Russia's stocks and currency were the worst performers on global markets on Monday, as President Vladimir Putin signed a decree recognizing two regions in Ukraine as independent states, a move that provoked renewed threats of severe economic sanctions against Russia.
Russian President Vladimir Putin holds a meeting of the Russian Security Council.
The ruble fell as low as 80.2 against the dollar Monday before recovering slightly to 79.7, continuing a decline that began around the time of Russia's invasion of Ukraine.
The MOEX Russia Index plunged by about 10.5% Monday afternoon compared to the previous day's close, landing at 10.4% under year-to-date and marking its biggest single drop since the invasion of Crimea.
The yield on Russia's 10-year Federal Loan Obligation bonds hit a high of 10% on Monday, as the cost of insuring Russia's debt against default rose to its highest in over a year.
Russia's largest company with a $73.5 billion market cap fell about 5% Monday compared to the previous day.
The Russian economy is dependent on fuel exports and a good sign is that the international oil benchmark rose more than 25% over the course of the year.
Russian currency.
Russia's economy has suffered as tensions around the Ukrainian border have risen. Russia canceled a weekly treasury bond auction due to market volatility. The U.S. has prepared a package of sanctions that would bar the U.S. banks from doing business with Russian banks in the event of an invasion. President Joe Biden has said that an invasion would result in the cancellation of the $11 billion natural gas line between Russia and Germany.
Russia, which relies on fuel revenues for 36% of its national budget, has been helped by rising oil prices. John Driscoll, director of JTD Energy Services, told CNBC Monday that the conflict between Russia and Ukraine could push oil to $150 per barrel. Russia depends on Russia for 34% of its natural gas and 27% of its oil, and an invasion of Ukraine could disrupt that. In January, the White House said it was looking for alternative fuel sources for Europe in case Russia cut off fuel shipments to Europe. China has absorbed billions of cubic meters of Russian natural gas since the beginning of the year. Russia's economy would be made more brittle by its dependence on fuel exports if it were forced to rely only on China.
Russia is not an economic powerhouse despite its large geographical size. Russia's GDP is less than half of Germany and less than a tenth of China.
The Economist suggests that the ruble should be valued at 23.24 to the dollar, based on the Big Mac Index.
How can Putin afford a war in Ukraine? His $130 billion gold horde helps.
Russian stocks, Ruble, and global markets are all down.
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