Russia ETF down 45%: sanctions should include Russia’s energy sector

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The iShares MSCI Russia ETF (ERUS) is down another 10% on Tuesday after payments giants Mastercard and Visa barred a list of Russian financial institutions from their networks.

The announcement complies with the broader sanctions the West imposed on Moscow, which hampered its access to its foreign reserves and removed some of the Russian banks from the global payments network, SWIFT.

WSJ author calls for broader sanctions against Russia

While the sanctions are already quite stringent, a column in the Wall Street Journal calls for the need for them to include Russia’s energy sector as well. On CNBC’s “Worldwide Exchange”, author Rochelle Toplensky said:

What we’re seeing is that Europe pays about $300 million a day for gas purchases to Russia. And the West pays about another $350 million. So, despite these sanctions, that money is just coming in and fuelling Putin and his actions.

Such sanctions, however, could fuel oil prices and aggravate consumer inflation in the West. Of concern is also the fact that Russia could continue or even expand on selling its oil to China. So, how much of a shock could it be for Russia if its energy sector is slapped with sanctions.

iShares Russia ETF almost halved in less than a week

The iShares MSCI Russia ETF has almost cut in half since Thursday morning when Russia launched a full-scale invasion of Ukraine. The MOEX Russia index continues to remain closed amidst the Ukraine war.

This morning, BlackRock – the New York-headquartered multinational investment company behind iShares ETFs said:

Liquidity of Russian securities has experienced significant declines. Therefore, the iShares MSCI Russia ETF has temporarily suspended creation of new shares. BlackRock cautions investors that ERUS may not meet its investment objectives, experience increased tracking error, significant premiums or discounts to its net assets value, and/or have bid-ask spreads wider than its historical average.

The VanEck Russia ETF has also crashed nearly 50% in less than a week. European energy majors, including BP plc, are quitting exposure to Russian assets in response to the Ukraine war.

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