Russian Markets Plummet On U.S. Moves
To Impose More Sanctions
August 09, 2018
The U.S. announcement of new sanctions against Moscow over its alleged
use of a chemical weapon against a Russian ex-spy has roiled global
markets and helped send the Russian ruble, bonds, and stocks plummeting.
The Russian currency dropped 3.1 percent to 65.55 per dollar, the lowest
level since November 2016, after the announcement late on August 8, and
the currency's downward spiral continued in Asian trading early on
Russia's RTS stock index lost nearly 3 percent of its value, while at a
bond auction on August 8 the Russian government was only able to sell
half the amount it had planned as borrowing costs jumped to the highest
level in more than a year.
The ruble and Russian stocks and bonds had already been hit by a Russian
media report providing details of "crushing sanctions" that some
legislators in Washington have proposed over Moscow's alleged meddling
in U.S. elections.
The legislation includes a provision to sanction Russia's sovereign debt
-- a move that could pack a major blow to Russia's economy but which
financial analysts said is unlikely to pass the U.S. Congress or be
signed into law by President Donald Trump.
"Sanctioning sovereign debt will be a last resort. Corporate debt and
individuals are a more likely target" in any new round of sanctions
against Russia considered by Congress, Shamaila Khan, a director of
emerging-market debt at AllianceBernstein, told Bloomberg.
Markets were so unsettled by the details in the U.S. legislative
proposal that the Russian Finance Ministry on August 8 sought to allay
market fears with a statement saying the measure might not be enacted
into law, Russian news agency Ria-Novosti reported.
U.S. officials said the sanctions over Russia's alleged chemical weapons
use will take effect on August 22, barring sales of sensitive
technologies to Russia.
second round of broader sanctions could be imposed later if Russia fails
to allow international inspectors into the country to determine whether
it has chemical or biological weapons.
Analysts said global investors are worried not only about a possible
U.S. ban on Russia's sovereign debt, but a provision of the
congressional bill that would clamp down on Russian banks, which they
said could also seriously stifle Russia's economy.
“If you start crushing Russia by causing the banking system to collapse
as a result of sanctions, it could actually lead to worse political
outcomes than what you have right now,” Khan told Bloomberg.
He said investors learned not to take the threat of U.S. sanctions
lightly after penalties introduced in April against Russian billionaires
with connections to the Kremlin sent global markets into a nosedive.