On 1 August 2019, the US imposed new sanctions against Russia. It was the 54th time that new sanctions from the US and the EU have been brought to bear since March 2014. Over 1-2 August, Russian equities contracted by 5.7% vs. a 3.2% drop in the MSCI EM index (all figures in US dollar terms). Is the latest round of sanctions a game-changer for Russia?
The consensus view is that Russia is not a growth story. We fully agree. Over the next three years, we expect annual sustainable free cash flow growth to be close to zero. When companies do not see many growth opportunities, they normally return cash to their shareholders or pay off debt.
On the 27 January the US Treasury Department excluded Rusal, En+ and EuroSibEnergo (ESE) from the special designated nationals (SDN) list. The regulator took this decision on 19 December last year. Within 30 days the US Congress had the chance to block this action, but failed to so.