The ruble weakened for a third day and the Micex equities gauge declined as President Vladimir Putin said Russia can’t subsidize Ukraine’s economy “forever” amid continued unrest in the east of the country.
The ruble retreated 0.1 percent versus the central bank’s target basket of dollars and euros to 41.8325 by 6 p.m. in Moscow, when the central bank stops its market operations. The Micex Index dropped 0.3 percent to 1,348.85, having earlier decreased as much as 1.1 percent, and yields on 10-year ruble-denominated debt fell one basis point to 8.89 percent.
Russia may seek advance payments for delivering natural gas to Ukraine, which owes $2.2 billion for energy, or halt supplies, Kommersant reported, citing an unidentified state official. Putin has ratcheted up pressure after annexing Crimea last month, ignoring sanctions from the U.S. and European Union and massing troops along Ukraine’s eastern border.
“Investors are betting on a further increase of tensions, that Russia might send forces to eastern Ukraine,” Andrey Vashevnik, who manages $25 million as chief investment officer at R&B Investment Fund Ltd. in Moscow, said by phone. Gas producer OAO Gazprom “is losing its appeal because of fears it may lose Ukraine as a market,” he said. Gazprom fell in Moscow and London today.
Russia can’t subsidize Ukraine’s economy forever, Putin said at a meeting with the government today. The country will hold talks with Ukraine and may demand prepayment for gas if no agreement is reached, he said.
Ukraine won’t import Russian gas until a price is agreed, Energy Minister Yuri Prodan told reporters in Kiev. Ukrainian government bonds fell, with the yield on debt due 2023 rising 4 basis points to 9.5 percent, the highest in more than two weeks. The hryvnia depreciated 3.1 percent versus the dollar.
An index of 20 most actively traded developing-nation currencies was little changed at 92.6212, erasing earlier gains and snapping three days of advances. The ruble weakened less than 0.1 percent against the dollar to 35.70 in Moscow and by 0.1 percent versus the euro to 49.3155.
“Foreign politics is still keeping a lid on the ruble,” Alexei Egorov, an analyst at OAO Promsvyazbank in Moscow, said by e-mail. “People are wary of a Crimea repeat.”
Ukrainian officials are struggling to stem unrest in the eastern region of Luhansk and Donetsk, where pro-Russian separatists continue to occupy official buildings. U.S. Secretary of State John Kerry joined Ukraine in accusing Russia of using “special forces and agents” to fuel the protests.
“Today is relatively calm, given no further escalation in eastern Ukraine,” Vladimir Miklashevsky, a strategist at Danske Bank A/S in Helsinki, said in e-mailed comments. The “unresolved situation there and threat of massive sanctions from the EU toward Russia’s top officials and business representatives keeps investors’ fingers rather on the sell button,” he said.
First Deputy Prime Minister Igor Shuvalov yesterday urged companies to delist shares from overseas exchanges to trade in Moscow as international sanctions mount against the country.
Gazprom fell 0.7 percent to 132.31 rubles in Moscow trading and 1.5 percent to $7.42 by 4 p.m. in London. OAO Lukoil, Russia’s second-biggest oil producer, lost 1 percent in the nation’s capital and 1.7 percent in London.
“Shuvalov’s comments about delisting stocks from foreign exchanges have spooked some investors,” Vashevnik said.
Russian capital outflows in the first quarter were the largest since the last three months of 2008, reaching $50.6 billion, more than double the $17.8 billion that left in the previous quarter, the central bank in Moscow said in a statement on its website today.
OAO Dixy Group jumped 13 percent to 310.50 rubles, the most since May 2009. The food retailer said today it increased its fourth quarter profit sixfold to 1.7 billion rubles. OAO Magnit, the nation’s biggest food retailer, tumbled 3.2 percent to 7,980 rubles.