By Elena Fabrichnaya
MOSCOW (Reuters) – Russian markets reacted cautiously to U.S. President Donald Trump’s threat to impose new sanctions, with analysts saying on Wednesday a weaker ruble and higher oil prices as a result of his measures may support the economy in the short term.
Trump said on Tuesday the United States would start imposing tariffs and other measures on Russia “10 days from today” if Moscow showed no progress toward a peaceful settlement in Ukraine. Oil prices gained more than 3% on his remarks.
The ruble has dropped 4.3% since July 24 to 81.9 to the U.S. dollar on Wednesday. Russia’s stock market has fallen by 3.4% since July 24.
A weaker ruble boosts export competitiveness by making Russian goods cheaper globally and increases revenue from oil exports priced in dollars.
“The uncertainty of new U.S. sanctions will continue to weigh on the sentiment of Russian investors,” said Alexei Antonov from Alor brokerage.
The ruble has rallied by up to 45% against the dollar this year, thanks to the central bank’s tight monetary policy and hopes for easing tensions between Russia and the U.S. after talks held in Saudi Arabia in February.
The ruble’s appreciation lowered the revenue of Russian commodity firms from oil and gas majors to metals and fertilizer exporters. Such firms make up about 60% of the stock market, which is off-limits to Western investors because of sanctions.
FUNDAMENTAL SUPPORT
Shares in some exporting companies rose after the ruble started sliding, with oil firm Rosneft, Russia’s biggest, gaining over 2% since the start of the week, and nickel producer Nornickel rising by over 5% on July 29.
“Fundamental support for the Russian exporters’ stocks is provided by soaring oil prices and a significantly weakened ruble,” said BCS brokerage analyst Mikhail Zeltser.
The central bank’s decision on July 25 to cut its key interest rate as inflation eased also helped the rouble’s fall.
A weaker ruble will support the state budget, the main target of Trump’s measures, by increasing the ruble-denominated value of Russia’s energy revenue even if that shrinks due to new sanctions.
Energy made up 27% of Russia’s state budget revenue in the first half, down from around 30% in 2023 and 2024.
Although some weakening of the ruble to around 90 to the dollar is welcomed by the market, a more significant slide towards 100 and beyond is seen as harmful for the economy.
Some analysts recalled November 2024, when the ruble weakened sharply after the U.S. imposed new sanctions. The ruble lost 11% between November 22 and November 27.
Finam analysts said Russian investors were lining up to buy foreign currency to hedge the risk of falling export revenues in case Trump imposes secondary sanctions on buyers of Russian oil, such as China and India.
“In part, the concerns are not unfounded. It was precisely (former U.S. President Joe) Biden’s farewell sanctions package at the end of last year that caused the rouble to plummet,” Finam analysts wrote in their research note.
(Writing by Gleb Bryanski; Editing by Bernadette Baum)
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