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
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

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

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Graduate Application Support Analyst

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Christine McCleave: FP&A Analyst

£36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn