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U.S. Funds Nervous About U.S. Sanctions On Russia

Several U.S. funds are concerned about the investment risk posed by potentially broad economic U.S. sanctions on Russia in response to Moscow’s actions in Ukraine.

According to Reuters, securities filings submitted by major funds show that fund managers believe that there is a major downside risk to investments in Russian assets. If the U.S. and Europe issue biting sanctions, they could cut into the Russian stock market, contribute to a devaluation of Russian currency, lead to a credit downgrade, or cause asset freezes.

These cautionary notes were found in filings submitted to the SEC by, among others, ING Russia Fund ($124.6 million) and SSgA Emerging Markets ($841.1 million). The filings were in response to U.S. securities regulators who inquired about exposure to Russian assets. The funds involved and the Securities and Exchange Commission all declined to comment.

Over the weekend, members of the U.S. Senate Foreign Relations Committee -- one of them ranking Republican Bob Corker (Tennessee) -- called for strong U.S. sanctions on Russia’s banking and energy sectors. Committee member Chris Murphy (Democrat-Connecticut) told NBC’s Meet the Press on April 20, “I think the time is now to rapidly ratchet up our sanctions, whether it’s on Russian petrochemical companies or on Russian banks.”

Related Article: Where Would Increased U.S., EU Sanctions on Russia Leave Energy Investors in Ukr

The markets have experienced a roller coaster ride in terms of the geopolitical risk over the last several weeks, as diplomatic moves that seemingly reduce tension give way to renewed tension on the ground in Ukraine.

The latest whipsaw occurred as an international agreement reached in Geneva on April 17 appeared to ease tension. But over the weekend, violence was reported in eastern Ukraine, where three people died in a shootout. Russia has now accused Ukraine of violating the accord. “Steps are being taken – above all by those who seized power in Kiev – not only that do not fulfill, but that crudely violate the Geneva agreement,” Russian Foreign Minister Sergei Lavrov said on April 21.

For its part, the Ukrainian government blamed the incident on outside forces backed by Russia. Two more bodies were found in a river in Donetsk on April 21 and appeared to be pro-Russian militants, according to the New York Times.

There are fears that the violence could lead to further confrontations between Russia and the West, which would raise the likelihood of economic sanctions and increase the investment risk to any funds exposed to the Russian economy.

By Charles Kennedy of Oilprice.com

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  • Constantine on April 22 2014 said:
    Dear Arkadiy, you are a liar !! Russia has brutally annexed peninsula of Crimea (the territory of independent Ukraine) using its military forces and holding illegal "referendum" - Russia will pay big price for that..
    Now, Arkadiy, remember who was the previous president and government in Ukraine (embezzlers yanukovich, azarov, lebedev -defense minister of Ukraine and the citizen of Russia same time,and many more persons... All of them were russian FSB agents who tried to destroy Ukraine, it's army, economy, patriots, territorial entity from inside for many years ahead!! This was a russian scenario planned by Russia's president with his FSB many years ago, to enslave Ukraine (in a new USSR) or to destroy it in case Ukraine's pro-western vector.
    Now Russia tries to play same game of annexation (as in Crimea) in eastern part of Ukraine, trying to show it to the globe as a split of Ukraine.. The civilized world sees and understands all and must punish Russia for that with sanctions!!
    Russia must pay the highest price ...
  • Arkadiy on April 22 2014 said:
    Dear Gentleman,

    what kind of Russian's actions do you realy see in
    Who did visited Maidan a lot of times?- Viktoria Nuland and other Western politicians! Who did visit Kiev a week ago? Director of CIA! What did he do there?! Right, he just visited for sightseen of Kiev!
    U.S. actions did provoked the split of Ukrain!
    And Russians just opened the door for the Crimea to
    come in!
    Dear friends, mind yr own business in America! You do not have the exclusive rights to decide what is black and what is white! You are trickers! Do not
    touch Russia. You demonstrated yr "success" to export yr Western Democracy values to Iraq, Afganistan, Serbia! But in reality the American companies like Halliburton are beneficiaries of such actions!

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