The Trump administration’s new sanctions on Russian oligarchs and top government officials began to bite on Monday as the rouble suffered its biggest daily fall in more than three years, the main Russian stock index slumped and investors dumped shares in businesses controlled by Oleg Deripaska.
Russia’s currency briefly dipped more than 4% before recovering slightly to trade at 60.42 to the dollar on Monday evening, down 3.8%, its biggest daily percentage fall since January 2015.
The value of Deripaska’s aluminium producer Rusal halved in Hong Kong and more than 40% was wiped off the value of his London-listed EN+ as investors took fright at the potential impact. Shares in Rusal and EN+ had already fallen sharply on Friday in response to the sanctions, which were announced towards the end of trading in London.
The Russian stock market also fell heavily. The main RTS index dropped 11%, affecting companies not caught by the sanctions. The price of aluminium jumped as traders worried Rusal would be excluded from supplying the market.
The firm, which produces almost 6% of the world’s aluminium, said the sanctions could cause technical defaults on bank loans and some credit obligations. Both Rusal and EN+, Deripaska’s holding company, said the sanctions could be “materially adverse to the business and prospects” of the companies.
Rusal and seven other companies linked to Deripaska were the main targets when the US imposed sanctions designed to punish Vladimir Putin’s inner circle for “malign activity”, including support for Bashar al-Assad’s government in Syria and interfering with the US election in 2016. Rusal sells more than 10% of its aluminium to the US.
The sanctions freeze any assets that those targeted have in US jurisdictions and bar Americans from doing business with them. By making it virtually impossible for Deripaska’s businesses to trade in US dollars, the measures threaten the empire of one of Putin’s closest allies.
The sanctions could also threaten a tentative revival in Russia’s economy, which had only just started to recover from those imposed in response to its annexation of Crimea in 2014. The latest sanctions affected companies such as Sberbank, whose shares fell 17% in Moscow. The state-controlled bank is seen as a barometer for the wider Russian economy.
Evraz, the steel company controlled by the Chelsea football club owner Roman Abramovich, was the biggest faller in the FTSE 100, dropping almost 15%. Polymetal, a Russian miner listed in London, was the biggest FTSE 250 faller, down 18%.
Concerns also spread to Glencore, the FTSE 100-listed mining and energy giant. Glencore is one of Rusal’s biggest investors and buyers of its aluminium, and its chief executive, Ivan Glasenberg, sits on the Rusal board. Glencore shares fell 3.4% to a four-month low.
EN+ said its annual report might be delayed and that its independent director, Dominique Fraisse, had quit on Friday after less than four months in the job. The company floated its shares in London in November, raising $1bn (£710m), despite concerns that it could face sanctions related to Deripaska’s ties to Putin.
Deripaska, whose wealth Forbes magazine estimates at $6.7bn, meets Putin regularly and has said his own interests cannot be separated from those of the Russian state. He features in Robert Mueller’s investigation into Russian meddling in the US election because of his ties to Paul Manafort, Donald Trump’s former campaign chairman.
Russia’s prime minister, Dmitry Medvedev, told his government to draw up possible retaliatory steps. He said the new US sanctions were unacceptable and illegitimate, and that the government would come up with plans to support the companies affected.
The Kremlin spokesman, Dmitry Peskov, said Moscow was watching events on the markets closely but that an assessment of the impact of the sanctions would take time. “The situation is pretty egregious from the point of view of legality, it tramples on all kinds of norms, and so a thorough analysis is necessary,” he said.