The Russian stock market fell on Thursday and the rouble hit a two-year low after the Trump administration prepared sweeping new sanctions against Russia in response to the poisoning of a former Russian agent on British soil. Moscow Exchange’s benchmark dollar-denominated RTS index shed 3.5 per cent in early trading on Thursday to its lowest level since April, while the rouble-denominated MOEX index fell as much as 1.5 per cent. The rouble weakened to 66.7 to the dollar, the lowest since August 2016, before easing slightly to trade at 66.2 at 11.15 Moscow time. The slide in Russian assets came after the US government said late on Wednesday that new sanctions would be applied against Russia from August 22.
The measures, which would block Russian state imports worth hundreds of millions of dollars, were a response to the poisoning of the British citizen and former Russian agent Sergei Skripal and his daughter Yulia with a military-grade nerve agent in the UK in April. The UK has called the attack on the Skripals the first offensive use of chemical weapons in Europe since the end of the second world war and blamed the Russian government. The incident has already severely strained Russia’s ties with western countries, triggering tit-for-tat expulsions of large numbers of diplomats.
Following Britain’s argument that the attack was a state-sponsored chemical weapons attack, the Trump administration said the sanctions would be enacted under the Chemical and Biological Weapons Control and Warfare Elimination Act (CBW Act). Washington demands that Russia provide “reliable” evidence that it is no longer using chemical or biological weapons and allow inspections by the UN-backed chemical weapons watchdog. The US said that if Moscow failed to comply with those demands, another set of “more draconian” sanctions would follow.