Eurasian Resources Group could lose its OFAC license for settlements with Russian banks over deal with businessman linked to VTB

A controlling stake in the international mining and minerals processing company Eurasian Resources Group (ERG) is set to be acquired by a Kazakh businessman with close ties to Russia’s banking sector. As The Insider found, the deal has seriously alarmed the U.S. Department of State, with officials in Washington fearing that the company could come under Russian control. As a result, ERG’s management is faced with the prospect of losing a U.S.-issued license that allows it to service debts to Russian banks.

The matter concerns an attempt by Kazakh businessman Shakhmurat Mutalip to acquire a 40% stake in ERG.

The first report of Mutalip’s offer came in late December from the Financial Times. According to the newspaper, Mutalip intends to outbid a proposal by ERG Board Chairman Shukhrat Ibragimov, the son of the company’s co-founder Alijan Ibragimov. This past May, the younger Ibragimov announced plans to acquire a 40% stake in the mining company, effectively buying out the shares of his late father’s partners, businessmen Patokh Chodiev and Alexander Mashkevich. The deal would have given Shukhrat Ibragimov a controlling stake. However, as the FT notes, the talks stalled after Ibragimov failed to raise the necessary funds.

Mutalip, the owner of Kazakhstan-based construction group Integra Construction KZ, stepped in by reaching an agreement with the Chodiev and Mashkevich families to acquire their combined stake for $1.4 billion, FT reports. Meanwhile, according to FT's sources, the deal would require Ibragimov to first withdraw his bid for the shares.

What is ERG known for?

Eurasian Resources Group (ERG) is a major global mining and mineral processing holding. Its main shareholder is the government of Kazakhstan, which owns 40% of the shares. Control of the remaining stake is distributed among the families of the company’s founders — businessmen Alijan Ibragimov, Patokh Chodiev, and Alexander Mashkevich.

ERG is ranked among the world’s leading producers of ferrochrome and cobalt. It is also a major supplier of copper, alumina, and aluminum. Aside from Kazakhstan, it operates in South America and Africa. In the Democratic Republic of the Congo, for instance, ERG runs several facilities that mine and process copper and cobalt, and in Brazil, it operates a mine producing high-quality iron ore.

American interests

The story of ERG’s asset sale has been unfolding for around a year, a source close to the company’s management told The Insider. Due to its mining capacities in the DRC, the deal drew the attention of the U.S. Department of State following Donald Trump’s return to the White House last January. According to the source, Washington is interested in gaining greater influence in sub-Saharan Africa, a region that is also attracting the attention of China and Russia.

Another reason for American interest involves the Trump administration’s efforts to resolve the conflict between the DRC and neighboring Rwanda. Hostilities have been ongoing for a year, primarily in the eastern part of the country, where ERG’s main assets are concentrated.

Risks of Russian control

According to The Insider's source, the State Department fears that ERG’s assets could fall under Russian control. After the FT article was published, Mutalip signed a Sales Purchase Agreement (SPA) with other company shareholders, as confirmed by two sources, who also pointed out the Kazakh businessman's close ties with Russian bankers.

As FT also noted, ERG is heavily dependent on financing from Russia’s two largest banks: VTB and Sberbank. By 2023, the company’s debt to VTB was around $3 billion. According to another source close to ERG’s top management, Mutalip has support from VTB.

One of The Insider’s sources added that Mutalip is personally acquainted with VTB president Andrey Kostin, and that entrepreneur Alisher Usmanov “introduced” the Kazakh businessman to the Russian banks. “Mutalip has VTB’s backing, which raises a flag for the American side. There has always been a possibility that VTB could effectively orchestrate the company's default in order to take it under control,” he explains.

As The Insider discovered, to facilitate ERG’s repayment of its debt to Russian banks that fell under U.S. sanctions after the war began, the Office of Foreign Assets Control (OFAC) granted the company permission to conduct transactions with VTB and Sberbank. This was confirmed by two sources close to ERG’s management:

“One of the grounds for obtaining this license — which the Americans were initially reluctant to grant — was precisely that if [the Russian banks] were to push the company into default, they would simply take the shares they hold as collateral. And the Americans were completely opposed to that,” one of The Insider’s sources explained.

If Mutalip’s purchase of a stake in the company is successful, ERG’s management fears it could affect the OFAC license. In that case, the company risks opening the door for the Russian banks to declare it in default and to subsequently gain control over its shares.

The Insider sought comment from the Kazakh presidential executive office and from Shakhmurat Mutalip but had not received a response at the time of publication.