Russia’s status as the latest darling of emerging market investors has hit a bump. Russian stocks, bonds, and the ruble have gotten pummeled ever since the United States levied a fresh round of sanctions on the country last Friday. U.S. officials cited several Russian aggressions as the reason for these additional sanctions, including election meddling, cyberattacks on U.S. infrastructure, a recent nerve-agent attack in the UK that left a former Russian spy and his daugher in critical condition, and military actions in Syria and Ukraine.

While Russia has weathered several rounds of Western sanctions since 2014, these are the toughest imposed by the U.S. to date, and seem carefully designed to impact individuals with close ties to President Vladimir Putin. The sanctions freeze any U.S.-based assets of the blacklisted individuals and entities, constrain their ability to access Western financing, and forbid Americans from doing business with them – including trade and investments. The ban also extends to non US-citizens who “knowingly facilitate significant transactions, including deceptive or structured transactions, for or on behalf of any person subject to US sanctions.” This new provision by the U.S. Treasury significantly increases the impact of the sanctions.

The announced sanctions triggered a broad selloff across the Russian markets. The ruble has declined more than 8% over the past two days to a 16-month low of R62.87 per dollar; Russian equities, as represented by the MOEX, also tumbled more than 8%, recording their sharpest drop since 2014 when Russia annexed the Crimea; The yield on Russia’s 10-year sovereign bond jumped more than 30 basis points as the country’s credit risk was repriced. The severity of the downdraft can be attributed to several factors . . .

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