For a few weeks, investors on the Moscow stock exchange could get the impression that there was no sign of a crisis despite the unprecedentedly severe sanctions against their country.

Commodity exporters such as Gazprom benefited from high energy prices;

By mid-June, shares in the state-controlled group had recovered to pre-war levels.

But at the end of June, the illusion was shattered when the Gazprom shareholders' meeting, which is dominated by the Russian state, decided not to pay a dividend for 2021, and the stock lost 30 percent of its value in just one day.

Catherine Wagner

Business correspondent for Russia and the CIS based in Moscow.

  • Follow I follow

Previously, several other large companies had taken the same step, including the largest and state-owned bank Sber, electronics retailer M.Video, and steelmaker Severstal;

The mixed holding company AFK Sistema was also added on Monday, and its shares then fell significantly on Tuesday.

According to analysts, the dividend yield of the largest companies listed in the Moex index of the Moscow Stock Exchange is likely to be only half as high this year as it was last year.

According to experts, the fact that the state also made this decision for Gazprom shows that things are not going well for the group: The analyst Sergej Kaufman from the investment company Finam told the newspaper "RBK" that Gazprom is actually currently earning enough from the high gas prices to take care of everyone to cover expenses.

The group management had given as a reason for stopping the dividend payment, among other things, a soon due higher tax burden.

According to Kaufman, that's not the real reason.

Worst case scenario for Gazprom

The worst possible scenario is unfolding for Gazprom, since the group cannot reorient itself to the east in time, but exports to Europe are already falling: “Unfortunately, without dividends, without exports to Europe and without the start of massive deliveries to China, Gazprom is not an interesting one History more for investors.” Eduard Charin from the investment company Alfa-Kapital said Gazprom might want to withhold the money for capital expenditures.

"To build pipelines to Asia and a liquid natural gas plant would cost a total of $100 billion to $150 billion, and if you have to build fast, it gets even more expensive."

The crash in Gazprom shares also caused the ruble-denominated Moex index to fall by a good 7 percent on the day the dividend was decided.

Gazprom is heavily weighted in the index at 18.9 percent.

The index has lost a good 30 percent since shortly before Russia invaded Ukraine;

its value has almost halved since the autumn of last year.

Its counterpart, calculated in dollars, the RTS index, has also fallen by a good 5 percent since the beginning of the war.

However, the index has benefited in recent weeks from the strong ruble, which has appreciated by almost 37 percent against the dollar since the end of February.

Strong ruble problematic

However, the strong ruble is a problem for the Russian economy, especially for exporters like Gazprom: Most of their income is in dollars, but they have to spend in rubles.

When exchanging currency, they suffer losses, which also has a negative impact on the budget.

The government therefore wants to weaken the ruble.

According to statements by the Minister of Finance that the purchase of foreign currency from "friendly countries" is also being examined, and because of fluctuations in the price of oil, the exchange rate against the dollar has already fallen by 9.2 percent since the end of June.

However, due to the persistently high current account surplus, most analysts expect the ruble to appreciate again soon.

That would not be a good development for the Russian economy.

Because of the negative consequences for exporters, the analyst Wassilij Karpunin from the financial consultancy BCS Express sees an increased interest in titles that are aimed at domestic demand, such as the electronics retailer M.Video, the children's goods group Detskij Mir or the discount chain Fix Price.

Karpunin recently wrote in a report that this trend will probably remain the same.