What's going on?
Late last week, the US government introduced new economic sanctions targeting high-profile Russian businessmen, their companies and government officials, sending Russian stocks overall down more than 10% and its currency (which investors buy to invest in Russian businesses) down 4% on Monday [tweet this].
What does this mean?
The sanctions are primarily intended to stop Americans from doing business with companies the US believes are engaged in “malign activity” – but the US is also threatening further sanctions against non-US citizens if they help these companies make transactions.
A number of the companies targeted deal in commodities (including metals like aluminum) priced in dollars, while holding cash mostly in Russian rubles. That means anyone doing so much as a currency exchange with these companies could find themselves in hot water with the US government.
Why should I care?
For markets: Russian stocks down, aluminum up.
Massive aluminum producer Rusal (owned by one of the businessmen on the US sanction list) was the hardest hit – its stock fell by over 25% in Moscow (and 50% in Hong Kong, where it also has shares listed). Rusal produces 6% of the world’s aluminum; disruption to its business affects the supply of the metal. This helped push up the price of aluminum (used in everything from drinks cans to cars and airplanes) by 2% on Monday.
The bigger picture: The US has Russia in its sights as well as China.
The US said these sanctions were in response to alleged Russian malfeasance in Ukraine, Syria and the West. But the timing also fits neatly with the Trump administration’s ongoing tariff battles with China, which kicked off with the US introducing import taxes on steel and aluminum at the start of March. Russia’s government called the latest sanctions “scandalous” and “illegal” and began working on retaliatory measures of its own.