By James Marson and Scott Patterson
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (April 10, 2018).
MOSCOW -- Russian markets convulsed in the wake of new U.S.
sanctions, as the ruble tumbled and domestic and foreign investors
dumped Russian stocks.
Shares in United Co. Rusal PLC, the giant Russian aluminum
maker, lost half of their value on Monday, after the U.S. hit the
company and its main owner, Oleg Deripaska, with sanctions on
Friday. The damage spread across a broad range of Russian assets,
leaving the country's main MICEX stock index down more than 8% and
the ruble off 4% against the U.S. dollar, amid uncertainty over
which other companies could be hit by potential further
sanctions.
"Now, no one in the top 100 list [of wealthiest Russians] can be
sure they won't be subject to sanctions," said Timothy Ash, an
analyst at BlueBay Asset Management in London.
The Russian government scrambled to respond Monday, with Prime
Minister Dmitry Medvedev ordering ministers at a government meeting
to work out measures to support companies that have been targeted
by sanctions, without giving details. He called the sanctions
inadmissible and illegitimate.
The measures could hit Russian economic growth, already forecast
to be weak this year, as banks will be even more cautious about
lending to Russian companies, Mr. Ash said. However, analysts from
Renaissance Capital said the impact on growth should be limited by
the fact that many companies have reduced external debt in recent
years.
Many investors were surprised by the severity of the sanctions,
which targeted senior Russian government officials as well as some
of President Vladimir Putin's closest business allies and the
companies they own.
The measures have also coincided with harsher rhetoric from U.S.
President Donald Trump toward Russia, after a suspected
chemical-weapons attack by Syrian President Bashar al-Assad, a
Moscow ally, killed dozens of civilians in the Middle Eastern
country.
"The thinking was that Trump would do as little as possible on
Russia," said Elina Ribakova, head of EMEA research at Deutsche
Bank in London.
Now, the perception is that the recent actions have been
coordinated with European allies, in the wake of a nerve-agent
attack against a former Russian spy in England that the U.K.
government blames on Russia. "Things could be ratcheted up
further," Ms. Ribakova said.
Hardest hit Monday was Rusal. Its shares finished down 50% in
Hong Kong, its main listing, after it said in a filing Monday that
U.S. sanctions "may result in technical defaults in relation to
certain credit obligations" and that it was evaluating the impact
of any such defaults on the company's financial position.
The specter of disruptions hit global aluminum markets, which
jumped 4.8% in London trading. London commodities broker SP Angel
estimates Rusal's primary aluminum output last year accounted for
about 6% of global production and 14% of production excluding
China.
Rusal was one of 12 companies, owned by seven Russian tycoons,
that the U.S. government sanctioned Friday over what Treasury
Secretary Steven Mnuchin called Russia's "malign activity" around
the world, including military interventions in Ukraine and Syria
and cyberattacks. A Kremlin spokesman on Monday called the measures
unlawful and said that the government was analyzing them and
preparing a response.
Mr. Deripaska, Rusal's main owner, was also specifically named
in U.S. sanctions Friday. Mr. Deripaska on Friday called the
measures against him "baseless, ridiculous and absurd," a
representative told Russian news agencies.
En+ Group PLC, a London-listed company that is majority owned by
Mr. Derispaska and holds a 48% stake in Rusal, as well as power
companies in Russia, said it was "highly likely" that the sanctions
would hurt its business. En+ shares fell 42% on Monday after a
brief trading suspension.
Western firms that have partnered with Russian firms now on the
sanctions list were also assessing new risks. Swiss engineer Sulzer
AG said it had agreed to buy shares from its main owner, Renova
Holdings, which appeared on the sanctions list along with its
chairman Viktor Vekselberg, in order to comply with the sanctions.
Sulzer shares fell 16% in Swiss trading.
Swiss-based mining and trading giant Glencore PLC holds a nearly
9% stake in Rusal. Glencore Chief Executive Ivan Glasenberg has
been a Rusal board member since 2007. It is unclear if the
sanctions directly affect that shareholding. Glencore declined to
comment. The company's shares fell 3.4% in London trading.
The new U.S. restrictions make it all but impossible for Rusal
and other sanctions firms to do business in dollars, analysts said,
raising questions about their banking and trading relations.
The U.S. government said that non-U.S. citizens may face
sanctions for "facilitating significant transactions" for
sanctioned individuals or entities. That could make activities as
simple as exchanging currencies more expensive for Rusal, given the
international scope of its operations and the fact that sales are
priced in U.S. dollars, said Edward Sterck, an analyst at BMO
Capital Markets.
Ira Iosebashvili contributed to this article.
Write to James Marson at james.marson@wsj.com and Scott
Patterson at scott.patterson@wsj.com
(END) Dow Jones Newswires
April 10, 2018 02:47 ET (06:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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