Benchmark aluminium on the LME was down 2.3% at $2,252 a tonne at 1037 GMT from an earlier $2,215.5.

Western countries have imposed sanctions on Russian banks and wealthy individuals connected to President Vladimir Putin since Russia's invasion of Ukraine in February, but so far there are no restrictions on buying Russian metal.

However, metal industry sources say there is concern that Rusal will be unable to sell its metal and will deliver it into the LME system, which would distort prices.

Stocks of aluminium in LME warehouses jumped 65,825 tonnes to 433,025 on Friday. Of that, 23,525 tonnes were delivered to Gwanyang in South Korea and 44,675 tonnes to Port Klang in Malaysia.

"Port Klang is normally Indian material, Korea could be Russian," an aluminium trader said. "The LME is a market of last resort, that's where metal nobody wants, normally goes."

Another trader said it was not possible at this stage to determine the origin of the aluminium that was delivered to LME warehouses and that you would need access to LMEsword, the exchange's electronic transfer system for warrants.

Rusal did not respond to requests for comment. The LME declined to comment.

Rusal is the world's largest aluminium producer outside China, accounting for 6% of global supplies estimated at around 70 million tonnes this year. Its metal is trading at a discount.

Earlier this month, the LME launched a discussion paper on the possibility of banning Russian aluminium, nickel and copper from being traded and stored in its system.

Aluminium prices spiked more than 7% last Thursday after Bloomberg reported the U.S. government was weighing restrictions on Russian aluminium imports.

Aluminium is used widely in the transport, construction and packaging industries.

(Reporting by Pratima Desai; editing by Ed Osmond)

By Pratima Desai