Putin hit by more misery – Ruble plummets as financial markets grapple crisis

Joe Biden says sanctions have ‘crippled’ Russian economy

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After nearly a month of closure, financial activity is slowly restarting with the Bank of Russia allowing limited trading to resume on March 21. In a statement, the central bank said trading in federal loan bonds would resume as usual from 1pm Moscow time. Trading in shares still remains suspended with little indication as to when this might resume. Speaking on Friday, Bank of Russia Governor Elvira Nabiullina said Russia was “ready to resume trading gradually” with information so far only being given a few days ahead.

Andrei Braginsky, a spokesman for the Moscow Exchange, said: “Technically everything is ready, and we are hoping this will resume in the near future.”

Russia has been concerned about a market crash if stock trading reopens – having seen the massive declines in Russian owned or linked companies on other financial markets such as the London Stock Exchange.

Timothy Ash, senior emerging markets sovereign strategist at BlueBay Asset management, explained Russia was attempting to “test the water” after having been caught off guard by the level of sanctions.

“This was a major hit to macro-financial stability in the whole country just because they didn’t expect it” he explained, adding they were now looking to “ease pressure on the banks and the currency by opening up a bit”.

The ruble meanwhile has slid lower with the resumption of bond trading, falling from around 101 to the dollar to 106 to the dollar.

Faced with ongoing weakness in the currency, the central bank has decided to maintain emergency interest rates of 20 percent in a bid to help prop up the ruble.

So far, Russia has already seen bank runs with citizens queuing to withdraw money in cash and change it into other forms.

In response, the Bank of Russia has put currency controls in place, limiting access to foreign currencies.

With bond trading resuming, the bank has also said it will purchase government bonds to help support prices.

On Monday, Russia’s State Duma will discuss a third term for Ms Nabiullina, who has been nominated by President Putin.

Ms Nubiullina reportedly has significant trust from Putin having received praise for her handling of the Russian economy after the previous Ukraine crisis in 2014.

As Russia cautiously attempts to reopen markets, it faces a key further test with billions of dollars worth of debt payments due in the next month.

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The country narrowly dodged default last week on a dollar denominated bond, however there is now intense speculation as to whether it will continue to meets its obligations.

International exposure to Russia has decreased considerably in recent years since sanctions were first imposed after the annexation of Crimea in 2014 – with the majority of government borrowing coming from domestic Russian banks.

A default is therefore likely to cause most harm to Russians themselves, though it would also massively impact Russia’s ability to borrow from international sources such as China in the future.

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