Corrected: U.S. mulls sanctions reprieve for Rusal, rocking aluminum prices

(In first paragraph, please read "American allies and partners" instead of "Rusal's American allies and partners". In third paragraph please read share prices rose in Moscow after falling in Hong Kong,)

WASHINGTON (Reuters) - The United States on Monday opened the door to sanctions relief for United Company Rusal Plc as it considered the Russian aluminum giant's bid to avoid U.S. sanctions and weighed the potential impact of such measures on American allies and partners.

The news shook the metals industry, sending aluminum prices down as much as 10 percent after the U.S. Treasury Department announcement.

Shares in Rusal, one of the world's largest aluminum companies, rose 13 percent on the Moscow Exchange after the announcement after earlier ending down 8.4 percent in Hong Kong trading.Shares of its U.S. rival Alcoa Corp were down 11 percent in morning trading.

In a statement, the U.S. Treasury Department said Americans have until Oct. 23 to wind down their business with Rusal and that the United States was not trying to harm those who depend on the company. The previous deadline was June 5.

It also said it would not impose secondary sanctions on non-U.S. entities engaged with Rusal or its subsidiaries.

"RUSAL has felt the impact of U.S. sanctions because of its entanglement with Oleg Deripaska, but the U.S. government is not targeting the hardworking people who depend on RUSAL and its subsidiaries," U.S. Treasury Secretary Steven Mnuchin said.

The United States could provide sanctions relief if Deripaska ceded control of the company, the department said.

Washington imposed sanctions on Rusal earlier this month citing ties to Deripaska, who is among seven Russian oligarchs sanctioned as part of larger action targeting Moscow's "malign activities" around the world.

Representatives for Rusal and Deripaska did not immediately respond to requests for comment. Representatives for the Kremlin also did not immediately respond.

The news comes as European leaders worked to persuade U.S. President Donald Trump to ease sanctions on Russia, including measures against Russian aluminum producers, with the presidents of France and Russia poised to visit the White House this week.

"Given the impact on our partners and allies, we are issuing a general license extending the maintenance and wind-down period while we consider RUSAL's petition," Mnuchin said in the statement.

(Reporting by Susan Heavey in Washington and Polina Devitt in Moscow; Editing by Steve Orlofsky and Bernadette Baum)