Russian shares, ruble slump on new U.S. sanctions
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[July 17, 2014]
By Polina Devitt
MOSCOW (Reuters) - Russian assets fell
on Thursday after Washington imposed its toughest economic sanctions
yet on Russian energy, financial and defense firms, also hitting the
rouble and the country's sovereign dollar bonds.
The U.S. government imposed sanctions on Wednesday on some of the
key players in the Russian economy over what Washington says is
Moscow's reluctance to curb violence in Ukraine.
The sanctions, which in effect close medium- and long-term dollar
funding, were put on Russia's largest oil producer Rosneft, its No.2
gas producer Novatek, its third largest bank, Gazprombank, and state
The rouble-traded MICEX dropped 2.6 percent in early trading and was
down 2.0 percent at 1,445.30 points at 0350 ET; the dollar-traded
RTS index was down 3.3 percent at 1,305.76 points.
Shares in Rosneft paired losses to 5 percent after falling 6 percent
within a minute of opening. Novatek fell 5 percent.
"The U.S. administration has unveiled new sanctions against Russian
entities and individuals. However, despite the eye-catching
headlines, the steps stop short of the much discussed, but yet not
pursued, 'sectoral sanctions'," VTB Capital said in a note.
"That said, for the first time they touch – even if only lightly –
major Russian corporations," it added.
The threat to Rosneft and Novatek from the sanctions is that Europe
may follow suit and impose the same limitations on borrowing from
European banks, Alfa Bank said in a note.
EU leaders said on Wednesday they would expand sanctions against
Russia to target companies that undermine Ukrainian sovereignty and
ask the European Investment Bank and the European Bank for
Reconstruction and Development to suspend new lending.
Russia's Foreign Ministry reacted with disappointment that the
European Union "succumbed to the blackmail of the U.S.
administration and, contradicting its own interests, followed the
path of sanctions" against Moscow.
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The MSCI global emerging equities index was down 0.3 percent, while
Russian sovereign dollar bonds slumped to multi-week lows and
Russian debt insurance costs soared to two-month highs.
International payment systems Visa and MasterCard said the new U.S.
sanctions did not affect their operations in Russia.
The rouble hit a one-month low against the dollar in early trade and
was down 1.3 percent against it at 34.85. It also lost 1.4 percent
against the euro and was at 47.16.
This left the rouble 1.4 percent weaker at 40.38 against the
dollar-euro basket that the central bank uses to guide the
currency's nominal exchange rate.
(Reporting by Polina Devitt, Olga Popova, Vladimir Soldatkin,
Vladimir Abramov and Katya Golubkova; Writing by Polina Devitt;
Editing by Elizabeth Piper and Jeremy Gaunt)
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