Ukraine crisis: Moscow spends $10bn in bid to stabilise rouble after sell-off

Investors panic at prospect of military conflict in Ukraine, pushing currency to record low

Russia spent a fifth of the entire cost of the Sochi Olympics within a few hours on Monday in a desperate attempt to prop up the collapsing rouble. But investors still sold the currency down to record lows in panic at the prospect of an escalation of the Ukraine conflict.

Russia's central bank in Moscow bought an estimated $10bn (£6bn) of roubles in the market in an attempt to stave off a collapse in its value. Nevertheless, the currency fell to its lowest-ever levels against the euro and the dollar.

It was not just the rouble from which investors fled. The Moscow stock market and Russian government bonds crashed too, with the Micex stock index losing nearly $60bn on paper, or more than 10 per cent.

Russia spent a reputed $51bn on hosting the Winter Games. "Investors held a selling spree of Russian assets," Dmitry Kulakov, a stockbroker at the Olma investment house, said, adding they were "frightened" by the situation around Ukraine.

There was also collateral damage for non-Russian companies in the Moscow-shares rout. BP, one of Britain's biggest companies, saw its shares tumble due to the decline in Russian oil giant Rosneft, of which it owns nearly 20 per cent. The British company's shares fell more than 2 per cent by the close of trading on Monday night.

It was far from alone. Shares across the world fell from their recent record-high levels as investors sought safer havens for fear of escalation of the political crisis.

Read more: Ukraine appeals to Moscow: 'This is a crime and you will answer for it'
Russia dismisses '3am ultimatum' as 'total nonsense
Latest: Ukraine 'on the brink of disaster' as Russian troop movements prompt stand-off
Ukraine crisis: Nato ‘betrayal’ and Brussels rhetoric pushing Vladimir Putin to act
Ukraine crisis: UK ministers to boycott Paralympics in response to Russia’s ‘declaration of war’

Energy and grain prices leapt amid concerns about production shortages. Ukraine is the world's third-biggest corn exporter and Russia is the biggest seller of oil and gas overseas.

More than a third of Europe's oil and gas from Russia is routed through pipelines in Ukraine. Supplies have not been disrupted yet, although Russia has used its gas as a weapon in previous political rows. Gas and oil prices rose sharply, while gold and the yen - traditional safe-haven investments in times of geopolitical turmoil, also rose.

Economists said sustained higher commodities prices could trigger potentially damaging global inflation if the crisis continued.

Edward Meir, an analyst at the global commodities group INTL FCStone, said: "If the situation is not defused, it has the potential to spark wider economic turmoil through higher oil and gas prices, trade sanctions and a general ratcheting-up of global tensions that could endanger the fragile global economic recovery."

However, the threat of sanctions for Russia could be a long-term problem. Most traders were convinced the impact for the rest of the world's stock markets would not last.

"The Ukraine news is troubling, but there are always global risks and short-term fluctuations because of these risks," one fund manager told Bloomberg News.

Russia's central bank not only spent billions propping up its currency, it also moved to protect it by increasing interest rates in the hope that would be enough of a lure to prevent some of the flight of investors. It still had plenty of firepower to buy more roubles, with nearly $500bn in gold and foreign-exchange reserves. That was preventing further slides in the value of the currency, traders said.

In Russia, meanwhile, some high street currency exchange bureaus reported running out of dollars as Russians rushed to exchange their roubles.

Analysts were attempting to calculate the impact of the situation on the Russian economy, given the increasing likelihood of economic sanctions. While the European Union would not be likely to stymie its own economies by putting sanctions on Russian energy, other products could be targeted as well as potential asset freezes on selected individuals and companies.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

£16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

Day In a Page

Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones