Russia's stock market plunges after attacks on Ukraine

Worst-case scenarios have become reality. Russia's president, Vladimir Putin, has attacked Ukraine in what has already been called a "massive attack", an offensive that began in the early hours of Thursday morning and has already left several people dead as a result of the bombings.

These attacks are beginning to have their first effects. Among them, the economy has suffered one of the most worrying consequences after the gas market has shot up by 30% while the price of oil continues to rise by 6%. Stock markets continue to suffer severe falls, with the most severe being recorded on the Moscow stock exchange with a 25% drop.

As for the Russian energy sector, the Russian gas company Gazprom has been one of the biggest victims, plummeting by 30%. Along with Gazprom, the oil company Lukoil has suffered a 25% fall, which directly affects the rise in oil prices. In this line, the head of commodities strategy at ING Groep NV, Warren Patterson, quoted by the Bloomberg agency, has indicated that "the worsening situation in the Ukraine crisis has pushed crude oil prices to the level of $100 per barrel. The oil market will now wait to see how Western countries will respond to the latest Russian measures".

The same slump has been experienced in the currency market where the rouble has been hit hard after depreciating by more than 8% against the dollar. As for the euro, the Russian currency has fallen by 7% to 98.5 roubles per single currency.

In view of this situation, the Central Bank of Russia has initiated a series of interventions in the foreign exchange market and has approved a series of operations that promise to provide additional liquidity to the banking sector. In addition to these sectors, the raw materials market, in which Russia is a key supplier, has soared in both the energy and primary sectors, where the price of wheat has risen by 6%, followed by corn and soybeans, which continue to rise by 5%.

In this sense, both Russia and Ukraine export 29% of the world's exports of wheat, corn (19%) and sunflower oil (80%), a market in which Egypt and Turkey are the largest importers.

Europe is preparing to rein in Russia with a major sanctions package. European Commission President Ursula Von der Leyden has reported that a series of "tough sanctions targeting strategic sectors of the Russian economy and blocking its access to technologies and markets that are key to Russia are being approved. We will weaken Russia's economic base and its ability to modernise. In addition, we will freeze Russian assets in the European Union and block Russian banks' access to European financial markets," she said.

Von der Leyden also argued that "millions of Russians do not want war" and urged Putin to stop "putting the future of Europe at risk" and asked him to "leave the territory". We will not allow you to replace the rule of law with the rule of force," she said. You must not underestimate the strength of our democracies".

On the other hand, the head of European diplomacy, Josep Borrell, points out that "we are at the worst moment since the end of the Second World War" since "a nuclear power has attacked its neighbour and threatens anyone who helps it. It is the biggest violation of international law and is costing lives with incalculable consequences. The EU wants to respond".

Despite the sanctions, however, Russia has been preparing for a long time to deal with these repercussions. Putin's government has managed to accumulate significant foreign currency reserves and has also cut back on some of its budgets to keep its economy in check. Last January Putin's international reserves of foreign currency and gold reached record levels at over $630 billion, which may help withstand a sanctions regime. 

Even so, it is worth remembering that despite Russia's significant military investment in recent years and its status as a major nuclear power, the Russian economy is stagnating, and its GDP is failing to grow by more than 1 or 2 % per year. Russia's attacks are in no way positive for the world, but neither are they positive for Russia, a country that is trying to regain the "honour of empire" using coercive tools that, while not achieving their goal, will serve to destabilise Europe, another of the Kremlin's objectives.