Russian shares fall as US sanctions kick in

Foreign counterparties scrambled to reassess their dealings in Russia and shares fell as the effect of US sanctions on some of the country’s wealthiest men rippled through the financial sector yesterday.

Bank Rossiya, the only company to be named in the US sanctions list and described by Washington as “the personal bank for senior officials of the Russian Federation”, said that Visa and MasterCard had suspended payment processing services to its clients.

In response, Russia’s central bank announced that “if necessary” it would take “appropriate measures” to protect the interests of Bank Rossiya’s depositors and creditors.

The US imposed sanctions on 20 individuals and prepared to draw up more sweeping restrictions on sectors of the Russian economy.

Legal experts warned that European and US companies that do business with Russia and Ukraine should take action to protect themselves from the sanctions regime. "It looks like sanctions will be ratcheted up in the next few weeks and if a business does not have a contractual entitlement to suspend the contract they risk huge losses," said Tom Stocker of Pinsent Masons, the law firm.

Gas prices
Separately, Dmitry Medvedev, Russia's prime minister, threatened yesterday to raise Ukrainian gas prices and sue the country for $11 billion (€8 billion) in arrears, hours after Kiev signed a hotly contested integration deal with the EU.

Mr Medvedev, during a meeting with president Vladimir Putin and the rest of Russia’s national security council, also raised the additional $2 billion owed by Kiev to Russia’s government-owned energy company Gazprom and another $3 billion lent as part of last year’s aborted $15 billion Russian bailout of Ukraine. Mr Putin signed the laws completing Russia’s annexation of Crimea yesterday.

Shares in Novatek, Russia’s largest independent gas producer, part-owned by Gennady Timchenko, Russia’s sixth-richest man, slipped 8.6 per cent. French group Total holds a 16 per cent stake in the company.

Traders said Gunvor, the fourth-largest oil trader and co-founded by Mr Timchenko, continued to trade, although its banks were assessing what impact the US sanction announcement would have on their ability to lend to it. Mr Timchenko sold his 43 per cent stake in the oil trader to Torbjorn Tornqvist, his fellow co-founder, on Wednesday, one day before the sanctions were announced, according to the company. Nonetheless, Gunvor's bond has sold off, with yields rising from 7.4 per cent on Thursday morning to 8.8 per cent on Friday.

Gunvor share sale
A spokesman for Gunvor said Mr Timchenko's share sale agreement did not contain a clause allowing the businessman to buy back his holding at a future date.

The US Treasury on Thursday said Mr Putin "has investments in Gunvor and may have access to Gunvor funds", a claim that was strenuously denied by the company.
– (Copyright The Financial Times Limited 2014)