H as its domestic manufacturing industries and lessening ties to unfriendly economies. A2 Waymo is sending fully autonomous vehicles onto San Francisco's streets, its first attempt to put them into a major metropolitan area. B1 A second mistrial was declared in the Justice De- partment's effort to prose- cute alleged price fixing in the poultry industry. B3 CVS Health will pay $484 million to settle opi- oid-related claims by the state of Florida. B3 The CDC dropped its Covid-19 travel health notice for cruise ships, a move that leaves passengers to make their own risk assessments. B3 World-Wide Moscow dismissed a dip- lomatic overture by Ukraine in peace talks, while Rus- sian forces hit targets around Kyiv on Wednesday despite saying they would limit attacks there as they stepped up ground and air assaults in eastern por- tions of the country AL People sought shelter in a church in Mostyska, Ukraine, on Wednesday after an air raid siren sound U.S. Sanctions Oligarch, W Exempts His Companies Yellen said penalties would 'impose massive costs'; the impact is milder On March 3, the day the U.S. Treasury De- partment sanctioned Russian oligarch Al- isher Usmanov, a cargo ship arrived in Mo- bile, Ala., carrying 53,000 tons of pig iron destined for a Mississippi steel plant. It came from a subsidiary of the company that accounts for much of Mr. Usmanov's wealth, By Justin Scheck, Betsy McKay and Rob Barry shipping records show. Another subsidiary owns the shipping firm that delivered it. It was all legal. In imposing economic sanctions after Russia's invasion of Ukraine, U.S. officials created exceptions. Their worry was that oligarchs like Mr. Usmanov had interests so deeply woven into the global economy that Penalties Exempt Businesses Continued from Page One tions ensured that the damage for these targeted people, who the U.S. says have become some of the world's richest people partly by supporting Russian President Vladimir Pu- tin, has been milder than the Biden administration's rhetoric might suggest. U.S. officials confront a complicated calculus in penal- izing Russian billionaires. De- taining yachts and aircraft de- prives them of lavish comforts and produces flashy headlines. Freezing their businesses can cause turmoil in markets, harm investors in oligarchs' companies who are otherwise unconnected to sanctioned in- dividuals, and lead thousands of workers to lose jobs. I As a result, even though sanctions have helped hobble Russia's economy, the U.S. government's fears about dis- rupting global trade prompted it to water down or avoid im- posing financial penalties against key Russian entities and individuals, according to the current and former Trea- sury officials and internal Treasury and National Secu- rity Council emails reviewed by The Wall Street Journal. The official overseeing sanctions, Deputy Treasury Secretary Wally Adeyemo, traveled this week to London and met with investors who about expressed concerns sanctions, said a person famil- iar with the meetings. Without broad exemptions, the inves- tors said, they were likely to pull their money out of any company, associated with a sanctioned individual even if the U.S. didn't mandate it, ac- cording to the person. 'Usmanov mitigation' The Treasury held back on Mr. Usmanov out of concern that curtailing his business empire could have unplanned effects on global trade, said the current Treasury officials. In an email exchange on March 1 with the subject line "Usmanov mitigation," Trea- sury official Lisa Palluconi told colleagues about the plan. Public "messaging will be that we continue to look into his entities...or something like that," she wrote in an email viewed by the Journal. Ms. Palluconi didn't respond to a request for comment and the Treasury declined to make her available. A Treasury spokeswoman said: "Financial sanctions on Russian elites im- T ing NA ple A6 mi Ru A7 The Ukraine Crisis Refugee count tops 4 million....... Europe woos Qatar for natural gas..............A7 LNG exports drain U.S. supplies.......... U.S. split on curbing Russian cyber firm... A9 SO of ar curtailing their businesses could trigger broader economic pain and legal blowback, said current and former Treasury officials. Treasury Secretary Janet Yellen, in an- nouncing penalties against Russian oligarchs ho including Mr. Usmanov, said the measures would "impose massive costs on Putin's closest confidants and their family members and freeze their assets." At the same time, the Treasury's excep- Please turn to page A8 M or ato taile status for Ukraine with its se curity guaranteed by the U.S., comument on the proposal, and Please turn to page 49 of Man government as part of a broader effort to pressure Mr. Putin over Russia's behavior in Ukraine, Syria and elsewhere, created problems for the Trea- sury, said authorities on Russia and sanctions. They roiled global commodities markets, spiked the price of aluminum and angered U.S. allies. A plant in Russia operated by Metalloinvest, a USM Holding subsidiary, above. Alisher Usmanov, below in 2017, owns 49% of USM; the U.S. Treasury Department worried that curtailing his businesses might hurt global trade. around the world, according to a person familiar with the Treasury's deliberations and a Journal examination of corpo- rate records. His main publicly known asset is 000 USM Hold- ing Co., a Russian metals, min- ing and telecom conglomerate in which he holds a 49% stake. norm The sanctions don't apply to entities in which the targets of sanctions own less than 50%. Instead of blocking businesses in which Mr. Usmanov holds a majority stake-the when sanctioning oligarchs- the Treasury issued a special addendum exempting all busi- nesses of which he owns 50% or more, unless otherwise specified. There are currently no additional specifications. The U.S. can block assets tied to Mr. Usmanov person- ally. When the Treasury blocks assets, it prohibits U.S. per- sons and businesses from us- ing, transferring or otherwise transacting with them. The U.S. blocked a yacht it said Mr. Usmanov owns, as well as an Airbus A340-300 aircraft. But his business entities can continue to do business with companies subject to U.S. ju- risdiction. He can still receive funds in rubles from compa- nies based in Russia, which are outside the Treasury's reach. "I've never seen any such exemption before, especially against a Russian billionaire," said George Voloshin, head of the Paris office for Aperio In- telligence, a London-based risk consulting firm. Levchenko said, adding that Mr. Usmanov hasn't "acquired anything or benefited from any state or government, including Russian." Personal properties such as the yacht and plane are in irrevocable family trusts of which Mr. Usmanov isn't a beneficiary, he said. Mr. Usmanov was an early major investor in Facebook, now Meta Platforms Inc., which netted him a hefty profit shortly after the social-media company went public. He also invested in Twitter Inc., Uber Technologies Inc. and Alibaba Group Holding Ltd., among other tech firms, according to a section of USM's website that was recently deleted. He no longer owns shares in these companies, said Mr. Levchenko. Mr. Usmanov, who is retired from business activity, has also drawn income from dividends from companies in Russia, Mr. politicians and companies whom the U.S. government has sanctioned over the invasion of Ukraine and other Russian government actions. The U.S. has avoided sanc- tioning Roman Abramovich, in part over concerns about his steel holdings, said the person familiar with the Treasury's deliberation. Mr. Abramovich owns a 29% stake in U.K.-based steelmaker Evraz PLC, which operates steel facilities in Ore- gon and Colorado. BI SJ.com/Markets Subsidiaries of Mr. Deri- paska's Russian aluminum com- pany, United Co. Rusal, in the U.S., Ireland, Sweden and other countries "faced imminent clo- sure without limited sanctions mitigation," the Treasury said in a letter to then-Senate Ma- jority Leader Mitch McConnell later that year. FROM TOP: ANDREY RUDAKOV/BLOOMBERG NEWS; SERGEI KARPUKHIN/REUTERS Rusal's parent company, EN+ Group PLC, along with Rusal and another subsidiary, peti- tioned the Treasury to remove them from the sanctions list. After eight months of talks, the Treasury agreed on the condi- tion that the companies curb Mr. Deripaska's control, reduce his ownership stake and ap- point new independent direc- tors. Mr. Deripaska sued the U.S. government over his sanc- tion. A judge ruled against Mr. Deripaska, who then lost an appeal of that ruling this week. But the lawsuit and negotia- tions over Mr. Deripaska's sta- tus ate up time and resources certain sanctioned Russian banks on transactions related to oil and energy production, at least until June 24 of this year. And the U.S. allows business ac- tivities of Russian energy com- panies to continue, even though it banned Russian oil imports. The U.S. hasn't sanctioned oligarch Alexey Mordashov, who owns Severstal PAO in Russia, which exports steel to Europe mostly for construc- tion, whom the European Union hit with sanctions days after the Ukraine invasion be- gan. Mr. Mordashov said in a written statement: "I have ab- solutely nothing to do with the emergence of the current geo- political tension and I do not understand why the EU has imposed sanctions on me." Mr. Abramovich, who for years denied having a close re- lationship with Mr. Putin, has recast himself as a peace nego- tiator, the Journal reported this month. Though the Trea- sury prepared sanctions for Mr. Abramovich, the White House held them back after Ukraine's president, Volodymyr Zelensky, said Mr. Abramovich is a go- between for him and Mr. Putin, at OFAC, according to the for- mer Treasury officials and sanctions experts. Jp Larissa Belyaeva, press sec- retary for Mr. Deripaska, before this week's ruling said: "The sanctions against Mr. Deripaska are deeply misguided, not to mention supported by baseless and hollow accusations." She didn't immediately respond to requests for comment after the loss of the appeal. The effect on Severstal, in which Mr. Mordashov owns a 77% stake, has been profound. The company, which has 52,000 employees, immediately lost about a third of its sales after the EU imposed sanctions on Mr. Mordashov, and is at risk of a debt default, despite having funds available, spokeswoman Anastasia Mishanina said. Economic pain The situation is sensitive with the U.S. facing inflation and high gas prices. The Trea- OFAC managers are wary of another lawsuit that would di- vert staff time and attention from the business of coming up with new sanctions, said the current and former Treasury officials. In internal discus- sions, Treasury officials wor- lead could to a ried measures against Mr. Us- Deripaska repeat, said the per- son familiar with the Treasury's deliberations. sury wants to "maximize the amount of economic pain in- flicted on adversaries, while minimizing" consequences to the U.S. economy, said Chris- topher Swift, a national secu- rity lawyer at Foley & Lardner manov USM subsidiaries produce iron products they export world-wide to buyers including U.S. plants in Mississippi, Texas and North Carolina. Treasury officials worried that acting against Mr. Usmanov could drive up global metal prices, said the Treasury offi- cials. They were also concerned about harming a newspaper publisher Mr. Usmanov owns. More concerning, the de- partment didn't have a full ac- counting of the businesses he owns or invests in, the officials said. Its researchers identified some 800 entities in which he owns or owned shares, said the person familiar with the Treasury's deliberations. As Russia's attacks esca- mediately cut them off from The exceptions help remove their wealth, their ability to doubt about the legality of the Levchenko said. He doesn't the Journal reported. Mr. Abra- LLP who helped enforce sanc- lated in late February, some make or receive payments, their travel, and their ability to extract revenue from their companies." hold controlling stakes in these companies, he said. Mr. Usmanov is one of hun- dreds of Russian billionaires, 53,000-ton pig-iron shipment to the American steelmaker, Steel Dynamics Inc. A Steel Dynamics spokeswoman said the com- pany relies on foreign suppliers for pig iron, a raw material for making steel. It has bought slightly more than a million tons of it from Metalloinvest, a USM subsidiary, since 2019, she said, and is contractually obli- gated to take a certain volume of pig iron from it this year. The Treasury's measures al- low Mr. Usmanov's companies to keep paying U.S. bondhold- ers. "Many of the companies that Mr. Usmanov founded are indeed important elements of international supply chains," said a USM representative, Grigory Levchenko. Mr. Usmanov declined to be interviewed. He considers the sanctions against him to be "unfounded and unfair," Mr. The Treasury worked on a tight time frame and couldn't do a detailed analysis of how sanctioning Mr. Usmanov would affect global trade, said Treasury officials. "Oftentimes when we go after elites, we take time to understand their holdings and come up with a detailed mitigation plan," one person familiar with the pro- cess said. In this case, the per- son said, the Treasury decided "to go after the individual right away" and decide later whether to go after companies until it could better understand how they related to global trade. Mr. Usmanov, whose net worth Forbes currently esti- mates at $12.5 billion, is tied to hundreds of companies EGOR ALEYEV/TASS/ZUMA PRESS movich declined to comment. in tions at the Treasury before The Treasury has similarly entering private practice. There was disagreement allowed American firms to con- tinue doing some business with the Treasury about the ap- The U.S. In 2018 sanctioned Oleg Deripaska, right. It hasn't sanctioned Alexey Mordashov, left. proach to Mr. Usmanov's sanc- tions, said people familiar with the deliberations. His exemp- tion "basically turns his desig- nation into a PR thing, rather than a financial thing," said one of the people, who wanted the moves to be tougher. The Treasury became more cautious after the reaction to previous sanctions the OFAC officials argued that nearly all of Mr. Usmanov's businesses should be exempt from sanctions, said the Trea- sry officials. His investments could give him the ability to file onerous litigation in U.S. courts, those people argued. Others within OFAC be- lieved such a cautious ap- the sanctions, the person said. proach defeated the purpose of In the March 1 email, the Treasury's Ms. Palluconi wrote that a so-called general license administration leveled in 2018 would give the agency space ANDRE SAMSON TASS ZUMA PRESS Trump against billionaire aluminum magnate Oleg Deripaska and energy and aluminum compa- nies he controlled, the current more than 50%. OFAC to deal with Mr. Usmanov's interests. business grants such licenses, which al- low U.S. firms to continue do- and former Treasury officials ing business with sanctioned said. They covered businesses entities, to help the agency of which Mr. Deripaska owned fine-tune sanctions, protect U.S. levied on Mr. Deripaska mer Treasury lawyer. Those sanctions, which the rapidly, said Mr. Swift, the for- the U.S. economy and react to bolster