Lock, stock, and barrel
Stocks plummet and oil prices collapse in response to tariffs
Hello from the Bear Market Brief.
This week in the news:
President Trump’s sweeping tariff measures caused stocks to plummet and oil prices to collapse, negatively affecting the Russian economy.
The State Duma adopted in the first reading amendments to Russian electoral law that will increase the prevalence of electronic voting.
The nationalization of privately-owned companies continued with the seizure of Nizhpharm, and shares of the St. Petersburg Oil Terminal.
— Sara Ashbaugh, Editor in Chief
Economic turmoil
Ripple effects from the U.S.’s new sweeping global tariff measures are posing a significant threat to the Russian economy. Although President Trump did not impose new tariffs on Russia directly, the economic fallout from his “Liberation Day” announcement has sent Russian markets reeling. Moscow Exchange (MOEX) companies’ market capitalization decreased by over 2 trillion rubles ($23.7 billion) between Trump’s announcement on Wednesday and close of trading on Friday. The MOEX Russia Index, which tracks 43 of Russia’s largest publicly-traded companies, fell by 8.05% last week and continued to decline this week. On Monday, it dropped 3.91% for its 14th consecutive day of losses. Despite Trump’s abrupt reversal on Wednesday—pausing the so-called reciprocal tariffs for 90 days—the MOEX Index was down 3.69% at close of trading, hitting a new three-month low.
In addition to plummeting stocks, Trump’s trade war has also affected the price of oil. As fears of a global recession loom, oil prices have slowed in response. Brent crude oil fell below $63 per barrel this week for the first time since 2021. Urals crude, Russia’s main export blend, has dipped to almost $50 per barrel, far below the $70 per barrel benchmark used to estimate Russia’s 2025 federal budget. This comes after the ruble has strengthened against the U.S. dollar in recent weeks, which puts further strain on export-related revenues of the Russian federal budget. On April 7, the price of Urals crude was $51.54—the lowest it has been in almost 2 years. Energy revenue makes up approximately 30% of Russia’s total state income, making a dip in oil prices highly destabilizing. Oil and gas revenues were expected to add 10.93 trillion rubles ($130.9 billion) to the federal budget in 2025, helping to fund defense spending on Russia’s war in Ukraine. However, oil revenue was already down 10% year-over-year during the first quarter, and additional declines are now all but guaranteed. Central Bank Governor Elvira Nabiullina noted the risks of lower energy prices during a meeting with the Communist Party at the State Duma. An increase in tariffs “usually leads to a decline in world trade, the world economy, and, possibly, demand for our energy resources,” she said. Lower oil prices may also lead to a collapse in the ruble exchange rate, further weakening the Russian economy. Additionally, last week, a bipartisan group of U.S. senators proposed introducing a 500% tariff on countries that buy Russian oil, gas, and uranium, in case the Kremlin refuses to engage in negotiations about the war in Ukraine.
Russian officials have spoken out about the trade war in a rare instance of criticism against President Trump. Foreign Ministry spokesperson Maria Zakharova expressed “serious concern,” saying that the tariff announcement “demonstrates that Washington no longer considers itself bound by the norms of international trade law.” Kremlin spokesperson Dmitry Peskov called the situation “extremely turbulent, tense, and emotionally charged” and said that Russian authorities would do everything they could to “minimize the consequences of this international economic storm.”
— Sara Ashbaugh & Andras Toth-Czifra
U.S. and Russian delegations arrived in Istanbul on Thursday for a second round of talks aimed at restoring embassy operations between the two countries. The meeting was led by Alexander Darchiyev, Russia’s newly-appointed ambassador to the U.S., and Sonata Coulter, U.S. Deputy Assistant Secretary of State for Russia and Central Europe. The discussion reportedly centered around practical concerns, including financial services, direct air travel, and visa processing for diplomats, as well as restoring Russian access to six diplomatic properties confiscated by U.S. authorities. Ukraine was “absolutely not” on the agenda, according to the U.S. State Department. The two delegations agreed to reach “mutually acceptable solutions” by the next round of consultations, the Russian Foreign Ministry said. (photo: TASS)
Changes to electoral legislation
The State Duma adopted in the first reading amendments to Russia’s electoral legislation that will affect the way next year’s federal legislative elections will be conducted. The most important amendment concerns electronic and online voting, whose role will be further strengthened. According to the first-reading version of the amendments, which may still change, in regions where electronic voting is introduced, the use of paper ballots may be completely eschewed. This was already the case in Moscow’s municipal assembly election in 2024. The Russian capital—which uses a separate electronic voting platform—has been used as a pilot project over the past years for the rollout of electronic voting. Studies have shown a strong pro-Kremlin bias in electronic votes, which, especially for votes cast online, were difficult or impossible for observers to verify. Electronic voting also likely makes electoral engineering techniques such as coerced voting or ballot stuffing (which political operatives have already been using “offline”) more efficient. The independent electoral observation network “Golos” has also criticized online voting for the fact that its rules are laid out by the Central Electoral Committee rather than the law. Additionally, the new amendments will make it possible for the authorities to hide evidence of fraud in individual voting stations by pooling votes cast electronically and online.
The amendments to the law also prescribe that Russian citizens living abroad will be only allowed to vote for federal party lists in the future and not for candidates running in single-mandate districts. This reduces opportunities for protest voting, such as the late Alexei Navalny’s “Smart Voting” initiative, which asked voters to support the strongest nominally-opposition candidate in single-mandate districts in hopes of overwhelming candidates from the ruling United Russia party. The authorities’ toolbox to disqualify candidates will also be further strengthened, as the law prohibits accepting donations from legal entities established by “foreign agents” as well as persons added to the register of “terrorists and extremists.” The fourth significant novelty of the amendments prescribes that no by-elections shall be held within a year of scheduled regular elections.
The amendments could still change before their final adoption, and the role of elections as a whole has changed over the past years in Russia’s increasingly hard autocracy. However, changes in electoral law, which have happened before virtually every major election over the past decades, usually highlight the Kremlin’s domestic priorities and concerns.
— Andras Toth-Czifra
Russian national Alexander Ovechkin scored his 895th NHL career goal on Sunday, surpassing the previous all-time record set by hockey legend Wayne Gretzky. 39-year-old Ovechkin made the record-breaking goal during a game between his team, the Washington Capitals, and the New York Islanders at the UBS Arena in New York. Fans in Russia cheered on his victory, including with billboards like this one, which reads, “Onward, Sasha!” President Putin also personally congratulated Ovechkin, saying, “Without a doubt, this achievement is not only your personal success but a true celebration for fans in Russia and abroad.” (photo: Alexander Nemenov / AFP)
Continuing nationalization
The nationalization of key privately-owned companies continued apace last week with several notable new cases. A court in the Leningrad Region approved the Prosecution’s request to transfer 55% of the shares of the St. Petersburg Oil Terminal, Russia’s largest petroleum transshipment terminal in the Baltic region, to the state. The argument was that the owners of the companies to which the shares belong, the children of Dmitry Skigin (the former, now deceased owner of the terminal), hold foreign citizenship and are thus banned from owning strategically important companies in Russia. The Prosecution has ramped up the seizures of companies based on this argument in recent months.
The Prosecution also moved to take into state ownership Sayanskkhimplast, Russia’s largest PVC producer. Here the prosecutors argued that the company’s beneficial owner, former deputy from the Irkutsk Region Viktor Kruglov, used his office for corrupt gains; however, Kruglov also has Cypriot citizenship, and he reportedly started extracting money from the company after the start of Russia’s full-scale invasion of Ukraine. Also over the past week, President Vladimir Putin signed a decree according to which Nizhpharm, one of Russia’s largest pharmaceutical companies, will be taken into state ownership from the German Stada group. The company will be temporarily administered by the Russian “Pharmirus” company, which was created in 2020.
Quoting an insider source this week, The Financial Times suggested that the Rotenberg brothers—who maintain a close personal relationship with Putin—have been behind many of the nationalization cases launched against major companies over the past years, including potentially the recent move to take Moscow’s Domodedovo Airport into state ownership. The article stresses that Putin has been distracted by questions concerning the war in Ukraine and has been paying less attention to economic policy. It also notes that the owners of companies targeted by nationalization efforts have tried to use their access to the President to push back against it.
For more on the conflicts arising from—among other things—the nationalization of private enterprises, read FPRI’s recent report. The above examples of ongoing nationalization also serve as a warning for Western companies that are considering a return to Russia, either because they expect the lifting of sanctions or under a theoretical U.S.-Russia investment deal.
— Andras Toth-Czifra
On the podcast
The weeks after Donald Trump and Volodymyr Zelenskyy’s Oval Office clash have precipitated drastic shifts in transatlantic relations and the potential trajectory of Russia’s war in Ukraine. Now a possible ceasefire is on the horizon.
This week on the Bear Market Brief podcast, host Aaron Schwartzbaum and Maximilian Hess make sense of the Oval Office blow-up and discuss President Trump’s strategic aims, Russia’s goals, Europe’s response, the U.S.-Ukraine minerals deal, and what might come next with Russian sanctions.
Quickfire: Regions
On April 11, unconfirmed rumors appeared about law enforcement raids in the Sverdlovsk Region related to a corruption case concerning the region’s ex-governor, Yevgeny Kuyvashev. The existence of the case itself was reported by the Kommersant daily earlier, but it has not been officially confirmed. Kuyvashev, who denied that he is under investigation, remains at large. The former governor, an ally of Moscow Mayor Sergey Sobyanin, was dismissed from his position in March. This came less than a year after the appointment of Artyom Zhoga, a former military commander from the Russia-occupied Donetsk Region, to presidential plenipotentiary in the Urals Federal District where Sverdlovsk is located. Also this week, prosecutors arrested Anton Vinogradov, the former First Deputy Prime Minister of the Republic of Komi, another region where a new governor—Rostislav Goldshtein—was appointed in March.
As of April 11, according to Russia’s Aerial Forest Protection Service, 48 wildfires were burning in Russia on almost 50,000 hectares (123,500 acres) of land. Most of the areas affected currently are located in the Transbaikal Territory, where (together with certain areas in the neighboring Buryatia) the authorities introduced a state of emergency. However, authorities are also predicting high risks in other Far Eastern and Siberian regions as well as in Southern Russia. Altogether, fire season has been declared in 64 Russian regions. In the Far East, fires were threatening to cause disturbances on the Baikal Highway, a major road, and the situation is likely to get worse in the following weeks. Apart from the dry weather, risks related to wildfires also have to do with Russia’s labor market crunch. Over the past three years, war-induced changes on the labor market have exacerbated labor shortages in public services, including among firefighters and paramedics, which has raised the risk of destruction.
Prime Minister Mikhail Mishustin held a strategic session of the government on the development of the coal and oil sectors. Apart from the accumulating troubles of the oil sector due to turbulence on global markets (discussed above), the situation in the coal sector also remains dire. Governor Ilya Seredyuk of the Kemerovo Region, Russia’s main coal producing region, urged the government again to adopt crisis management measures for the sector to avoid problems arising from unpaid wages and pending debt collections (albeit coal industry representatives highlighted that there were no mass layoffs in the industry). Mishustin suggested that the government is intent on further increasing transit capacities for coal in the Eastern direction and reducing costs for exporters, although it has so far been reluctant to initiate significant support programs, relying instead on the Russian Railways. This week, the Prime Minister also decreed a ban on cryptocurrency mining in the south of the Irkutsk Region until 2031 in order to prevent overloading the region’s power grid. Problems with the overuse of cheap electricity in Siberia previously prompted the introduction of a politically fraught tariff system.
— Andras Toth-Czifra