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  HOME | Business & Economy (Click here for more)

US Sanctions Put Russia on Edge

MOSCOW – Russian officials and companies were bracing for further economic pain Thursday, as the United States decision to punish the Kremlin for an alleged nerve-agent attack in the United Kingdom diminished hopes of a bilateral thaw.

The ruble registered the steepest daily decline in almost two years, losing as much as 5 percent against the dollar since the State Department said on Wednesday it would impose new sanctions on Russia later this month over the incident. Russian blue-chip stocks plunged as much as 9 percent, led by state banks and national airline Aeroflot, which risk losing access to US markets if the sanctions are deepened.

The Kremlin on Thursday denied playing any role in the attack on a former Russian spy and his daughter in southern England earlier this year while playing down the importance of the sanctions. President Vladimir Putin’s spokesman said Russia remains committed to building “constructive relations with the US” and wouldn’t draft countermeasures before learning the full details.

Although the first tranche of sanctions would focus on Russia’s defense sector and have a limited initial effect, according to political analysts, investors and firms are preparing for a downward spiral of measures and countermeasures that would hurt the wider economy. A spate of Western sanctions against Russia since Mr. Putin’s decision to annex Crimea in 2014 have already wiped out half of the ruble’s value, reduced investment in the energy sector and crippled aluminum giant United Co. Rusal PLC.

The second set, which could be triggered by the end of the year, would include the downgrade or suspension of diplomatic relations, suspension of flights between the U.S. and Russia, and restriction of imports of Russian goods. A separate set of financial measures against Russia being considered in Congress would reduce the country’s ability to raise capital abroad.

“We are sliding toward an economic war,” Vladimir Vasiliev, a senior fellow at Moscow’s Institute of US and Canadian Studies, told state television Thursday. “We are reaching a point of no return in our relations and I don’t see any base for improving them.”

Russia’s economic tsar, Anton Siluanov, said the finance ministry and central bank were standing by with a range of financial tools to counter the effects of any sanctions. “The Russian economy, the balance of payments in recent years has become much more resilient to external effects, whether they be fluctuations in the price of oil or imposition of economic restrictions,” Mr. Siluanov was quoted as saying by the local Interfax news agency Thursday.

The second-largest state bank, VTB, which is already restricted by the US from issuing foreign debt, said it is analyzing the potential impact of the sanctions to protect its business and clients. The second-biggest gas producer, Novatek, said it would redouble its efforts to switch to sales contracts in local currencies.

Lawmakers from Russia’s ruling party accused US politicians of treating the country like a punching bag in their partisan infighting and in midterm campaigning. On state television, analysts and commentators lamented President Donald Trump’s inability to push through a hostile Congress a reset in relations with Russia following a summit with Mr. Putin in Helsinki last month.

The head of the foreign-relations committee of Russia’s senate, Konstantin Kosachev, compared the new sanctions to a “lynching.”

“The US is once again behaving like a police state, beating out evidence from suspects by threats and torture,” he told Interfax.

 

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