By John Q. Hosedrinker 
President Trump’s new tariffs and a subsequent drop in global oil prices triggered Russia’s worst stock market week in over two years, with the MOEX Russia Index falling 8.05%. The Moscow Exchange lost $23.7 billion in market capitalization over two days, impacting major companies like Sberbank, Gazprom, and Rosneft. This downturn follows a global market decline, fueled by China’s retaliatory tariffs and analysts’ increased prediction of a global recession. Russia’s heavy reliance on commodity exports makes it particularly vulnerable to these global economic shifts.
Read the original article here
Russian markets are experiencing a significant downturn, their worst week in over two years. The Moscow Exchange (MOEX) saw a staggering 2 trillion ruble ($23.7 billion) drop in market capitalization over just two days, shrinking from $651.8 billion to $627.9 billion. This dramatic fall is attributed to a confluence of factors, primarily the impact of global tariffs imposed by the previous US administration and a simultaneous collapse in global oil prices.
The MOEX Russia Index, tracking Russia’s largest publicly traded companies, plummeted by 8.05%, its most severe drop since September 2022. Individual companies suffered substantial losses; Sberbank, Gazprom, VTB, Rosneft, and Lukoil all experienced significant share price declines, mirroring the overall market trend. Other major players like Mechel, Aeroflot, and Novatek also felt the impact. This situation has led some observers to describe it as a “massive crisis unfolding.” The relatively small overall size of the Russian market, estimated at around $650 billion, makes it particularly vulnerable to these external shocks.
The situation is complex, and the relationship between the US tariffs and the Russian market downturn isn’t straightforward. While some have pointed to the tariffs as the primary culprit, it’s crucial to remember that no additional tariffs were specifically targeted at Russia during this period. Therefore, the impact is likely indirect, stemming from the broader global economic consequences of those tariffs rather than a direct punitive measure against Russia.
Another contributing factor is the substantial impact of the ongoing war in Ukraine. Russia’s massive mobilization effort, aiming to compensate for military losses, has significant economic implications. The need to recruit hundreds of thousands of soldiers, potentially drawing from the white-collar sector, puts additional strain on already struggling businesses and further destabilizes the economy. The increased military spending diverts resources away from other sectors and contributes to economic instability.
The sharp drop in global oil prices also plays a substantial role. This drop, partly driven by increased production from OPEC nations, further exacerbates the economic difficulties faced by Russia, a major oil exporter. The lower oil prices significantly reduce Russia’s export revenue, impacting the government’s budget and the overall economic performance. This makes the situation even more precarious than the direct impact of the tariffs alone would suggest. The decline in oil prices was not anticipated and appears unrelated to any specific US policy, adding another layer of complexity to the unfolding economic crisis.
It’s important to approach this situation with a measured perspective. While some celebrate the negative economic impact on Russia, it’s crucial to remember the real human cost of such volatility. The economic downturn affects everyone, from large corporations to ordinary citizens, and the consequences can be severe. The level of market fluctuation is concerning, and the use of economic policy as a political tool deserves careful consideration and a more balanced approach. The massive scale of economic losses, potentially reaching into trillions, highlights the significant global ramifications of these intertwined events. The situation underscores the interconnectedness of the global economy and the far-reaching consequences of geopolitical conflicts and trade policy decisions.