Russian rouble plunges following US sanctions
THE ROUBLE plunged for the second day in a row on Tuesday following fresh United States sanctions against Russia.
The Russian currency hit lows against the dollar and euro last seen in 2016, while the government trailed as-yet unspecified support measures for sanction-hit companies.
The sanctions introduced Friday against numerous Russian businessmen, officials and companies have caused sharp share price drops for sanctioned companies – most notably aluminium producer Rusal – but also the wider stock market, particularly banks which may be exposed to the sanctioned firms. Forbes magazine’s Russian edition estimated that Russian billionaires lost a total of US$12 billion on Monday alone.
Russian Deputy Prime Minister Arkady Dvorkovich said planned government support for sanctionshit companies will focus on stabilising them to avoid job losses, rather than propping up share prices.
“The main thing right now is to minimise uncertainty while securing stable functioning of the companies, where hundreds of thousands of people work,” he told an economic forum in Moscow.
President Vladimir Putin’s spokesman, Dmitry Peskov, said the Kremlin attributes the “strong negative trends” on the Russian stock market in part to an “emotional reaction” to the sanctions, rather than more fundamental issues.
The rouble fell sharply in morning trading to go above 63 to the dollar for the first time since December 2016, but later recovered to 62.5 as of midafternoon. The euro briefly went over 78 rubles for the first time since early 2016, when historically low oil prices were hurting the Russian economy.
CHANGES AT RUSAL
On the Moscow exchange, the main MOEX index was up almost four per cent by late afternoon after taking a heavy hit on Monday, though the dollardenominated RTS index was down 0.7 per cent.
Rusal shares have dropped by more than half since the sanctions were announced, and the company has warned it may technically default.
On Tuesday, the chief executive of commodities giant Glencore, Ivan Glasenberg, left the board of Rusal, Glencore said.
Glencore also said it “will not proceed ... at this time” with a planned deal to swap its 8.75 per cent stake in Rusal for a stake in billionaire Oleg Deripaska’s holding company EN+ Group.
Glencore, which purchases large quantities of aluminium from Rusal, added it is “still evaluating the position under its contracts with Rusal”, but notes that these contracts are not financially material to Glencore.
The US Treasury Department on Friday announced sanctions against seven leading Russian businessmen, 17 officials and a dozen Russian companies.
Besides Deripaska, targets included Alexei Miller, the head of state natural gas giant Gazprom, and Andrey Kostin, the head of the state-controlled VTB Bank, which is Russia’s second-largest.
There was also a place on the list for Kirill Shamalov, who is reportedly Putin’s son-in-law, married to his daughter Katerina Tikhonova – although neither Putin nor the Kremlin has acknowledged that she is his daughter.
The sanctions freeze any assets that those targeted have in US jurisdictions and bar Americans from doing business with them. They were imposed following US frustration with Russian policy in Syria and Ukraine, as well as alleged election interference.
Clearstream, which provides key infrastructure underpinning the financial markets, said on Tuesday it would not process securities issued by those on the sanctions list.