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Eastern Europe
February 16, 2019 www.intellinews.com I Page 19
against 24 FSB agents considered to have been participants in the attack in the Kerch Strait; regarding the Russian shipbuilding industry in the event that Russia violates freedom of movement in the Kerch Strait or anywhere else in the world; in relation to supporting the development of oil resources in Russia;
against state-owned energy projects outside of Russia.
The statement also lists other key provisions of the bill. This is support for Nato (it will be possible to leave the alliance only with the support of two thirds of senators) and measures to speed up the transfer of weapons to those Nato countries that depend on Russian weapons.
It is also proposed to create several centres that would help fight Russia and the opponents of the US in areas such as hybrid and cyber threats.
In particular, the National Information Process- ing Center will have to confront disinformation
and other threats from Russia to counter hybrid threats. The Department of Cyberspace and Digital Economy in the State Department will coordinate diplomatic efforts to ensure international cyber security, Internet access and Internet freedom, and so forth. And the Foundation to counter Russian influence will help European countries to resist the intervention of the Kremlin.
Sell-off
The sell-off comes on the bank of a lot of recent good news that has pushed Russia’s dollar-denominated Russia Trading System (RTS) index up 14% YTD including: a record $115bn current account surplus in 2018 and a record 2.7% of GDP federal budget surplus. In addition Moody’s returned Russia to “in- vestment grade” last week, completing the hattrick of investment grade ratings from the leading ratings companies that should have pulled in even more new money. Russian enjoyed inflows of new cash in the last week on the back of a general return to favour of emerging markets (EM) in general.
The sell-off on February 13 was made worse
after New York banks began warning customers to batten down the hatches for new sanctions. Morgan Stanley cut its recommendation on Russia amid “complacency” over new sanctions, adding momentum to the sell-off in assets.
Rout sends ruble down
The rout sent the ruble down the most since De- cember, trimming a rally that’s been the biggest among the world’s major currencies in 2019 YTD. Equities lost 2% on the news and the leading Va- nEck Vectors Russia ETF dropped 3.4% on the day.
Investors fear a repeat of the April 6 round of sanctions that saw the aluminium producer Rusal and energy holding EN+ that belong to Russian oligarch and Kremlin insider Oleg Deripaska targeted, along with half a dozen other businessmen, by sanctions. That caused chaos in financial and metal markets as both the company securities and its business are both deeply integrated into the global economy.
Fearing that this round of sanctions could be worse, Morgan Stanley told investors to sell the ruble, load up on credit protection and cut back on local equities to prepare for headwinds from a possible new round of sanctions.
“The consensus within the US legislative class re- mains broadly aligned against Russia,” according to Ilya Gofshteyn, a strategist at Standard Chartered in New York, as cited by Bloomberg. “The ruble should also underperform because global growth fears will remain a headwind to oil prices,” he said.
A survey of analysts all returned the same answer: hold or sell Russia and wait and see what happens next.
A buying opportunity could present itself. Yong Zhu, a money manager at DuPont Capital in Wilmington, Delaware, told journalists that the fundamentals on Russian bonds were improving on the back of the extraordinary macro results in 2018, but that is more than outweighed by the growing risks.