Will Nerve Attack Impact Markets?

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The case of Sergei Skripal, the former Russian spy poisoned with a nerve agent in the English town of Salisbury, has dominated international news over the last few days. The UK has now announced retaliatory sanctions against Russia and many other countries are expected to join them. In this article, we’ll take a look at what these sanctions may mean for stock and currency markets in Russia, Europe and beyond.

Moves In Russia

Despite all the media attention that has been lavished on Russia over the past few years, the Rouble has been relatively stable. Therefore, it’s unlikely that any new round of sanctions would have a major impact on the Russian currency as such actions appear to have already been ‘priced in’ by investors.

 

UK sanctions could have a much bigger impact on individual Russian investors, many of whom have major investments in the country or have a residence there. This could be bad news for individual companies that are reliant on Russian investment or custom, although the overall effect on the UK market is likely to be small.

USD/RUB Price Chart

Geopolitical Repercussions

Although the EU has pledged its full support for Britain in this matter, it is likely to be reluctant to impose any major sanctions on Russia unless its hand is forced. This is because much of the continent is reliant on gas that is imported from Russia (reliance has increased in recent years) and Russia has been willing to shut off gas supplies to countries that it regards as aggressors in recent years.

This will further minimise the impact that any sanctions could have on the British economy as without broader international support, they are to make much of a dent in Russia’s economy.

International Support

The impact on Russia’s international standing, however, could be bigger. The World Cup is hosted in the country this year. While there is no talk of team boycotts, the whole affair casts a shadow over FIFA’s decision to host the tournament in the country.

The overall impact that any sanctions will have on Russia is dependant on the international support that Britain can muster. Without it, any move is likely to be a damp squib.