THE Russian Government pledged to minimize the fallout from U.S. sanctions Tuesday and dismissed steep falls in the rouble and financial markets as short-term volatility, saying Russia needed time to adjust to the new curbs.
The rouble fell sharply for a second day, shedding over 3 percent of its value against the dollar despite rising prices of oil, the country’s main export, as investors continued an asset sell-off fuelled by fears that the United States could impose more sanctions and a realization that Russian credit and market risks have substantially increased.
Some rich Russians were dismissive about their losses, with one consoling himself with the thought he had once lost US$1 billion in a single day.
“Being on the Russian stock market is like living on a volcano,” he said.
The sanctions, announced Friday, target officials and businesspeople around President Vladimir Putin in an aggressive response to alleged Russian meddling in the 2016 U.S. election.
Analysts are struggling to understand how some of the businessmen targeted were chosen however, adding to swirling uncertainty.
The Russian market is under additional pressure from a proposal by two U.S. congressmen to impose further sanctions on Russia over the poisoning of ex-spy Sergei Skripal and his daughter in Britain — allegations Moscow denies.
The financial shock poses a potential political problem for Putin, who was re-elected last month and has promised to raise living standards.
The fragile economic recovery is now at risk and the government may have to spend money earmarked for fulfilling his pledges to bail out sanctioned Russian firms. Sharp falls in the rouble’s value are also likely to make imports costlier.
Putin’s spokesman, Dmitry Peskov, said he thought the slump in asset values would be short-lived. ?(SD-Agencies)