The Russian ruble tumbles on fresh US sanctions. Meanwhile the Russian central bank chief and other officials tried to soothe investor nerves as the U.S. sanctions targeted some of the large companies in Russia.
The ruble fell to 63 to the U.S. dollar losing about 4.5 percent on April 10 which marked the biggest decline since December 2016. The ruble also posted strong declines against the euro falling to 78 marking a first time since early 2016 which was a time during recession led by low oil prices and was further aggravated by U.S. sanctions.
The declines in the Russian ruble came a day after the currency posted the largest single day decline in more than three years. The Russian stock market also fell sharply after the U.S. announced sanctions late on Sunday/early Monday.
Russia’s deputy Prime Minister Dvorkovich acknowledged the uncertainty in the investor community in the wake of the new round of sanctions that as imposed by the U.S. Department of Treasury on April 6th.
“The main thing right now is to minimize uncertainty while securing stable functioning of the companies where hundreds of thousands of people work…. If necessary we will ensure the preservation of stable functioning.” Dvorkovich said speaking at an economic forum in Moscow last week.
He said that “share prices were a secondary thing” as his statement appeared to be aimed at individuals and was seen by many as an attempt to show that the Russian administration was more concerned about the well being of the individual rather than shares of a company.
The sanctions from the U.S. targeted specific individuals compromising of business tycoons, multi-national companies, officials and various political figures who were deemed close to the Russian president Vladimir Putin. The sanctions were part of an attempt to punish Russia for its “malign activity around the globe” according to the U.S. Treasury Secretary, Steven Mnuchin.
Russia’s central bank chief, Elvira Nabiullina said that the financial sector’s stability wasn’t at risk for the moment and said that the central bank had a series of tools to address the risks associated by the sanctions. Previously, during the height of the Crimean war, Russia was hit by the U.S. sanctions. The Russian central bank injected liquidity into markets in an effort to stabilize the currency but only gave up as speculators continued to short sell the ruble.
“Friday’s events [the U.S. sanctions] are surely causing the market correction that we are now seeing. As usual in such cases, the market becomes volatile during first days,” Nabiullina said. She cautioned that the central bank needs some time in order to adapt the economy’s financial sector to the changing external conditions.
Besides the deputy Prime Minister and the central bank governor, Russia’s finance minister Anton Siluanov also tried to soothe investor nerves by saying that the administration will implement all tools required in order to mitigate the risks of new sanctions and other external events.
The U.S. led sanctions are aimed at freezing any assets that the targeted individuals have in the U.S. jurisdictions. It also bars U.S. citizens and businesses from doing businesses with the companies that were targeted.
The sanctions targeted at certain individuals also targeted some prominent names who were involved in the meddling of the 2016 U.S. presidential elections. Some of the big names include the CEO of the state controlled gas giant Gazprom, Aleksei Miller and the National guard chief and former bodyguard of Putin Viktor Zolotov and Nikolai Patrushev, the secretary of Putin’s security council.
The sanctions come just than under a month after Putin won a six year presidential term for the fourth time with a landslide victory which underlined his dominance as Russia’s most authoritative figure.
During his election campaign, Putin pledged that he would improve the living conditions and promised to keep the economy growing at a pace of 2% in 2018. Russia was seen emerging from a brief two-year recession as the economy grew 1.5% last year.