Russia in financial free-fall as Syria backlash sees market conditions ‘like a volcano’

Russia in financial free-fall as Syria backlash sees market conditions ‘like a volcano’

RUSSIA is facing financial turmoil after US sanctions against the country sparked the worst market session in four years in a backlash against Vladimir Putin’s support of Syria.

The rouble plunged 4.1 percent against the dollar, while the country’s bonds also plummeted as traders described conditions as “like living on a volcano”.

Donald Trump has imposed fresh sanctions on Russia and a handful of influential oligarchs in response to Putin’s support of Syrian President Bashar al Assad after he allegedly carried out a chemical attack on civilians.

Confidence in Russian stocks has slumped, sparking a mass sell-off that sent Moscow’s blue-chip MOEX index down 8.34 per cent.

The rouble dropped against the dollar despite rising prices of oil, the country’s main export, as investors continued an asset sell-off fearing more sanctions.

Inherent risks for Russian credit and assets have substantially increased as the Kremlin fights to find a way to retaliate against President Donald Trump.

But rich Russians remain dismissive about their losses, with one consoling himself with the thought he had once lost $1billion in a single day.

Kirill Dmitriev, head of the state-run Russian Direct Investment Fund, told reporters to keep things in perspective.

He said: “We think it is an absolutely short-lived market reaction, which in large part is driven by speculators.”

After losing $250m on Monday, Oleg Tinkov, founder and chairman of Tinkoff Bank, said he was unfazed.

He said: “There were worse days.

“I remember losing $1bn in one day so it was actually a very positive day yesterday ... Being on the Russian stock market is like living on a volcano.”

Putin had, up to now, ignored warning from senior officials there would be “consequences” for destabilising actions Moscow has taken against European allies and the US.

But his Prime Minister Dmitry Medvedev is believed to be planning retaliatory steps against the United States.

He discussed the state of the economy with Putin during the “routine meeting” yesterday, saying that based on data for 2017 the economy was “absolutely stable”.

However Mr Medvedev is preparing measures to support sanctioned Russian entities. Floundering aluminium producer Rusal is expected to be one of the first firms to be rescued.

Tensions between the West and Russia are mounting after the presumed Russian attack on former double agent Sergei Skripal and his daughter Yulia, as well as the alleged Russian meddling in the 2016 US election.

President Trump finally lost patience with his Russian counterpart this week, tweeting: “Many dead, including women and children, in mindless CHEMICAL attack in Syria. Area of atrocity is in lockdown and encircled by Syrian Army, making it completely inaccessible to outside world.

“President Putin, Russia and Iran are responsible for backing Animal Assad. Big price to pay. Open area immediately for medical help and verification. Another humanitarian disaster for no reason whatsoever. SICK!”

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