Russian currency crashes 14% on new bank sanctions over Ukraine invasion
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The latest round of US sanctions has limited the ability of the Russian central bank to defend the rouble, sending the currency plunging and increasing the economic pressure on the country for its invasion of Ukraine.
The rouble crashed at one stage by 30% before paring some of the sharp losses to trade 14% down at 97.76 against the dollar. The latest ban, along with the planned isolation of Russian banks from the global Swift bank messaging system, are designed to punish all Russian firms, with the exception of oil and gas firms.
Capital Economics in London said that there is only a small amount of exports from Europe to Russia, but it will take time to assess whether there will be a hit to European manufacturing supply chains because Russia is a key global producer of palladium. The metal is used in many products by car makers and in electronics.
The Russian central bank announced a slew of measures to shield its economy, including more than doubling its key policy rate and introducing capital controls after sanctions cut some of Russia's banks off the Swift financial network and limited Moscow's access to its dollar reserves.
The US blocked any transactions involving Russia's central bank. The ECB put banks with close ties to Russia, such as Austria's Raiffeisen Bank International and the European arm of VTB, under close observation following the sweeping financial sanctions by the West.
The ECB's measures include that those banks report their liquidity more frequently and update the central bank's supervisors in Frankfurt and Vienna on the impact of the sanctions on their assets and operations in Russia and Ukraine, the sources said.
Raiffeisen Bank International's chief executive Johann Strobl said in a statement to Reuters that RBI's Russian subsidiary "had a very strong liquidity position and (was) recording inflows". The VTB did not respond to a request for comment.
Shares in RBI, one of 115 major banks that the ECB supervises directly, fell 14% in trade in Vienna, having almost halved in value since February 10.
The lender, which focuses on Eastern Europe and is part of Raiffeisen Banking Group Austria, had 11.5% of its loan book in Russia last year and valued its stake there at €2.4bn. It also owns smaller banks in Ukraine and Belarus.
VTB Bank Europe is a unit of Russia's second-largest bank which focuses on European companies which want to settle transactions in Russia. It is based in Germany, where it is supervised by local authorities and also takes deposits.
Markets signalled that Irish households and businesses face continuing rises in energy bills through the summer. The price of European wholesale gas for delivery in July and August rose, with the August contract up 10% to €100 per megawatt-hour.
Brent crude jumped by almost 2.5% to $100.25 a barrel late Monday, after touching a high of $105.07 a barrel in early trade.
"Growing concerns about disruptions to Russian energy supplies are pushing oil and gas prices up sharply," Commerzbank analyst Carsten Fritsch said.
"Russia could retaliate to these harsh measures by reducing or even completely suspending energy shipments to Europe," Mr Fritsch said.