Following Donald Trump’s underdog election victory over Hillary Clinton to secure the White House, a lot of chatter was aimed at leaked emails which hurt the Clinton campaign. Rumors abounded that the Russian government interfered with the election by hacking Clinton’s emails and releasing those emails strategically to maximize the effect of the leak and help Trump win office. Now, those rumors have been verified by the government and President Obama has retaliated by issuing executive orders to grant more authority for sanctions against Russia. How will Russia respond? What can investors expect as a result?
Russia Has Been Sanctioned By The USA, But Will Putin Retaliate? How?
On Thursday, President Obama hammered Russia with sanctions stemming from the U.S. government’s determination that Russian intelligence used cyber attacks to affect the course of the U.S. presidential election. In response, Russian President Vladimir Putin has said he would retaliate in a way which would create “considerable discomfort in the same areas” for the U.S. What exactly were Obama’s sanctions? Will Putin risk a warming relationship with the incoming president?
Obama sanctioned nine entities and individuals — two Russian intelligence services (the GRU and the FSB); four individual officers of the GRU; and three companies that provided material support to the GRU’s cyber operations. In addition, the Department of the Treasury is designating two Russian individuals under a pre-existing portion of a former Executive Order for using cyber-enabled means to cause misappropriation of funds and personal identifying information. As a result, all sanctioned Russians and their families were given 72 hours to leave the U.S. The Department of State is also denying Russian access to two Russian government-owned compounds in Maryland and New York. Additionally, the U.S. government will also issue a Joint Analysis Report (JAR) by the Department of Homeland Security and FBI containing declassified technical information on malicious Russian cyber activity.
Obama did not hold back on sanctions, saying the Russian government tried to interfere with the most democratic aspect of U.S. life. Russia has denied any involvement, but Putin has said he will formulate a plan to retaliate in the same areas. However, Trump has, on several occasions, praised Putin and Russia. With Trump being sworn into office in one month, Putin may actually show restraint and hold off on retaliation. Or he may retaliate in a less severe manner. Trump can overturn Obama’s, but the current administration is strongly urging him to not do so.
Here's a report from CBS News regarding Putin's reaction to U.S. sanctions:
In all likelihood, tensions will heat up over the next month, and start to cool once Trump takes office. Removing Obama’s sanctions won’t be high on Trump’s list, but he’ll find a quiet way to do so. In the meantime, what is more likely than Russian sanctions against American diplomats and individuals in Russia is stricter enforcement of policy on American companies within Russia. Investors can expect rising hostility to spill over into the market with American companies in Russia and Russian companies traded publicly, such as Mechel PAO (MTL) and Mobile TeleSystems PJSC (MBT) to see shares slide down.
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