Russia Ukraine Crisis: Russian Economy Suffers as New Sanctions Unveiled | City & Business | Finance
Russian stock markets fell further as investors seek to avoid exposure to the country as the Ukraine crisis unfolds. Russia’s MOEX fell more than 5% on Tuesday, bringing its total loss since Monday to almost 15%. The ruble fell 3% against the dollar. Investment bank Federated Hermes has confirmed that it will reduce its position in Russia.
Kunjal Gala, the firm’s emerging markets portfolio manager, said: “Despite low valuation and a possible rebound in equities, the outlook for the Russian economy will be weak going forward.
“At some point, the euphoria in energy markets should also subside, turning tailwinds into headwinds for Russia’s oil and gas-dependent economy.”
The market impact also affects foreign companies with exposure to Russia and its economy.
AJ Bell chief investment officer Russ Mold said: “Investors are very much in risk aversion mode, abandoning commodity producers – especially those with exposure to Russia or Ukraine – as well as technology and travel stocks.
“Russian-focused gold miner Petropavlovsk has fallen 29% in two days in the London market, simply because of the location of its assets.
“Wizz Air has collapsed on its focus on Eastern Europe and because airlines in general are facing significant cost pressures from a further 3.5% rise in the price of oil .”
Gas and oil prices have accelerated as the crisis intensifies, with Brent Crude poised to break through $100 a barrel.
Throwing further uncertainty into energy prices, Germany announced it would suspend approval of the Nord Stream 2 gas pipeline following Russia’s decision to recognize the independence of two self-declared republics in eastern Ukraine.
The pipeline was intended to provide a new supply route from Russia to Europe via Germany, but it has been criticized, including by the Biden administration, for its growing reliance on Russia supplying already 40% of European natural gas.
While it is a blow to Russia’s long-term gas export ambitions, the shutdown could also be a blow to European economies.
Jamie Maddock, equity research analyst at Quilter Cheviot, predicted: “As Germany looks for alternatives, it will take time and will eventually push prices further up the continent.
“A significant part of Europe’s gas supply comes from Russia, so any disruption to that will have an effect on the prices paid by states, businesses and ultimately the end consumer.”
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Meanwhile, in the UK, new sanctions have been announced against Russian banks Rossiya, IS Bank, General Bank, Promsvyazbank and Black Sea Bank.
Sanctions were also targeted at three high net worth individuals; Boris Rotenberg, Igor Rotenberg and Gennady Timchenko, who Boris Johnson called “very close” to the Kremlin.
Under the sanctions, their UK assets will be frozen and they will be prohibited from entering the country or doing business with UK individuals or companies.
Boris Rotenberg is co-owner of the SGM group, one of the main builders of gas and oil infrastructure in Russia, while his nephew Igor Rotenberg is the majority shareholder of the oil drilling company Gazprom Bureniye.
Mr. Timchenko is the founder of the private investment group Volga Group, which focuses on oil and infrastructure.
New sanctions targeting both banks and individuals are also expected from the EU later today.