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August 3, 2018 www.intellinews.com I Page 3
unlikely to have a dramatic impact. Overall, once/ if the ban becomes the law I would expect 2-5% decline in the RUB rate (to RUB65/$) and a simi- lar fall in Russian indices.”
The sanctions proposed against Russia’s energy sector could cause more damage, but the details remain unclear.
“Sanctions against the energy sector potentially are more damaging, long-lasting and destruc- tive,” says Saenz. “There were numerous at- tempts to introduce such sanctions made in the course of last year, but these were not success- ful due to a rather firm response from Russia’s partners in EU, most notably Germany. If the EU takes a similar stand this time again, I’m sure that the US State Dept. will advise against the intro of such sanctions. Especially as Europe becomes softer in responding to US pressures to buy their LNG.”
Investors wary of Turkey’s tipping point
(TRY) to a fresh record low of 5.0934 against
the dollar as the betting on Turkey’s overheating economy experiencing a hard landing intensified.
The currency was trading at 5.0612 as of around 17:30 local time, a decline of more than 1.3% d/d. Before the announcement of sanctions the TRY had never weakened beyond the psychological threshold of 5 to the USD.
Traders are pinning hopes on an August 3 be- tween US Secretary of State Mike Pompeo and Turkish Foreign Minister Mevlut Cavusoglu in Singapore on the sidelines of an Asean summit in Singapore producing a breakthrough in the Brunson matter. But an unnamed banker told Reuters on August 2 that if the meeting failed to produce the desired results and the US adds to
The bill is also likely to face resistance at home from the US oil industry lobby, many of which have projects in Russia and are keen to win more. Likewise, EU energy companies in Europe are likely to lobby against to strict a bill.
The Kremlin is yet to respond to the news and if it does is likely to offer a muted protest.
“To start with, Russia does not have any significant firepower at its disposal – this explains muted, almost non-existent response from Kremlin to the latest rounds of US sanctions. Moscow can opt to ignore the ban on new debt issuance as – at cur- rent oil prices – Russia can easily redeem the debt instead of rolling it over. But energy sector sanc- tions is another matter and I won’t be surprised
to see a more material response from Moscow – perhaps ranging from restrictions on US busi- nesses in Russia to less accommodative stance in intl conflicts (Iran/ME, Ukraine),” said Saenz.
its sanctions on Turkey, a TRY rate of 5.30 or worse to the dollar could be seen.
The sanctions move, which specifically penal- ised Minister of Justice Abdulhamit Gul and Min- ister of Interior Suleyman Soylu, also hit Turkey’s 10-year domestic bond yield. It tested a new high of 19.48% on August 2, after closing the previous day at 18.59%. Two-year benchmark domestic paper saw 22.09%, up from 21.06% the day before.
The cost of insuring debt in Turkey climbed to the highest level seen since January 2012. Credit de- fault swaps (CDS) rose to 348bp on August 2 from 333bp on August 1.
The Istanbul stock exchange’s benchmark BIST- 100 was down 3.02% to 94,274. Despite all the woes, with analysts warning a currency-and-debt crisis may lie ahead, the stock market was gener- ally seen as standing relatively solid on the day, but it has lost 22% from the record high level of 121,531.5 it saw on January 29. The index fell as