Shares on the Russian stock market fell sharply on Thursday, following the new Western sanctions imposed over President Putin’s failure to de-escalate the crisis in Ukraine.
The rouble declined by over one percent against the dollar, heading for what is described as the steepest drop for several months. The MICEX index fell to its lowest level since the end of May.
Shares in Russia’s largest oil producer Rosneft went tumbling. Other firms in the energy, defence and financial sectors were also hit.
A New York-based research group says the American and European attempt to squeeze Russian access to financing will probably push the Russian economy into recession.
“From the West’s perspective they could not have chosen a better time to intensify sanctions,” added Societe Generale strategist Regis Chatellier. “Until a few weeks back Russia was in a position of relative strength because there was massive pressure on oil, but that is not the case any more.”
Russia’s Foreign Ministry reacted with disappointment that the European Union “succumbed to the blackmail of the US administration and, contradicting its own interests, followed the path of sanctions” against Moscow.
European companies with high exposure to Russia also saw their shares fall in value on Thursday. They included Austrian bank Raiffeisen, Italian bank Unicredit and German retailer Metro.
Energy companies are likely to feel the impact of the sanctions because Europe imports much of its oil and gas from the region.
“The Russia sanctions are having a bit of an impact on the European markets. The financials and natural resources companies could be squeezed a bit,” said Mike Turner, European equity derivatives broker at XBZ Ltd.