The situation is far from resolved, but markets are reacting as the possibility of new forms of agreements between the two countries emerges. Of course, much of the credit for the strengthening of Russian assets goes to Russia itself because of its actions to save its economy.
The ruble has been boosted in recent weeks by capital controls as well as President Vladimir Putin’s demand that European buyers of Russian natural gas pay for it in rubles.
But Europe has vowed to remain united against Moscow’s demand as the threat of an imminent supply stoppage has eased.
According to Promsvyazbank analysts, the ruble should be in the 80-90 per dollar range in the next two weeks.
Russia must pay its debts
The market has also closely scrutinized Russia’s ability to continue servicing its foreign debt. On Monday, Russia is due to pay $552 million of the 2022 Eurobond and $84 million in coupon payments on the 2042 Eurobond.
Nervous trading continued in the stock market, but almost all blue chips were in the black after the market reopened last week after a nearly month-long break.
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Shares of Russia’s second-largest sanctioned lender VTB outperformed the market, gaining 7.5% on the day. Its peer, No. 1 lender Sberbank, rose 4.8%.
The situation needs to be monitored and no statements or information should be taken as definitive. Given the news about the Russian economy, we also need to be cautious, as many of the things associated with Western sanctions will have big long-term effects and will not fully manifest themselves in the short term.