Russian Stocks, Ruble Fall Amid U.S. Sanctions

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President Trump and Russian President Vladimir Putin hold a press conference after their meeting in Helsinki on July 16.

President Trump and Russian President Vladimir Putin hold a press conference after their meeting in Helsinki on July 16.


Photo:

grigory dukor/Reuters

Newly announced U.S. sanctions—and the potential for a second round of actions in 90 days—roiled Russia’s currency and blue-chip stocks as the country braced for further economic pain amid uncertainties over the Trump administration’s commitment to enforcement.

In Moscow, the ruble shed as much as 5% against the dollar on Thursday and stocks plunged as much as 9%, led by state banks and national carrier

PJSC Aeroflot-Russian Airlines
,

which risk losing access to U.S. markets if the sanctions escalate. In Washington, the administration remained notably silent on the action and offered few details on the severity of the prospective punishments.

The sanctions stem from a March nerve-agent attack against a former Russian spy in the U.K. The U.S. and Britain have held Russia responsible for the attack. Moscow has repeatedly denied involvement.

The sanctions are mandated by a U.S. law that requires action over the use of chemical and biological weapons—but President Trump maintains significant discretionary power over the degree of that punishment.

A spokesman for President

Vladimir Putin

of Russia struck a cautious tone and said Moscow remained committed to building “constructive relations with the U.S.” and wouldn’t draft countermeasures before learning the full details.

Others in the country expressed alarm and dismay over the U.S. move, which threatened to diminish hopes of improved bilateral ties.

Lawmakers from Russia’s ruling party accused U.S. politicians of treating the country like a punching bag in their partisan infighting and in midterm campaigning. On state television, analysts and commentators lamented Mr. Trump’s inability to push through a hostile Congress a reset in relations with Russia following a summit with Mr. Putin in Helsinki in July.

The head of the foreign-relations committee of Russia’s Senate,

Konstantin Kosachev,

compared the new sanctions to a “lynching.”

“The U.S. is once again behaving like a police state, beating out evidence from suspects by threats and torture,” he told Interfax.

Emergency-services personnel wearing protective suits and breathing equipment cover ambulances with tarpaulins at the Salisbury District Hospital in Salisbury, southern England, on March 10, after the poisoning of Sergei Skripal and his daughter Yulia with a nerve agent.

Emergency-services personnel wearing protective suits and breathing equipment cover ambulances with tarpaulins at the Salisbury District Hospital in Salisbury, southern England, on March 10, after the poisoning of Sergei Skripal and his daughter Yulia with a nerve agent.


Photo:

daniel leal-olivas/Agence France-Presse/Getty Images

The Kremlin, meanwhile, repeated its previous denial of any involvement in the attack on

Sergei Skripal

and his daughter Yulia in southern England this year, while playing down the importance of the sanctions.

As a volatile day unfolded in Moscow, response from Washington was muted. Mr. Trump made no public comments on the matter, and communications aides referred all questions to the State Department, which said the U.S. still sought improved ties with Moscow.

Department spokeswoman

Heather Nauert

said the administration had “complied with the law” and would continue to do so, but added: “We’d like to have a better relationship with the Russian government, recognizing that we have a lot of areas of mutual concern.”

The measures announced Wednesday constitute the first tranche of sanctions dictated by U.S. law. A second tranche of sanctions would take effect within three months unless the president certifies to Congress that Russia has met three conditions: ceasing the use of chemical and biological weapons; credibly assuring the U.S. that it won’t use such weapons in the future; and submitting to inspections by international observers to ensure compliance.

Russian Stocks, Ruble Take Hit on Uncertainty Over U.S. Sanctions


Should Russia fail to meet these criteria, the president has discretion over the severity of the next measures, requiring Mr. Trump to impose at least three of six types of additional sanctions. These include opposing any loans or other assistance to Russia by international-development banks; barring U.S. banks from issuing loans or extending credit to the Russian government; prohibiting exports of goods and technology to Russia; restricting imports of Russian goods; downgrading or suspending diplomatic relations with Russia; and suspending the authorization of Russian-owned or controlled air carriers to fly into and out of the U.S.

A spate of Western sanctions against Russia since Mr. Putin’s decision to annex Crimea in 2014 have wiped out half of the ruble’s value, reduced investment in the energy sector and crippled aluminum giant

United Co. Rusal

PLC.

The State Department declined on Thursday to provide further details on how the administration planned to tailor the potential second round of sanctions.

“That’s asking us to look into the future, and we don’t know what the future holds. That’s a hypothetical question,” Ms. Nauert told reporters.

The sanctions drew praise from House Foreign Affairs Committee Chairman

Ed Royce

(R., Calif.), who has urged the administration to respond to the poisoning.

In a March 15 letter to the president, Mr. Royce requested a formal determination of Russian responsibility and imposition of sanctions. The congressman sent a second missive on July 26, noting that the administration had exceeded the 60-day statutory limit for making this determination and urging submission of the required report to the committee by noon on Aug. 9.

“The administration is rightly acting to uphold international bans on the use of chemical weapons,” Mr. Royce said on Wednesday. “The mandatory sanctions that follow this determination are key to increasing pressure on Russia.”

But some still questioned the administration’s overall policy toward Russia after months of sometimes conflicting statements and actions.

Heather Conley,

a former deputy assistant secretary of state in the Bureau for European and Eurasian Affairs in Republican George W. Bush’s administration, characterized the latest move as emblematic of a “broader incoherence” in the U.S. approach to Russia.

Ms. Conley, who serves as senior vice president for Europe, Eurasia, and the Arctic at the Center for Strategic and International Studies, noted the two countries “don’t have that much bilateral trade, and what we do have is protected trade.” In light of those limitations, she said, the objective of the sanctions is uncertain.

“The interagency process is always tortured, on a good day,” she said. “But it’s starting to break down to a point where I’m actually very concerned we don’t have a coherent process anymore. And if we’re confusing ourselves, the signals that we’re sending to the Kremlin are very confused, may be misinterpreted, and can also lead to an escalation that we didn’t anticipate, either.”

Write to Anatoly Kurmanaev at Anatoly.kurmanaev@wsj.com