People walk past a currency exchange office in central Moscow on February 28, 2022 with zeros on the scoreboard as it does not have three-digit sections to display the current exchange rate.
Alexander Nemenov | AFP | Getty Images
LONDON. According to Timothy Ash, senior sovereign strategist for emerging markets at BlueBay Asset Management, even if the Russian invasion of Ukraine is de-escalated, there will be little investment in Russian assets in the near term.
The foreign ministers of Russia and Ukraine will meet in Turkey this week for important peace talks as Moscow’s offensive into Ukraine continues. Russian forces on Wednesday night were accused of bombing a children’s hospital in besieged Mariupol.
The prospect of a de-escalation sent global equity markets soaring on Wednesday and reversed recent gains in oil and other commodity prices. However, Ash suggested that those seeking to buy Russian assets on the cheap “have misunderstood Russia.”
“The story around Russia has changed and the ability of investors to buy Russia in the long term has also changed,” he said on CNBC’s Squawk Box Europe.
“The damage to the Russian economy will be long-term, so it all depends on why you are buying it – are you buying it because the Russian economy will bounce back? I do not think so”.
The Russian invasion has been met with unprecedented economic sanctions by Western powers aimed at cutting Moscow off from the global economy, and the US took significant action this week by banning Russian oil imports.
In the meantime, international blue-chip companies have ceased operations en masse in the country and disposed of their Russian assets.
Since the invasion began on February 24, the Russian ruble has fallen to a record low, Russian stock markets have been closed, and London-listed shares of Russian companies have lost almost all of their value.
Ash suggested that it would take a complete withdrawal of Russian troops from Ukraine for sanctions to be eased at all, but it would take much longer for companies to justify re-entering the Russian market.
“I think the West has realized that Russia is a big threat to Western liberal market democracy, so the relationship between the West and Russia will remain very, very difficult, and this also applies to ESG,” he said, referring to environmental, social and corporate control.
The attack on a hospital and Putin’s general aggression in Ukraine – with Russian troops also shelling humanitarian corridors and residential areas, stoking accusations of war crimes – means that any Russian investment is likely to fall short of the ESG criteria advocated by a growing number of investors. .
“Now it is very difficult for Western big business to be in Russia. This is the reality, and (Putin) will back off a bit, and that won’t change,” Ash said.
“So Russia is a very, very difficult investment story for a long time, unless we see major political changes in Moscow.”