Russia began to feel the pinch from the latest round of U.S. sanctions Monday as the ruble dropped nearly 2% against the dollar and stocks took their biggest drop since the world reacted to Moscow’s annexation of Crimea.
Russia’s top stock indexes, Mossbirge and the RTS, dropped by 9% and almost 11%, respectively, and the Russian ruble was trading at its lowest since November.
The U.S. Treasury Department placed a new round of sanctions on seven Russian oligarchs,12 companies they either own or control, and 17 senior Kremlin officials. The sanctions, which were announced Friday, targeted what the U.S. said were individuals and companies that aided or benefited from the Kremlin’s “malign activities” around the world, including attempts to interfere in the 2016 U.S. presidential election, supplying weapons to Syrian President Bashar Assad, and subverting Western democracies, among other allegations.
The sanctions make it difficult for those on the list to do business in the U.S., including getting access to financial markets for investments. Countries and companies that do business with sanctioned entities could face penalties in the U.S. Individuals on the sanctions list are prohibited from traveling to the U.S. or conducting business there.
The latest round of U.S. sanctions is an “outrageous violation of anything and everything,” Kremlin spokesman Dmitry Peskov told reporters Monday.
“The situation is being analyzed,” Peskov said. “The interests of our country are at the center of the matter.”
In a meeting with his Cabinet, Prime Minister Dmitry Medvedev said Russia would find ways to support the sanctioned companies. He cautioned that Russia had the right to react to the U.S. sanctions in what could be yet another round of the ongoing tit-for-tat between Moscow and Washington.
New US sanctions are unacceptable and illegitimate. Russia reserves the right to retaliate, including with decisions on existing trade agreements. We will consider supporting Russian companies affected by the restrictions— Dmitry Medvedev (@MedvedevRussiaE) April 9, 2018
The U.S. and Russia have been locked in a diplomatic row since Washington accused the Kremlin of attempting to meddle in the 2016 presidential election. Each side has expelled scores of diplomats from each side and shuttered consulates. In the latest round, about 150 Russian diplomats were expelled by more than two dozen countries, including the United States, several European Union member states and others. Those expulsions came in response to accusations that the Kremlin was behind the attempted assassination of a former Russian spy using a Soviet-made nerve agent, Novichok, on British soil. The former spy, Sergei Skripal, and his daughter, Yulia Skripal, survived and are slowly recovering in a hospital in the United Kingdom.
Moscow has denied any involvement in the poisonings, calling the West’s accusations of Kremlin involvement a “provocation.”
Among those taking the biggest economic hits Monday was Oleg Deripaska, a close ally of Russian President Vladimir Putin and one of Russia’s wealthiest oligarchs. Deripaska holds significant ownership in eight of the enterprises listed on the Friday sanctions, including En+ and Rusal. Both of those companies saw their shares drop on Monday.
Stocks for Rusal, one of the world’s biggest aluminum producers, dropped more than 50% on the Hong Kong exchange Monday, causing the company to issue a warning that it could default on some of its debt obligations. Deripaska and another oligarch on the sanctions list, Viktor Vekselberg, are both major investors in the aluminum giant.
Forbes magazine’s Russian version estimated that Deripaska’s personal wealth dropped $1.3 billion on Monday.
Deripaska was targeted by the Treasury Department sanctions “for having acted or purported to act for or on behalf of, directly or indirectly, a senior official of the Government of the Russian Federation.” He is a former business partner of Paul Manafort, the indicted former campaign chairman for President Trump.
On Friday, Russian media quoted Deripaska calling the U.S. sanctions “groundless, ridiculous and absurd.”
Ayres is a special correspondent.