* Many Russian regions report fuel shortages
* Government cancels bond auction due to market volatility
* Kremlin says no grounds for concern on economy's stability
* Stocks fall to their lowest in three years
MOSCOW, June 23 (Reuters) - The Russian rouble weakened on
Tuesday and stocks fell to their lowest level in three years, as
people queued for fuel across the country following attacks by
Ukrainian drones on Russian refineries in recent months.
Analysts and traders also said sliding global oil prices
following talks between the U.S. and Iran, a lack of progress in
talks to end the Ukraine war, and the central bank's
smaller-than-expected key rate cut last week were behind the
market selloff.
Many regions across Russia, the world's third-largest crude oil
producer, have reported restrictions on fuel sales and rising
prices for oil products, creating long queues at filling
stations due to supply shortages in recent days.
The Moscow Exchange stock index fell by 5% on June 22 before
rebounding slightly and is now at its lowest level since March
2023, while the rouble weakened past the 75-mark against the
U.S. dollar for the first time since May 6.
"All this leads to genuine apathy on the market," said
economist Evgeny Kogan, calling the selloff "a capitulation".
Many blue-chip companies, including air carrier Aeroflot,
diamond miner Alrosa, and retailer X5, faced margin calls.
Traders told Reuters that Russian oil firms were still selling
and repatriating their bumper foreign exchange earnings after a
period of high oil prices and the temporary easing of U.S.
sanctions during the Iran war, which provided some respite for
Russia.
The economy has demonstrated resilience against Western
sanctions during the four-and-a-half years of war in Ukraine but
started to lose steam last year, slowing down to 1% growth from
4.9% in 2024.
MARKET VOLATILITY
The central bank said in a statement after last week's rate cut
that a decline in fuel production created a risk that inflation
could start rising again. The bank had tamed inflation by hiking
interest rates at the expense of an economic slowdown and an
investment crunch.
President Vladimir Putin said on Tuesday that Ukrainian attacks
on civilian infrastructure in Russia were an attempt to
destabilise society.
Shares of Russia's state-owned energy giant Gazprom, whose
subsidiary Gazprom Neft owns a Moscow refinery that was hit by
drones last week, fell over 5% below 100 roubles ($1.35) on
Monday for the first time since 2009.
Analysts at Sinara investment bank said that June 22 was one
of the worst days on the Russian stock market since 2022 when
the war in Ukraine started. The Russian market was once a
darling for foreign investors but is now off-limits due to
sanctions.
Prices for Russian government OFZ bonds have also been falling
due to concerns about the rising deficit caused by increased
military spending. The government cancelled a bond auction on
Tuesday citing increased market volatility.
Kremlin spokesman Dmitry Peskov, asked about the rouble's
weakness and falling oil prices, dismissed concerns and said on
Tuesday that there were no grounds for concern about the
stability of Russia's economy.
"The stability of the Russian economy, macroeconomic
stability, is absolutely ensured," he said.