members, to ensure that Deripaska is not able to exercise unofficial control over En+, Rusal, or ESE," the spokesman said.
He said any attempt by a coalition of shareholders to change the composition of a company's board would be uncovered by OFAC and result in the reimposition of sanctions on En+, its subsidiaries and any other parties involved.
En+ chairman Greg Barker, a former British government minister, said the board would go beyond the requirements set out by OFAC by establishing a compliance committee and would retain independent counsel to advise on governance.
QUESTION OF CONTROL?
Some U.S. Democrats remain concerned, however, that despite the various checks and balances, Deripaska may still be able to wield influence.
Senator Mark Warner, the top Democrat on the Senate Intelligence Committee and among the most vocal critics of the deal, said there were potential conflicts of interest in the new governance structure.
One of the trustees appointed by OFAC to exercise voting rights in En+ to ensure Deripaska cannot influence the board is a law firm based in Jersey that has worked for him and his companies for years.
"My concern all along was that Deripaska would, directly or indirectly, still retain control over his companies and benefit personally from this deal," Warner said in response to a Reuters question about the law firm's role as trustee.
Two former U.S. sanctions officials said the deal did sever Deripaska's control. But whether he exercises de facto influence is beyond OFAC's scope, said Michael Dobson, a former U.S. Treasury official now at the Morrison & Foerster law firm.
Analysts said Deripaska may continue to influence decisions simply because of his aluminum market expertise.
"Deripaska has a good understanding of the aluminum market, taking into account the number of years he has been dealing with it," said Oleg Petropavlovskiy, senior analyst at BCS Global Markets. "En+'s independent directors will probably have their ear to him."
As for the managers recruited by Deripaska over the years to run his empire, a source close to En+ said there were no plans to remove anyone unaffected by the U.S.-mandated restructuring.
The source said: "(En+ is) not pretending that Deripaska is completely removed from the business, that was never the issue. The question is the control of the business, defined by control at shareholders meetings and of the board."
(Additional reporting by Polina Ivanova in Moscow and Clara Denina in London; editing by David Clarke)
By Polina Devitt and Arshad Mohammed