•VanEck recently suspended two Russia ETFs due to prolonged inactivity caused by Western sanctions.
•The Russian market has been hit hard by the country’s invasion of Ukraine, leading to the closure of Moscow’s stock market.
•Western sanctions have effectively prohibited Russia’s major stocks from trading in the West, causing liquidity issues for funds.
VanEck, a New York-based asset manager, recently announced the liquidation of its two Russia exchange-traded funds (ETFs) due to prolonged inactivity. This decision was made due to the country’s invasion of neighboring Ukraine, which has caused Western sanctions against Russia to bite hard on profitability.
The ongoing Western sanctions against Russia have effectively prohibited its major stocks, including Gazprom, from trading in the West. This unsavory development has caused liquidity issues for the funds, leading to a lack of Western investment interest in the country. As such, VanEck expressed in a press release Wednesday that “the Funds’ inability to buy, sell, and take or make delivery of Russian securities has made it impossible to manage the Funds consistent with their investment objectives. The Funds will not engage in any business or activities in Russia.”
Furthermore, the Russian market has taken a hit since the country invaded Ukraine, with Moscow’s stock market closing temporarily. This has put pressure on liquidity, with Western investment in Russia effectively drying up. As a result, VanEck had to take the difficult decision to suspend its two Russia ETFs, as the prolonged inactivity has made it impossible to maintain their operations.
The suspension of VanEck’s Russia ETFs is yet another example of the harsh repercussions of the country’s invasion of Ukraine. With Western sanctions effectively prohibiting Russia’s major stocks from trading in the West, the country’s economy has taken a major hit, leaving investors with little choice but to liquidate their funds. Going forward, it remains to be seen how the situation in Russia will develop, and whether Western sanctions will be lifted in the near future.