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Moscow slams US sanctions as ‘absolutely illegal’ while Russian markets tumble

Thomas Franck

The Kremlin on Thursday lashed out at new U.S. sanctions on Moscow, calling them "absolutely illegal" and assuring investors that the country's financial system is firm despite declines in the ruble and domestic equities.

The U.S. State Department said Wednesday it would impose additional penalties against Russia by the end of the month after concluding that Moscow used a nerve poison against a former Russian spy and his daughter in an attack in England.

Russia assets tumbled following news of the sanctions, with the U.S. dollar strengthening to its highest level against the ruble since November 2016.

The Russian RTS index dropped nearly 2 percent Thursday after falling nearly 3 percent Wednesday. Meanwhile, the U.S.-traded VanEck Vectors Russia exchange-traded fund fell more than 4 percent Wednesday, its worst day since April.

Moscow's 10-year note yield hit a high above 8 percent Wednesday, its highest level since April 13, 2017.

"Making a linking to these events (the British poisoning) is for us unacceptable and such restrictions like those passed by the American side earlier ... are absolutely illegal and do not correspond to international law," said Kremlin spokesman Dmitry Peskov, according to Reuters. He added that the U.S. move was "absolutely unfriendly," but reiterated Moscow's hope for improvements to the stressed relations between the two countries.

U.S.-Russian relations have soured in recent months over the White House's new tariffs on foreign aluminum and an investigation into Moscow's alleged hacking and disinformation campaign during the 2016 U.S. presidential election.

"Confusing seems to be the message when administration actions seem disconnected with actions and words coming from the President," Thomas Block, Washington policy strategist at Fundstrat Global Advisors, said in an emailed statement.

Russian markets plunged in April after President Donald Trump 's administration slapped its harshest sanctions to date against the country. The U.S. penalized several Russian oligarchs, officials, businesses and agencies and froze assets from those entities that were under U.S. jurisdiction.

One of the people slapped with sanctions was oligarch Oleg Deripaska, a billionaire who ran Russian aluminum giant Rusal , which was also sanctioned. Deripaska has also been charged in special counsel Robert Mueller 's investigation regarding Russia's involvement in the 2016 election.

Those penalties sent the Russian RTS down 11.4 percent, its largest one-day decline in more than three years.

"Predictability is a core principle of good public policy and the lack of predictability of the Trump administration makes corporate and investment decision making more challenging," Block added.