* Rouble-denominated MICEX drops 2.3 percent
* Rouble down 1.6 percent against dollar
* Russian debt insurance costs soars to 2-month highs
(Updates shares, currency after the market closing)
By Polina Devitt
MOSCOW, July 17 Russian shares fell 2.3 percent
on Thursday after Washington imposed its toughest economic
sanctions yet on Russian energy, financial and defence firms,
also hitting the rouble and the country's sovereign dollar
The U.S. government imposed sanctions on Wednesday on some
major players in the Russian economy over what Washington says
is Moscow's reluctance to curb violence in Ukraine.
Sanctions, which in effect close medium- and long-term
dollar funding, were imposed on Russia's No. 1 oil producer
Rosneft, its No. 2 gas producer Novatek, its No. 3 bank
Gazprombank and state-owned Vnesheconombank (VEB).
News that nearly 300 were killed when a Malaysian Airlines
plane crashed in eastern Ukraine came after the market close.
The rouble-traded MICEX pared early losses of 3.1
percent to close 2.3 percent down at 1,440.63 points; the
dollar-traded RTS index was down 3.8 percent at 1,299.03
Russian Prime Minister Dmitry Medvedev said the sanctions
were "evil" and that these moves would not help Ukraine and
would fuel anti-U.S. sentiment in Russia.
Shares in Rosneft pared losses to 4.3 percent
after falling 6 percent. Oil-trading operations at Rosneft will
not, however, be hurt by the sanctions, traders said.
Novatek was down 5.5 percent compared with an
earlier decline of 9 percent. The company said its major
projects would go ahead despite the sanctions.
"Despite the eye-catching headlines, the steps stop short of
the much discussed, but yet not pursued, 'sectoral sanctions',"
VTB Capital said in a note. "That said, for the first time they
touch - even if only lightly - major Russian corporations."
The threat to Rosneft and Novatek from the sanctions is that
Europe may follow suit and impose the same limitations on
borrowing from European banks, Alfa Bank said in a note.
EU leaders said on Wednesday they would expand sanctions
against Russia to target companies that undermine Ukrainian
sovereignty and ask the European Investment Bank and the
European Bank for Reconstruction and Development to suspend new
Russia's Foreign Ministry reacted with disappointment that
the European Union "succumbed to the blackmail of the U.S.
administration and, contradicting its own interests, followed
the path of sanctions" against Moscow.
The MSCI global emerging equities index was down
0.5 percent, while Russian sovereign dollar bonds slumped to
multi-week lows and Russian debt insurance costs soared to
International payment systems Visa and MasterCard
said the new U.S. sanctions did not affect their
operations in Russia.
The rouble hit a six-week low against the dollar as
stop-losses were triggered on short positions and was down 1.6
percent against it at 34.94.
It also lost 1.6 percent against the euro to
trade at 47.24.
This left the rouble 1.6 percent weaker at 40.46 against the
dollar-euro basket that the central bank uses to guide
the currency's nominal exchange rate.
For rouble poll data see
For Russian equities guide see
For Russian treasury bonds see
Russia in graphics: link.reuters.com/dun63s
(Additional reporting by Olga Popova, Vladimir Soldatkin,
Vladimir Abramov and Katya Golubkova; Editing by Louise Ireland)